FAO(OS)(COMM) 211/2026 Page 1 of 39

$~

* IN THE HIGH COURT OF DELHI AT NEW DELHI

% Judgment reserved on: 15.09.2026

Judgment pronounced on: 28.09.2026

Judgment uploaded on: 28.09.2026

# CNR No. DLHC010371002026

+ FAO(OS) (COMM) 211/2026, CM APPL. 53404/2026, CM

APPL. 53405/2026, CM APPL. 53406/2026 and CM APPL.

53407/2026

KURUKSHETRA EXPRESSWAY PRIVATE LIMITED

.....Appellant

Through: Mr. Sandeep Sethi, Mr. Rajiv

Nayar and Mr. Dayan Krishnan,

Sr. Advs. along with Mr. Rishi

Agrawala, Dr. Sunil Mittal, Mr.

Daksh Arora, Mr. Rajat Sinha,

Mr. Ranjan Mukherjee, Mr.

Anant Shukla, Mr. Krisna

Gambhir and Ms. Shreya Sethi,

Advs.

versus

NATIONAL HIGHWAYS AUTHORITY OF INDIA

.....Respondent

Through: Mr. A. K. Nijhawan and Mr.

Abdul Vahid, Advs.

CORAM:

HON'BLE MR. JUSTICE ANIL KSHETARPAL

HON'BLE MS. JUSTICE SHAIL JAIN

J U D G M E N T

ANIL KSHETARPAL , J.:

1. The present Appeal has been filed assailing the correctness of

the judgment dated 28.07.2026

1

passed by the learned Single Judge

2

,

1

hereinafter referred to as „Impugned Judgment‟

2

hereinafter referred to as „LSJ‟

FAO(OS)(COMM) 211/2026 Page 2 of 39

through which the petition filed by the Respondent (Respondent

before the Arbitral Tribunal) under Section 34 of the Arbitration and

Conciliation Act, 1996

3

, challenging the Arbitral Award dated

16.08.2024

4

passed by a majority comprising of two members out of

three member Tribunal

5

, was allowed, setting aside the Arbitral

Award to the extent of relief granted in respect of Claim Nos.1 and 2,

towards Termination Payment and interest thereon, respectively.

2. At the outset, it must be highlighted that the challenge before

this Court, akin to that before the LSJ, was confined only to the Claim

Nos.1 and 2 raised by the Appellant (Claimant before the Arbitral

Tribunal). Hence, the examination in the present judgment is also

confined to the aforesaid claims.

A. BRIEF FACTUAL BACKGROUND:

3. In order to appreciate the present controversy, the facts in brief

are required to be noticed.

4. The present controversy finds its genesis in the Concession

Agreement dated 13.07.2010

6

, executed between the parties, whereby

the Appellant was granted a concession, on a Design-Build-Finance-

Operate-Transfer (DBFOT) basis, for the four-laning of the Rohtak–

Bawal Section of NH-71 in the State of Haryana, under NHDP III, for

a concession period of 28 years commencing from the appointed date

of 10.05.2011.

5. Pursuant to the Agreement, provisional Completion Certificates

3

hereinafter referred to as „Act of 1996‟

4

hereinafter referred to as „Arbitral Award‟

5

hereinafter referred to as „Arbitral Tribunal‟

6

hereinafter referred to as „Agreement‟

FAO(OS)(COMM) 211/2026 Page 3 of 39

were issued on 24.08.2013 and 30.09.2014, toll collection commenced

on 01.09.2013, and the final Completion Certificate was issued on

13.08.2018. Notably, disputes between the parties had earlier been the

subject matter of two rounds of arbitration. However, the present

proceedings arise out of the third round of arbitration culminating into

the Arbitral Award.

6. The third round of arbitration came to be initiated by the

Appellant on account of the prolonged suspension of toll operations

occasioned by the Farmers‟ Agitation and the COVID-19 pandemic,

which the Appellant characterised as an Indirect Political Force

Majeure Event subsisting beyond 180 days within a continuous period

of 365 days. Accordingly, the Appellant, vide letter dated 07.10.2021,

terminated the Agreement under Clause 34.8 thereof and called upon

the Respondent to make a Termination Payment of Rs. 1,347.53 Crore

together with certain other sums. Since no payment was forthcoming,

the dispute was referred to a third round of arbitration, culminating in

the Arbitral Award.

7. Before the Arbitral Tribunal, the Appellant filed its Statement

of Claim, raising (06) six claims besides interest and cost, including a

claim towards the Termination Payment and interest thereon. In turn,

the Respondent filed its Statement of Defence alongwith (05) five

counter claims aggregating to Rs.368 Crore, besides interest and costs.

8. Amongst the various Claims and Counter Claims, adjudicated

upon by the Arbitral Tribunal, Claims Nos.1 and 2 alone form the

subject matter of the present Appeal. The Claim No.1 came to be

allowed by the Arbitral Tribunal to the extent of Rs. 911.13 Crore, as

FAO(OS)(COMM) 211/2026 Page 4 of 39

against Rs. 1,347.53 Crore claimed, along with interest on

Termination Payment under Claim No.2 at graded rates. Aggrieved

thereby, the Respondent approached the LSJ, who by way of the

Impugned Judgment, set aside the Arbitral Award to the extent of

Claim Nos.1 and 2. Aggrieved thereby, the Appellant has now

approached this Court by way of the present Appeal.

B. SUBMISSION OF THE PARTIES:

9. Learned senior counsel representing the Appellant, has made

the following submissions:

9.1 It has been contended that the Appellant, as a

Concessionaire, raised a debt of Rs. 794.06 crore and invested

Equity of Rs.251.49 crore for construction of the Project with the

express approval of the Respondent under Articles 4.1.3(e) to (f)

5.2.2 of the Agreement. The Financing Agreement, Financial

Model and Financial Package were furnished to the Respondent,

scrutinised, modified in terms of its comments, and thereafter

accepted as being „in order‟, culminating in the declaration of

Financial Closure on 17.05.2011 in accordance with the

Respondent‟s policy dated 12.05.2010.

9.2 Further, it has been argued that the Agreement

undisputedly stood terminated on account of an Indirect Political

Force Majeure Event, and the Respondent took over the Project

Highway on 12.12.2021. Despite Article 37.3.3 of the

Agreement, the Respondent neither paid the Termination

Payment within 15 days nor deposited the toll revenues into the

Escrow Account, thereby wrongfully appropriating

FAO(OS)(COMM) 211/2026 Page 5 of 39

approximately Rs. 320 crore, which ought to have been utilised

towards discharge of the lenders‟ dues under Article 31.4.1 of the

Agreement.

9.3 The central submission of the learned senior counsel

orbited around the decision given by the LSJ, who as per the

Appellant erred in treating the Total Cost Project (TPC) and

Termination Payment as synonymous, thereby importing the

definition of TPC under Article 48.1 into the computation of

Termination Payment under Article 34.9.2, and introducing the

lowest of three limbs test, capped at Rs. 650 Crore.

9.4 By doing so, it has been argued that the LSJ, failed to

appreciate that Article 34.9.2 is a distinct and self-contained

operative provision, expressly providing that, upon termination

on account of an Indirect Political Event, the Appellant is entitled

to a Termination Payment „in an amount equal to: (a) Debt

Due... and (b) 110% of the Adjusted Equity‟.

9.5 Relying upon the introductory paragraph of the definition

clause under Article 48.1, reference has heavily been made to the

expression, „unless repugnant to the context or meaning thereof‟,

to argue that the definition of TPC could not be mechanically

imported into Article 34.9.2 of the Agreement so as to introduce

a substantive limitation not contemplated by the parties, thereby

introducing words „subject to a maximum of Rs.650 crores‟, into

Article 34.9.2.

9.6. It has been submitted that the LSJ, in the Impugned

FAO(OS)(COMM) 211/2026 Page 6 of 39

Judgment, misapplied K.V. Muthu v. Angamuthu Ammal

7

,

which, read correctly, and as followed in Jagdeep Chowgule v.

Sheela Chowgule

8

, and AICTE v. Shri Prince Shivaji Maratha

Boarding House's College of Architecture

9

, in fact supports the

Appellant‟s case, since it recognises that a defined term may bear

a different meaning where the context so demands, and that the

„unless repugnant to the context‟ qualification in the definition

clause itself permits departure from the defined meaning. In this

regard, it was further argued that the LSJ applied only the general

rule stated in that decision while ignoring the very exception on

which the Appellant‟s case rested and simultaneously overlooked

the opening words of Article 48.1 and the specific-clause-

prevails mandate of Article 1.4.2(a).

9.7 Relying upon the Agreement, it has been argued that it

prescribes a distinct formula for Termination payment depending

upon the nature of terminating events, highlighted under Articles

34.9.1, 34.9.2, 34.9.3 and 37.3.2. It was submitted that this

graded scheme, awarding progressively higher multiples of

Adjusted Equity depending on the degree of fault attributable to

the Respondent, is wholly irreconcilable with the existence of a

single, overriding Rs. 650 Crore ceiling common to all scenarios.

Since such a ceiling would render the enhanced 110%/150%

multiples otiose in precisely those cases where the formula, if

faithfully applied, would exceed Rs. 650 Crore. This internal

structure, it was submitted, is itself decisive of the parties‟

7

(1997) 2 SCC 53

8

(2026) 5 SCC 667

9

(2021) 12 SCC 629

FAO(OS)(COMM) 211/2026 Page 7 of 39

intention that TPC was never meant to operate as a ceiling on

Termination Payment.

9.8 Reliance has been placed on Articles 1.1.1 and 1.1.4 of

the RFP, to argued that Rs. 650 Crore was expressly described as

an estimated project cost at the bidding stage, with bidders

required to independently assess the actual project cost. Article

1.4.1 of the RFP, in particular, made it clear that this estimate

was not intended to survive as a cap on the Respondent‟s liability

upon termination.

9.9 Against this backdrop, it had been argued that the LSJ,

erred in elevating this estimated bid-stage figure into a binding

ceiling on Termination Payment, disregarding Article 1.4.1 of the

RFP, Article 2.2.4 of the Consultant Agreement, and Article

4.1.3(f) of the Agreement, and in doing so effectively re-

adjudicated the matter as though sitting in appeal over the

Arbitral Tribunal rather than exercising the limited jurisdiction

under Section 34 of the Act of 1996.

9.10. Relying on Nabha Power Ltd. v. Punjab State Power

Corporation Ltd.

10

, and Haris Marine Products v. Export Credit

Guarantee Corporation (ECGC) Ltd.

11

, it was submitted that a

commercial contract must be construed in a manner that accords

with business common sense and avoids commercial absurdity. It

was contended that capping the Termination Payment at Rs. 650

crores, despite the Respondent‟s knowledge and approval of the

10

(2018) 11 SCC 508

11

(2022) 20 SCC 776

FAO(OS)(COMM) 211/2026 Page 8 of 39

actual Debt of Rs. 794.06 crore and corresponding Equity, would

leave the Respondent with the commissioned highway while the

lenders remain unpaid, defeating the financing structure

underlying the PPP model.

9.11 It was further argued that the estimated TPC continues to

serve independent purposes under the CA, including bank

guarantees, Technical Expert‟s fee, change of scope thresholds

and appointment of an additional auditor. Thus, it was the LSJ‟s

interpretation, and not that of the Appellant, which rendered the

expressions „only the amounts so conveyed shall form the basis

of computing Termination Payment‟ and „amount equal to‟ in

Article 34.9.2 of the Agreement otiose.

9.12 It was the case of the Appellant that the view taken by the

Arbitral Tribunal was a plausible interpretation and not open to

interference under Section 34 of the Act of 1996. The Arbitral

Tribunal, upon construing Article 34.9.2 read with Article

1.4.2(a), the definition of Termination Payment and the

Disaggregation Letter dated 04.02.2019, awarded Rs. 561.30

crore towards Debt Due and Rs. 349.80 crore towards 110% of

Adjusted Equity, aggregating to Rs. 911.13 crore, strictly in

terms of the contractual formula. It was submitted that even the

Respondent, before the LSJ, had accepted that the Arbitral

Award was „at the least a plausible view‟, pointing to the

dissenting Member‟s own computation of Rs. 684.70 crore as

demonstrating that more than one reading of the contract was

reasonably possible.

FAO(OS)(COMM) 211/2026 Page 9 of 39

9.13. Reliance was placed on a consistent line of authority,

including Hindustan Construction Company v. NHAI

12

,

Konkan Railway Corporation Ltd. v. Chenab Bridge Project

Undertaking

13

, South East Asian Marine Engineering &

Construction Ltd. v. Oil India Ltd.

14

and Anglo American

Metallurgical Coal Pty. Ltd. v. MMTC Ltd.

15

, among others for

the settled proposition that a plausible interpretation adopted by

the Arbitral Tribunal cannot be substituted under Section 34

merely because another view is possible. It was further submitted

that, despite accepting the genuineness of the Disaggregation

Letter, the LSJ failed to give effect to it while computing the

Termination Payment.

9.14 As an additional and independent ground, a challenge has

also been raised, in the written submissions and the grounds of

appeal, to the findings returned by the LSJ on I.A. No. 540/2025.

However, the same was not pressed during the course of oral

arguments. Hence, we do not deem it appropriate to elaborate

upon the same.

10. Per contra, learned counsel representing the Respondent has

made the following submissions:

10.1 It was argued that Article 48 of the Agreement defines

TPC, as the lowest of three specified figures, namely, the capital

cost under the Financial Package, the actual capital cost upon

completion, and Rs. 650 crore, while Article 1.4.1 gives the

12

(2024) 2 SCC 613

13

2023 INS 742

14

(2020) 5 SCC 164

15

(2021) 3 SCC 308

FAO(OS)(COMM) 211/2026 Page 10 of 39

Agreement a precedence over other documents in case

consistency. It has been stated that the definition of Termination

Payment under Article 34.9.2 includes Debt Due and Adjusted

Equity, both of which being defined with reference to TPC,

makes the Termination Payment subject to the contractual ceiling

provided under Article 48.1 of the Agreement.

10.3 It was submitted that the Arbitral Tribunal, at paragraph

55 of the Arbitral Award, computed the Termination Payment on

the footing that the TPC was Rs. 1,045.5 Crore, in direct

contravention of the capped definition under Article 48.1, under

which the TPC could not exceed Rs. 650 Crore. This substitution

of a higher, uncapped figure for the contractually mandated

lowest-of-three limbs was not an exercise in interpretation but a

rewriting of the bargain between the parties.

10.4 It was further submitted that, independent of the above

error, the Arbitral Tribunal erred in additionally crediting a

separate equity component under Claim No.1. Since the debt

sanctioned to the Appellant by its lenders already exceeded/fully

covered the TPC (whether reckoned at Rs. 650 Crore or

otherwise), the TPC stood fully subsumed within the debt

component alone, leaving no occasion to separately reckon or

add an equity component. Since doing so would have resulted in

a double counting not contemplated by Articles 34.9.2 and 48 of

the Agreement.

10.5 In the alternative, and without prejudice to the foregoing,

it was submitted that even if both components, Debt Due and

FAO(OS)(COMM) 211/2026 Page 11 of 39

Adjusted Equity, are to be reckoned, their aggregate reflecting

the contractually envisaged debt-equity ratio of approximately

80:20, could not, in any event, exceed the overall TPC ceiling of

Rs. 650 Crore. On either analysis, the Arbitral Award of Rs.

911.13 Crore under Claim No.1 was demonstrably contrary to the

express terms of Articles 48.1 and 34.9.2 of the Agreement.

10.6 In support of the above, reliance was placed on Articles

4, 8, 26 and 31 to establish that the Respondent was not bound by

the Appellant‟s financing arrangements or the quantum of

debt/equity claimed by it, and the contractual obligations and

payment mechanism were governed by the Agreement itself. It

had further been submitted that Debt Due and related termination

entitlements could not exceed the contractually defined TPC, and

the Appellant will remain subject to its own obligations under the

Agreement.

10.7 Against the aforestated, it had been argued that the

Arbitral Tribunal, while computing Claim Nos.1 and 2,

disregarded the capped definition of TPC under Article 48.1 and

thereby rewrote the contractual bargain, amounting to patent

illegality under Section 34(2A) of the Act of 1996. Accordingly,

the LSJ rightly set aside the Arbitral Award qua Claim Nos.1 and

2, leaving the remaining claims and counter-claims undisturbed

and the Impugned judgment, therefore, warrants no interference.

C. ANALYSIS AND REASONING:

11. Before entering into the merits of any challenge to the

Impugned Judgment passed by the LSJ, this Court exercising

FAO(OS)(COMM) 211/2026 Page 12 of 39

jurisdiction under Section 37(1)(c) of the Act of 1996 must first

remind itself of the narrow channel within which the present

jurisdiction flows. An appeal contemplated by Section 37 is not an

occasion to re-examine the Arbitral Award at large, rather it is merely

confined to testing whether the LSJ, while exercising jurisdiction

under Section 34 of the Act of 1996 remained within the four corners

of the grounds available under the said provision.

12. The aforesaid position also stands settled by a consistent line of

Supreme Court authority. In Bombay Slum Redevelopment Corpn.

(P) Ltd. v. Samir Narain Bhojwani

16

, the Supreme Court held that the

Section 37 forum‟s task is only to ascertain whether the Court acting

under Section 34 exercised its jurisdiction within the statutory

grounds, a jurisdiction narrower even than that available under Section

34 itself. The same principle was reiterated in Reliance Infrastructure

Ltd. v. State of Goa

17

, where the Court cautioned that a Court acting

under Section 37 cannot travel beyond Section 34 to independently

reappreciate evidence or the merits of the underlying dispute.

13. Further, in Haryana Tourism Ltd. v. Kandhari Beverages

Ltd.

18

, it was held that the appellate court cannot convert itself into a

first appellate forum against the arbitral award, and its interference

remains confined to the recognised Section 34 grounds. More

recently, in Somdatt Builders-NCC-NEC (JV) v. NHAI

19

, the

Supreme Court observed that because the jurisdiction under Section

34 is itself narrow, the appellate jurisdiction under Section 37 over an

16

(2024) 7 SCC 218

17

(2024) 1 SCC 479

18

(2022) 3 SCC 237

19

(2025) 6 SCC 757

FAO(OS)(COMM) 211/2026 Page 13 of 39

order made under Section 34 becomes narrower, acting as a double

filter, so to speak. Lastly, AC Chokshi Share Broker (P) Ltd. v. Jatin

Pratap Desai

20

, further reinforces the position that the Section 37

Court‟s function is to test whether the Section 34 Court properly

exercised its jurisdiction, not to substitute its own view of the contract

where the Section 34 Court‟s view was itself a reasonable one.

14. The upshot of this recognised position of law is that this Court

while examining the Impugned Judgment, asks itself a narrower and

logical question, „did the LSJ, in setting aside the Arbitral Award on

Claim No.1, stay within the grounds that Section 34 permits, or did he

overstep them?‟ It is with this touchstone alone that the present appeal

must be examined.

15. Turning now to the dispute that arises before this Court, we

may note that the entire controversy in the present case traces to a

single interpretive fork in the road, what is the Total Project Cost

(TPC) against which the Termination Payment payable to the

Appellant is to be computed?

Overview of the findings given by the Tribunal and the LSJ

16. The Tribunal by way of the Arbitral Award, while answering

the aforesaid question, held that the Disaggregation Letter dated

04.02.2019, by which the Concessionaire notified the Respondent of a

TPC of Rs.1,045.55 crore constituted the operative and binding basis

for computing the Termination Payment. On this footing, applying the

formula under Article 34.9.2 of the Agreement, the Tribunal arrived at

20

(2025) 5 SCC 321

FAO(OS)(COMM) 211/2026 Page 14 of 39

a Termination Payment of Rs. 911.13 crore.

17. While reaching this conclusion, the Tribunal reasoned that

Article 1.4.2(a) of the Agreement, which provides that a specific

clause relevant to the issue at hand prevails over other clauses,

rendered the Rs. 650 crore ceiling included in the definition of TPC

under Article 48.1 as irrelevant to the computation of Termination

Payment, on the basis of a reasoning that the definition of Termination

Payment itself referred to the disaggregation notified by the Appellant

as the operative basis.

18. On the contrary, the LSJ held that the construction provided by

the Tribunal could not be sustained. On his reading, the definition of

TPC under Article 48.1, as the lowest of (a) the capital cost per the

Financial Package, (b) the actual capital cost on completion, and (c)

Rs. 650 crore less Equity Support, was not a free-standing or

dispensable definition. It was his view that the said provision and the

three limbs provided thereunder, laid at the very heart of the risk

allocation the parties had struck, and was designed specifically to cap

Respondent‟s exposure on termination.

19. The LSJ, with respect to the Disaggregation Letter, was of the

view that, it served a wholly different function, by merely

apportioning an already-determined TPC between its Debt and Equity

components and was not a mechanism by which the Appellant could

unilaterally enlarge the TPC itself. Upon reading the definition clause

and the Termination Payment clause together, the LSJ concluded that

the Termination Payment could not lawfully exceed what the TPC

definition permitted and set aside the Arbitral Award to that extent.

FAO(OS)(COMM) 211/2026 Page 15 of 39

Scope of jurisdiction exercised by the LSJ

20. At this stage, we deem it appropriate to also highlight the

boundaries of Section 34 of the Act of 1996, within the four walls of

which, the LSJ was expected to perform the jurisdiction so vested

upon him. Section 34 does not clothe the Court with appellate

jurisdiction over the merits of an arbitral award. Instead, it permits

interference only on the limited grounds enumerated in the provision,

including, where the Tribunal has taken a view that is otherwise a

possible one, the ground of patent illegality where the Tribunal has

construed the contract in a manner that no fair-minded or reasonable

person could adopt. Ordinarily, where the Tribunal‟s interpretation of

a contractual term is a possible one, the Court acting under Section 34

must defer to it, no matter how much it may itself have preferred a

different view.

21. Therefore, what follows from the aforestated is that whether the

LSJ correctly identified and applied the limited ground of patent

illegality, i.e., whether he was right to conclude that the Tribunal‟s

construction was not a possible one, and whether in undoing that

construction he himself stayed within the same narrow confines,

without descending into a re-appreciation of evidence or a substitution

of one reasonable contractual reading for another.

Examination of findings returned by the LSJ

22. Before proceeding further, we deem it appropriate to reproduce

the relevant paragraphs of the Impugned Judgment, which form the

basis of our analysis. The same is reproduced hereunder:

“53. This three limbed definition, particularly the cap contained in

FAO(OS)(COMM) 211/2026 Page 16 of 39

sub-clause (c), lies at the very heart of the Concession Agreement and

cannot be treated as surplusage for the purpose of determining the

“Termination Payment”. The purpose of this provision is clearly to

limit the financial exposure of NHAI upon termination. Indeed, this

provision is at the very heart of risk allocation in the Concession

Agreement.

54. Evidently, NHAI, as a public authority, set out this cap in the RFP

document itself so that its maximum financial exposure upon

termination would be confined to the project cost. This cap serves a

specific and vital commercial purpose; it protects NHAI against cost

over-run incurred by the concessionaire (whether due to inefficiency,

over borrowing or for any other reason) being passed on to NHAI in

the guise of a “Termination Payment”. Without this cap, a

concessionaire could borrow far in excess of the sanctioned project

cost and on termination, present NHAI with a demand that NHAI

never agreed to underwrite. The award by accepting the “total project

cost” at Rs.1045.5 Crore has rendered sub-clause (c) entirely

nugatory, effectively reducing it to a dead letter.

55. A copy of Request for Proposal (RFP) has been filed by the

Respondent. Clause 1.1.1 of the RFP clearly mentions the estimated

project cost as Rs. 650 Crore. The relevant portion of the same is

reproduced as under –

56. Evidently, the figure of Rs. 650 crore represented the estimated

Project Cost as reckoned at the time of bidding. By making it the

ceiling in the definition of the “Total Project Cost,” the parties sought

to ensure that, even if the actual cost exceeded this amount, NHAI‟s

financial exposure towards Termination Payment would continue to

be anchored to this ceiling. The unmistakable commercial rationale

underlying the contractual provision is that NHAI assumes the risk of

cost overruns during construction only to the extent contemplated

under sub-clause (c), and not in respect of any unlimited or excessive

expenditure that the Concessionaire may incur.

57. The Concession Agreement is founded upon a concession

FAO(OS)(COMM) 211/2026 Page 17 of 39

framework, under which the termination liabilities of the Authority are

capped. It is on strength of this risk matrix that bids were invited, that

the premium of Rs.12 crore per annum (escalating at 5% annually)

was offered by the respondent, and that the financial exposure of the

public exchequer stood crystallised. The ceiling ensures that the

consequence/s of any cost overrun or over-leveraging is not

transmuted into a liability of the Authority upon termination. To

construe the Agreement in a manner which dissolves this ceiling is to

redistribute, ex post facto, the very risk which the parties had

definitively allocated inter-se.

THE APPROVAL OF THE FINANCIAL PACKAGE DOES NOT

ASSIST THE RESPONDENT

58. Considerable emphasis was laid on behalf of the respondent on

the circumstance that the Financial Package (reflecting a capital cost

of Rs.992.58 crore), the Financial Model and the Financing

Agreements were scrutinised and approved by NHAI prior to financial

close. The submission is of no avail to the respondent. Sub-clause (a)

of the definition of "Total Project Cost" itself refers to "the capital

cost of the Project, as set forth in the Financial Package". The parties

were, therefore, fully alive to the fact that the Financial Package

would reflect a capital cost, and that such cost might well exceed

Rs.650 crore; it is precisely for this reason that the definition

stipulates that the Total Project Cost shall be the lowest of the three

specified amounts. The Financial Package figure thus stands

internalised within the definition itself – it supplies limb (a); it does

not, and cannot, abolish limb (c). The scrutiny of the financing

documents by the Authority serves an altogether distinct purpose,

namely, to ensure that the Concessionaire does not enter into

arrangements with its lenders which imperil the interests of the

Authority; such scrutiny cannot be construed as an undertaking by the

Authority to underwrite the entirety of the said cost upon termination.

Moreover, in terms of Article 1.4.1 of the Concession Agreement, the

Agreement prevails over all other documents.

TERMINATION SPECIFIC PROVISO – CONFIRMING ITS

APPLICABILITY FOR THE PURPOSE OF DETERMINING

“TERMINATION PAYMENT ”

59. The definition of “Total Project Cost” contains the following

proviso:

“provided that in the event of Termination, the Total Project Cost

shall be deemed to be modified to the extent of variation in WPI or

Reference Exchange Rate occurring in respect of Adjusted Equity and

Debt Due, as the case may be, in accordance with the provisions of

this Agreement; provided further that in the event WPI increases, on

an average, by more than 6% (six per cent) per annum for the period

between the date hereof and COD the Parties shall meet, as soon as

reasonably practicable, and agree upon revision of the amount herein

FAO(OS)(COMM) 211/2026 Page 18 of 39

before specified such that the effect of increase in WPI, in excess of

such 6% (six per cent), is reflected in the Total Project Cost;”

60. This proviso is of significant importance. It expressly addresses

the termination scenario and provides for the modification of the

“Total Project Cost” figure, but only to the extent of variation in the

WPI. The fact that the Concession Agreement itself incorporates a

termination-specific proviso into the definition of the “Total Project

Cost” conclusively establishes two things:

(i) that the definition is intended to apply in the context of termination

and is neither rendered inapplicable nor repugnant for the purpose of

determining the “Termination Payment”. A definition which itself

provides for the termination scenario cannot, in the same breath, be

branded as repugnant to that very scenario ;

(ii) that the parties specifically contemplated that the “Total Project

Cost” might require upward revision in a termination scenario, but

only by way of WPI adjustment and, where the WPI exceeded 6% per

annum, through mutual agreement between the parties. There is no

mechanism under the Concession Agreement permitting the

Concessionaire to unilaterally enhance the “Total Project Cost” by

relying upon a disbursement letter reflecting actual project costs far

in excess of the contractual cap.

61. If the parties had intended that the actual project cost notified in

the disaggregation letter would entirely displace or render nugatory

the definition of “total project cost”, there would have been no need

whatsoever for this proviso. Its very existence, providing a measured /

WPI linked adjustment mechanism, demonstrates that the parties

never intended the contractual cap to be by-passed by a unilateral

cost notification / disaggregation letter.

62. A unilateral notification by the Concessionaire of its actual

expenditure is not a mode of modification of the "Total Project Cost"

recognised anywhere in the Agreement. It is elementary that a

contract can be varied only in the manner provided therein or by the

mutual agreement of the parties; it cannot be varied by the unilateral

act of one party. Yet, the construction adopted by the Tribunal

ascribes to the disaggregation letter (a unilateral communication), the

effect of an amendment of the contractually defined "Total Project

Cost" from Rs.650 crore to Rs.1045.55 crore. No canon of

interpretation sanctions such an outcome.

DEFINITION OF “TERMINATION PAYMENT” EXPRESSLY

INCORPORATES THE CEILING REFERRE D TO IN THE

DEFINITION OF “TOTAL PROJECT COST”

63. The definition of “Termination Payment” in Article 48.1 provides

FAO(OS)(COMM) 211/2026 Page 19 of 39

that it “may consist of payments on account of and restricted to, the

Debt Due and Adjusted Equity, as the case may be, which form part of

the Total Project Costin accordance with the provisions of this

Agreement”.

64. Three expressions in this definition are of significant importance

and, independently support the relevance of the ceiling for the

purpose of determining the Termination Payment:

(i) “Restricted to” – the use of these words is intended to limit the

extent of the Termination Payment and to make it circumscribed;

(ii) “Which form part of the Total Project Cost” – this is a qualifying

and limiting stipulation. Only such Debt Due and Adjusted Equity as

form part of the contractually defined “Total Project Cost” are

payable. The inevitable consequence is that payments in excess of the

“Total Project Cost” are expressly excluded;

(iii) “In accordance with the provisions of this Agreement” – this

cross-reference ties the computation of the “Termination Payment” to

the definition of the “Total Project Cost” and precludes the possibility

of importing a different “Total Project Cost” figure from outside that

is at variance with, or inconsistent with, the contractual ceiling

contained in the definition of the “Total Project Cost.”

THE DISAGGREGATION LETTER CANNOT OVERRIDE THE

CAP IN THE DEFINITION OF “TOTAL PROJECT COST”; IT

OPERATES WITHIN IT

65. The respondent‟s principal submission, as accepted by the

Arbitral Tribunal, is that the disaggregation letter clause contained in

the definition

of “Termination Payment” makes the notified “Total Project Cost”

figure the sole basis for computing the “Termination Payment,”

thereby displacing the contractual cap of Rs. 650 crore. This

argument fundamentally misconstrues the function and purpose of the

disaggregation letter.

66. The disaggregation letter clause requires the Concessionaire to

notify NHAI of the “Total Project Cost” as on the COD, together with

its disaggregation into Debt Due and Equity. The purpose of this

requirement is to inform NHAI how the “Total Project Cost”, already

determined under the Concession Agreement as the lowest of the three

alternatives, is apportioned between its Debt Due and Equity

components so that the formula prescribed under Article 34.9.2 (Debt

Due + 110% Adjusted Equity) can be correctly applied.

67. The word “disaggregation” is itself dispositive. To disaggregate

means to break down a whole into its component parts. The

disaggregation letter mechanism is intended to allocate the “Total

Project Cost” between Debt Due and Equity. It is not a mechanism by

which the Concessionaire has been granted carte blanche to

FAO(OS)(COMM) 211/2026 Page 20 of 39

unilaterally „re-determine‟ the “Total Project Cost” or to undermine

or nullify the contractual ceiling prescribed thereunder.

68. If the interpretation canvassed by the respondent were correct, the

disaggregation letter would become an instrument by which the

Concessionaire could inflate NHAI‟s termination liability simply by

notifying a higher “Total Project Cost” figure, regardless of the

contractual ceiling prescribed for the same. This would lead to absurd

consequences and would be manifestly contrary to the intention of the

parties, who deliberately defined the “Total Project Cost” as the

lowest of the three alternatives

precisely to prevent such an outcome.

69. No rational commercial party could have intended that the

applicability of a ceiling, negotiated for the protection of one party,

should depend upon the unilateral election of the very party whom it

constrains. The deeming provision in the definition of “Termination

Payment” demonstrates that whether or not a disaggregation letter is

furnished, the contractually defined "Total Project Cost" remains

operative; the letter fixes the internal apportionment between debt and

equity, and nothing more. On the face of it, the letter is intended to

convey a “disaggregation”, not a unilateral re-valuation.

MISCONCEIVED RELIANCE ON THE EXPRESSION “ ONLY

THE AMOUNT SO CONVEYED SHALL FORM THE BASIS OF

COMPUTING TERMINATION PAYMENT” (OCCURING IN

THE DEFINITION OF “TERMINATION PAYMENT” AS

DEFINED UNDER ARTICLE 48)

70. The reliance placed by the Arbitral Tribunal on this expression is

untenable. The Arbitral Tribunal has, unfortunately, laid emphasis on

only a part of the relevant contractual provision while overlooking the

preceding as well as the succeeding parts of the same clause. The first

paragraph of the relevant clause defining “Termination Payment”

makes it expressly clear that the “Termination Payment” is to be

restricted to Debt Due and Adjusted Equity, which form part of the

“Total Project Cost.” The succeeding clarificatory paragraph refers

to the “Total Project Cost” and requires the Concessionaire to notify

the Authority of its disaggregation into Debt Due and Equity. The

stipulation that only the amount so conveyed or notified shall form the

basis for computing the “Termination Payment” was clearly not

intended to override the contractual ceiling contained in the definition

of the “Total Project Cost.” Had that been the intention of the parties,

nothing would have been easier than to expressly provide so.

71. The use of the expression “only the amount so conveyed shall form

the basis of computing the Termination Payment” was intended only

to preclude reliance upon extraneous sources for the purpose of

disaggregation. The concluding portion of the same paragraph is

significant. It provides that, in the event such disaggregation is not

FAO(OS)(COMM) 211/2026 Page 21 of 39

notified to the Authority, the Equity shall be deemed to be the amount

arrived at by subtracting the Debt Due from the “Total Project Cost.”

72. The above clearly demonstrates that the disaggregation letter is

only intended for the purpose of internal split between debt due and

equity; the outer limit as set out in the definition of the “total project

cost” is not rendered irrelevant.

THE FINDINGS QUA THE DISAGGREGATION LETTER DO

NOT CONCLUDE THE ISSUE

73. The Tribunal has devoted considerable attention to establishing

that the disaggregation letter dated 04.02.2019 exists; that the delay

in its submission was not attributable to any default or malafide on the

part of the Concessionaire; that its contents were not specifically

traversed by the Authority in its pleadings; and that the Independent

Engineer treated it as the formal disaggregation for the purpose of

computing the Termination Payment (paras 33 to 46 of the award).

This Court has no reason to disturb any of the said findings; they are

findings of fact within the exclusive domain of the Tribunal. The said

findings, however, do not carry the matter any further, inasmuch as

the existence, genuineness and bona fides of the letter were never

determinative of the controversy. The controversy concerns the legal

effect of the letter under the Concession Agreement and as to whether

it is capable in law of enlarging the "Total Project Cost" beyond the

contractual ceiling.

74. The reliance placed by the Tribunal on National Highway

Authority of India v. PNC-BEL (JV), 2019 SCC OnLine Del 9461 (at

para 46 of the award) is misplaced. It was held therein that the

certification by the Independent Engineer in that case, of rates in

respect of non-BOQ items, which the Engineer had certified and

submitted for approval, cannot be selectively disregarded by the

Authority. Evidently, the certification in question pertained to a

function which the contract contemplated from the Engineer. No such

function (for re-determining “Total Project Cost” in

derogation/disregard of the contractual ceiling) has been committed

to the Independent Engineer in the present case (as is evident from

contractual provisions noticed hereinbelow).

75. The reliance on Jetpur Somnath Tollways Limited v. National

Highways Authority of India, 2017 SCC OnLine Del 9453 (at para

53 of the award) is equally misplaced. The said decision was rendered

on petitions under Section 9 of the A&C Act (by the concessionaire

therein and by its lender), seeking interim measures of protection

pending arbitration, in the nature of a direction to NHAI to secure the

termination payment. The observations therein were, ex facie,

rendered at a prima facie stage, for the limited purpose of moulding

interim relief; they did not constitute a final adjudication of the

quantum of the termination payment. Further, the question considered

in paragraph 81 of the said decision was an altogether different one.

FAO(OS)(COMM) 211/2026 Page 22 of 39

NHAI had sought, on the strength of Recital B to the Common Loan

Agreement dated 19.08.2011 executed in that case (which recorded a

debt-equity ratio of 72.58:27.42 ) to import the said ratio so as to

make a further adjustment to the "Debt Due". It was in that context

that the Court observed that there was "admittedly, no such

stipulation in the Termination Payment clause that any such

adjustment is to be made prior to payment of the Debt Due" and that

"only the actual Debt Due has to be taken into account". The decision

thus declined to permit an adjustment extraneous to the contractual

provisions. The said judgement did not deal with the operation of a

definitional ceiling, forming an express part of the contractual text

itself. The said decision points against the respondent rather than in

its favour inasmuch as its ratio is fidelity to the „Termination

Payment‟ provisions as written. In the present case, the award

disregards the contractual ceiling of Rs.650 crore, and the words of

restriction in the definition of "Termination Payment".

76. Pertinently also, the function assigned to the Independent

Engineer under the Concession Agreement do not extend to

determining the "Total Project Cost". Article 23.2.1 provides that the

Independent Engineer "shall discharge its duties and functions

substantially in accordance with the terms of reference set forth in

Schedule-Q." The relevant portions of Schedule-Q read as under:-

“3.1 The role and functions of the Independent Engineer shall include

the following:

(vi) determining, as required under the Agreement, the costs of any

works or services and/or their reasonableness; ...

8.1 The Independent Engineer shall determine the costs and/or their

reasonableness that are required to be determined by it under the

Agreement”

77. The cost-determination function of the Independent Engineer is a

power exercisable only in respect of costs which the Agreement

specifically requires his determination. No provision of the

Concession Agreement commits the determination of "Total Project

Cost" to the Independent Engineer. The definition of "Total Project

Cost" in Article 48.1 is self-executing: it is the lowest of three

arithmetically stated figures, subject only to the WPI proviso (as

already noticed). What the Independent Engineer was called upon to

examine was whether the disaggregation letter dated 04.02.2019 "be

considered by the Authority as acceptable within the definition as

stipulated in the Concession Agreement" ( para 34 of the award). This

is a question of the timeliness and procedural acceptability of the

letter. The Tribunal's treatment of the Independent Engineer's

recommendation as though it were a determination of quantum does

violence to both the language and purport of the contract. The

Agreement nowhere empowers the Independent Engineer to approve,

sanction or certify a substitute "Total Project Cost" put forward

FAO(OS)(COMM) 211/2026 Page 23 of 39

unilaterally by the Concessionaire.

REPUGNANCY ARGUMENTS

78. The respondent has vehemently argued that the definition of the

“Total Project Cost” as on the COD is repugnant to the meaning

sought to be given by NHAI thereto. The said argument is thoroughly

misconceived.

79. Repugnancy can be said to arise only where the application of the

contractual definition results in a direct contradiction or absurdity. It

cannot be said to arise merely because the application of the

contractual definition results in a financially inconvenient outcome or

yields a lower recovery than that which the respondent would prefer.

80. Applying the “Total Project Cost” cap in the context of

“Termination Payment” does not create any absurdity or

contradiction. On the contrary, it produces precisely the outcome that

the parties agreed to when they executed the Concession Agreement.

The cap is not repugnant to the context of the “Termination

Payment”, rather, it is entirely consonant with it.

81. Importantly, as noticed hereinabove, the definition of the “Total

Project Cost” itself contains a termination-specific proviso

addressing WPI adjustments. A definition that expressly accounts for

a termination scenario cannot simultaneously be said to be repugnant

to the context of “Termination Payment.”

82. The authorities cited on behalf of the respondent in this behalf, far

from advancing its case, affirm the settled position that the defined

meaning is the rule and its displacement the exception. In K.V. Muthu

v. Angamuthu Ammal, (1997) 2 SCC 53, the Supreme Court held that

where a definition is preceded by the words "unless the context

otherwise requires", the definition is ordinarily to be applied and

given effect to, and may be departed from only if there is something in

the context to show that the definition could not be applied at all.

(paragraphs 10 to 12)

2

.

CLAUSE 1.4.2(a): NEITHER ATTRACTED NOR OF ANY

ASSISTANCE TO THE RESPONDENT

83. The Arbitral Tribunal has relied upon Article 1.4.2(a), which

provides that between two or more clauses, the specific clause

relevant to the issue under consideration shall prevail. Article 34.9.2

is indeed the specific provision governing the quantum of the

“Termination Payment” in the event of an Indirect Political Event.

However, the impugned majority award overlooks the fact that Article

34.9.2 operates by reference to the defined terms “Debt Due” and

“Adjusted Equity,” both of which are, in turn, defined by reference to

the “Total Project Cost.”

84. Thus, it is wholly untenable for the purpose of Article 34.9.2 to

ignore the definition of “Total Project Cost” inasmuch as the latter

FAO(OS)(COMM) 211/2026 Page 24 of 39

gives content to the relevant components of “Termination Payment”.

23. The LSJ while reaching to the conclusion of setting aside the

Arbitral Award to the extent of Claim No.1, located his interference

squarely within the ground of patent illegality under Section 34(2A) of

the Act of 1996, on the footing that the Tribunal‟s construction of the

TPC definition was not a construction that a fair-minded or reasonable

adjudicator could have arrived at on the words of the contract.

24. Notably, the law on when an arbitrator‟s interpretive exercise

crosses over into patent illegality is well settled. In Associate Builders

v. Delhi Development Authority

21

, the Supreme Court recognised that

while construction of contractual terms is ordinarily the exclusive

domain of the Arbitrator, this deference yields where the arbitrator

adopts a construction that no fair-minded or reasonable person could

adopt. This principle was carried forward into the statutory text of

Section 34(2A) of the Act of 1996 itself, as explained in Ssangyong

Engineering & Construction Co. Ltd. v. National Highways

Authority of India

22

, wherein the Court clarified that if the arbitrator

wanders outside the terms of the contract, or adopts a reading no

reasonable person would adopt, an error of jurisdiction results, falling

squarely within the new patent-illegality ground.

25. The distinction that emerges from this line of authority, and

which the LSJ also correctly drew upon, is between „interpreting‟ a

contract and „rewriting‟ it. An interpretation is the ascription of a

meaning that the words of the contract are reasonably capable of

bearing, however debatable that meaning might be; it is protected, and

21

(2015) 3 SCC 49

22

(2019) 15 SCC 131

FAO(OS)(COMM) 211/2026 Page 25 of 39

a court must not disturb it merely because another view is equally or

even more plausible.

26. By contrast, rewriting involves adding to, subtracting from, or

overriding what the parties actually agreed, so as to produce a bargain

the parties never made. This is precisely the defect identified by the

Supreme Court in PSA SICAL Terminals Pvt. Ltd. v. Board of

Trustees of V.O. Chidambranar Port Trust, Tuticorin

23

, and also

relied upon by the LSJ, wherein the Court held that an award that

effectively imposed upon the parties a bargain they had never struck

was held to be liable to interference as shocking the conscience of the

Court.

27. Applying this test, the central question before the LSJ was not

which of the two interpretations was better. The question was whether

the Tribunal had merely interpreted the definition of TPC or had

effectively rewritten it. The LSJ held that the Tribunal had rewritten

the definition, and it is this conclusion that now falls for consideration.

28. At its core, the dispute now raises one simple question: whether

the TPC for calculating the Termination Payment, is (i) the amount

determined under the three limbed definition under Article 48.1,

which is subject to a cap (as held by the LSJ), or (ii) the amount

notified by the Appellant to the Respondent through the

Disaggregation Letter as the actual project cost (as held by the

Arbitral Tribunal)?

29. On a considered examination of the Agreement as a whole, this

23

2021 SCC OnLine SC 508

FAO(OS)(COMM) 211/2026 Page 26 of 39

Court finds itself unable to fault the reasoning of the LSJ, inasmuch as

several provisions of the Agreement, when read together, support the

conclusion reached by him, which are examined hereunder.

30. Firstly, in the opinion of this Court, the Tribunal erred in

treating Article 34.9.2, which prescribed the formula for Termination

Payment, i.e., Debt Due and 110% of Adjusted Equity, as the only

specific provision governing the subject and, on that basis, permitting

it to override the definition of TPC contained in Article 48.1 by

invoking Article 1.4.2(a) of the Agreement.

31. However, the definition of TPC is itself a specific provision. It

expressly contemplates computation upon termination and contains a

termination-specific proviso dealing with WPI-based adjustment.

More importantly, it provides the basis for determining “Debt Due”

and “Adjusted Equity”, which are the very components used in the

formula under Article 34.9.2.

32. Where two provisions of a contract deal with the same subject,

the proper approach is to read them together and give effect to both,

rather than allowing one to override the other. This is what the

Impugned Judgment endeavours to do, it treats the definition of TPC

as prescribing the ceiling, while Article 34.9.2 provides the formula

for calculating the Termination Payment within that ceiling.

33. Such an interpretation gave effect to both provisions and

avoided rendering any part of the Agreement meaningless. On the

other hand, the Tribunal‟s interpretation, effectively rendered sub-

clause (c) of the TPC definition redundant. The Agreement must, as

far as possible, be construed in a manner that gives meaning and effect

FAO(OS)(COMM) 211/2026 Page 27 of 39

to all its provisions. The aforesaid position also stands recognised by

the Supreme Court in BGS SGS SOMA JV v. NHPC

24

, wherein it was

held that conflicting portions of a judgment must be harmonised by

reading the judgment as a whole and the same interpretive discipline

applies to contractual instruments.

34. Secondly, the LSJ was right in holding that the definition of

Termination Payment does not simply say that it consists of Debt Due

and Adjusted Equity; it says that it is „restricted to‟ the Debt Due and

Adjusted Equity „which form part of the Total Project Cost.‟ Words of

restriction and qualification deliberately incorporated into a definition

clause must be given meaning and effect.

35. Their purpose is precisely to cap the outer limit of the

obligation being defined. To read the clause as the Tribunal did,

permitting a Termination Payment computed on a debt and equity

figure with no relationship to the capped TPC, empties these words of

any operative content. This Court is unable to accept that

commercially sophisticated parties, negotiating a public infrastructure

concession running into decades, inserted words of limitation into the

very definition of the Respondent‟s termination liability without

intending them to limit anything.

36. Thirdly, the LSJ was right in holding that the proviso to the

TPC definition confirms, rather than dilutes, its application on

termination. If the parties had truly intended that the contractually

fixed TPC would become irrelevant upon termination, displaced

entirely by whatever figure the Appellant chose to notify, there would

24

(2020) 4 SCC 234

FAO(OS)(COMM) 211/2026 Page 28 of 39

have been no occasion for them to have inserted, within that very

definition, a proviso addressing how the TPC is to be adjusted for

WPI variation specifically „in the event of Termination‟.

37. The Agreement provides a specific mechanism for such

adjustment, namely, adjustment based on WPI variation, and where

such variation exceeds the prescribed limit, the adjustment is subject

to mutual agreement. No provision, however, permits the

Concessionaire to unilaterally enhance the TPC through a

Disaggregation Letter.

38. If the intention was that the contractually determined TPC

would cease to apply upon termination and could be replaced by any

figure notified by the Concessionaire, there would have been no need

for a termination-specific mechanism for adjustment of the TPC. The

existence of such a mechanism supports the view of the learned Single

Judge that the TPC continues to govern the computation of the

Termination Payment and may be adjusted only in the manner

provided under the Agreement. The Disaggregation Letter cannot be

treated as an independent or additional mechanism for enhancing the

TPC.

39. Fourthly, the LSJ rightly held that the function of

disaggregation is definitionally an internal apportionment, not a re-

valuation. The ordinary meaning of disaggregation, i.e., breaking a

known whole into its constituent parts, is itself instructive. The clause

requires the Appellant to notify the TPC as on COD and its break-up

between Debt and Equity. Whereas the deeming provision that

follows, equity to be treated as TPC less Debt Due, where no letter is

FAO(OS)(COMM) 211/2026 Page 29 of 39

furnished, shows that the entire clause is addressed to internal

allocation, not to establishing what the TPC itself is. To read a letter

whose stated purpose is disaggregation as instead performing the

function of re-fixing the aggregate itself is to invert the letter‟s own

name and purpose.

40. Fifthly, the LSJ was also right in holding that a unilateral

communication cannot vary a bilaterally agreed ceiling. It is

elementary that a written contract, once concluded, can be varied only

by the process the contract itself prescribes, or by the mutual

agreement of both parties and not by the unilateral act of one

contracting party purporting to notify a different figure to the other

contracting party. However, the Tribunal‟s approach effectively

permitted exactly this, it allowed a communication emanating solely

from the Appellant to operate as an amendment of a heavily

negotiated, capped definition from Rs. 650 crore (adjusted) to Rs.

1,045.55 crore. In this regard, it is to be noted that no principle of

contractual interpretation permits a party to unilaterally enlarge an

obligation which the other party undertook subject to a defined

ceiling.

41. Sixthly, the LSJ was right to say that the ceiling of Rs. 650

crore was based on the Respondent‟s estimated project cost at the RFP

stage and was intended to define the outer limit of its contingent

liability upon termination. To hold as the Tribunal did, that this ceiling

could be displaced merely because the Appellant subsequently

notified a higher actual cost would effectively shift the risk of cost

overruns and additional borrowing to the Respondent, without any

provision in the Agreement permitting such a reallocation.

FAO(OS)(COMM) 211/2026 Page 30 of 39

42. Seventhly, the reliance so placed on the Independent Engineer‟s

acceptance of the Disaggregation Letter also did not assist the

Tribunal‟s conclusion. This Court agrees that the Tribunal‟s treatment

of the Independent Engineer‟s recommendation as though it were a

determination of quantum does not do justice to both the language and

object of the contract, as the LSJ correctly held. Additionally, the

approval of the Financial Package also does not assist the Appellant,

and the LSJ rightly observed that, sub-clause (a) of the TPC definition

itself refers to the capital cost of the Project, as set forth in the

Financial Package, and the parties were fully alive to the fact that the

Financial Package would reflect a capital cost possibly exceeding Rs.

650 crore. As such, this figure stands internalised within the definition

itself under limb (a) and cannot render limb (c) otiose. This Court

finds no reason to disturb this reasoning and adopts it as its own.

Examination of contentions raised by the Appellant:

43. Learned counsel representing the Appellant has contended that

the debt and equity were raised with the approval of the Respondent,

following further scrutiny and acceptance of the Financial Package.

This contention, insofar as it rests on the proposition that such

approval assists the Appellant in enlarging the TPC, already stands

answered by this Court at paragraph no.42 above, where, adopting the

reasoning of the LSJ at paragraph no.58 of the Impugned Judgment, it

has been held that the Financial Package figure stands internalised

within limb (a) of the TPC definition and cannot render limb (c)

otiose. This Court sees no reason to re-examine that finding here and

confines the present discussion to the further and independent points

that arise from this contention.

FAO(OS)(COMM) 211/2026 Page 31 of 39

44. Independent of the observation made by the LSJ, we must

highlight that the consensual character of the Agreement precludes

any subsequent unilateral enlargement of the TPC; absent an express

contractual mechanism, mere review of the Financial Package cannot

be relied upon to enlarge the Respondent‟s liability.

45. While it is true that the Financial Package, reflecting a capital

cost of Rs. 992.58 crore was scrutinised and approved by the

Respondent prior to financial close. But this circumstance, far from

assisting the Appellant, only reinforces the correctness of the LSJ‟s

view. Had the parties intended, including at the stage of such

approval, that this higher, approved figure would operate as the TPC

for the purposes of Termination Payment, superseding the Rs. 650

crore ceiling, nothing prevented them from recording an express

amendment or addendum to the Agreement to that effect.

46. Indeed, Articles 5.2.2 and 5.2.3 of the Agreement required

drafts of the Financing Agreements and the Financial Package to be

submitted to the Respondent in advance, and provided that no change

or amendment thereto could be made without Respondent‟s written

consent. If the Appellant wished the reviewed and approved Financial

Package figure to serve as the operative TPC for termination purposes,

displacing or enhancing the Rs. 650 crore ceiling, it was open to it to

have this incorporated as an express stipulation or amendment to the

Agreement at that stage.

47. However, in the absence of any such contractually recorded

enhancement, the Agreement, having been entered into with the free

consent of both parties with full knowledge of the definitional cap,

FAO(OS)(COMM) 211/2026 Page 32 of 39

must be given effect to strictly as it stands; neither party can be

permitted to read into it, after the fact, a term enlarging its own

entitlement merely because a subsequent document, either the

Financial Package or the Disaggregation Letter, reflected a higher

figure.

48. It is a long-settled principle that where the terms of a contract

are unambiguous, effect must be given to them as they stand, and

neither a court nor a tribunal can substitute a different arrangement

merely because it may appear more fair or convenient. The Supreme

Court has repeatedly, by way its judgments in General Assurance

Society Ltd. v. Chandumull Jain

25

, and Nabha Power Ltd. v. Punjab

State Power Corporation Ltd.

26

, held that the commercial hardship or

subsequent convenience of a party cannot justify departing from the

terms expressly agreed between the parties.

49. Applying this principle, the subsequent review or approval of

the Financial Package by Respondent, in the absence of any

amendment to the Agreement enhancing the Rs. 650 crore ceiling

could not by itself alter the contractual TPC or enlarge the

Termination Payment. To hold otherwise would permit the Appellant

to unilaterally alter the agreed allocation of risk after the event. The

dispute before the Arbitral Tribunal was one concerning the

interpretation and application of the Agreement as executed, and not

an occasion to modify its terms or substitute a different bargain. Such

an interpretation would defeat the very purpose of reducing the

parties‟ bargain into a written and negotiated contract.

25

AIR 1966 SC 1644

26

(2018) 11 SCC 508

FAO(OS)(COMM) 211/2026 Page 33 of 39

50. The Appellant‟s contentions regarding the alleged conflation of

TPC with Termination Payment, and the characterisation of Article

34.9.2 as a self-contained provision, have already been addressed by

the LSJ in paragraph nos.83 and 84 of the Impugned Judgment and by

this Court at preceeding paragraph nos.30 to 33 above. Hence, there is

no need to revisit the same reasoning.

51. The contention of learned senior counsel representing the

Appellant, wherein heavy reliance was placed upon the expression

„unless repugnant to the context or meaning thereof‟, to argue that the

definition of TPC cannot be imported into Article 34.9.2 of the

Agreement, does not merit acceptance. This argument has also been

addressed by the LSJ under paragraph nos.78 to 82 of the Impugned

Judgment, wherein it was held that the cap provided under Article

48.1, in the context of Termination Payment, does not depict absurdity

or contradiction.

52. This Court finds the reasoning provided by the LSJ sound in

every particular. The relevant paragraphs of K.V. Muthu (Supra), as

extracted by the LSJ, make it clear that a „context otherwise requires‟

clause does not license departure from a defined term merely because

an alternative construction is available; rather it permits departure

only where the defined meaning cannot be applied at all to the

provision in question without producing an absurdity or contradiction,

which is a considerably higher threshold than mere inconvenience or a

less favourable financial outcome for one party.

53. The argument of the Appellant when analysed properly, does

not demonstrate that the TPC definition cannot be applied to Article

FAO(OS)(COMM) 211/2026 Page 34 of 39

34.9.2 of the Agreement; it only demonstrates that applying it yields a

smaller recovery than the Appellant would prefer, and this is precisely

the species of argument, paragraph no.79 of the Impugned Judgment

rejects.

54. Since the correctness of the LSJ‟s reliance on K.V. Muthu

(Supra) has been specifically assailed by learned senior counsel, it

deserves pointed examination. The decision does not permit a free

departure from a defined term merely because the contractual context

is perceived to be in tension with the defined meaning; rather, it

establishes a rule of restrained displacement, under which the

definition remains the governing rule, and the expression “unless the

context otherwise requires” operates only as an exception where

giving effect to the definition would defeat the object or purpose of

the instrument.

55. Measured against this standard, the LSJ was correct in holding

that the exception has no application in the present case. A definition

which expressly contemplates the termination scenario and prescribes

a specific mechanism for its adjustment in that eventuality cannot, in

the same breath, be rendered inapplicable merely because the context

is one of termination.

56. In respect to contention of the Appellant covered under

paragraph nos.9.8 and 9.9, it may be noted that the ceiling of Rs. 650

crore, traceable to the Respondent‟s estimated project cost at the RFP

stage, was intended to define the outer limit of its contingent liability

upon termination. It could not be displaced merely because the

Appellant subsequently notified a higher actual cost, as already stands

FAO(OS)(COMM) 211/2026 Page 35 of 39

examined and accepted by this Court at paragraph no.41 above. To

permit such displacement would effectively shift the risk of cost

overruns to the Respondent without contractual sanction. What

remains for independent examination is the further and more specific

submission that Article 1.4.1 of the RFP itself disclaims any intention

that the estimate survive as a binding cap, a submission which,

although not argued in these precise terms before the LSJ, must

nevertheless be addressed.

57. In the considered view of this Court, this further submission

does not alter the outcome already reached by the LSJ. Whatever the

RFP‟s own terms may say about the provisional character of the

estimate for purposes of the bidding process, that estimate ceased to

be a mere pre-contractual approximation the moment it was

consciously carried forward and written into the operative definition

clause of the executed Agreement, as one limb of the three-limbed

„lowest of‟ formula under Article 48.1 of the Agreement.

58. In any event, the RFP is a pre-contractual document, and the

LSJ, under paragraph no.58 of the Impugned Judgment, has already

noted, in the context of rejecting reliance on the approved Financial

Package, that „in terms of Article 1.4.1 of the Concession Agreement,

the Agreement prevails over all other documents‟. It necessarily

follows that whatever qualification Article 1.4.1 of the RFP may

purport to place on the continued applicability of the RFP‟s estimates,

it cannot override or dilute a term that the parties, with full knowledge

of such estimate's provenance, chose to incorporate as a binding limb

of the definition in the concluded Agreement itself.

FAO(OS)(COMM) 211/2026 Page 36 of 39

59. The Appellant‟s submission under paragraph no.9.10 was not

urged before the LSJ, and consequently, has also not been dealt with

thereof. However, even upon an independent examination of the said

argument and the reliance placed on Nabha Power (Supra) and Haris

Marine Products (Supra), this Court finds it to be misconceived.

60. The business-common-sense canon of construction, as

explained in Nabha Power (Supra), is a tool for resolving genuine

ambiguity or for declining to imply a term into a contract‟s silence. It

authorises a Court to prefer the construction that avoids commercial

absurdity only where the contractual language itself admits of more

than one meaning. Even then, the implication of any additional term

must satisfy the strict test of business necessity, not the lesser test of

mere reasonableness or convenience to one party.

61. Similarly, Haris Marine Products (Supra), stands on no

different footing, it also addresses the construction of doubtful or

silent contractual language, not the displacement of an express,

unambiguous limitation because one party finds its consequences

commercially not viable. Moreover, the underlying premise of the

Appellant‟s argument itself is not sound. The risk that the Appellant‟s

actual project debt might, at completion, exceed the ceiling negotiated

at the RFP and definitional stage was a risk that the Respondent and

its lenders assumed when they structured the financing of the project.

It was not a risk the Respondent undertook to absorb, and nothing in

the Agreement suggests otherwise.

62. The consequence of enforcing the cap may leave certain lenders

less than fully satisfied out of the Termination Payment is a

FAO(OS)(COMM) 211/2026 Page 37 of 39

consequence of the parties‟ own bargain, not an absurdity of the kind

that permits a court or tribunal to depart from the plain words of that

bargain. Accordingly, the Court finds no substance in the reliance

placed on Nabha Power (Supra) and Haris Marine Products (Supra),

and, if anything, this Court finds that the reasoning in Nabha Power

(Supra), if properly understood, operates against, rather than in favour

of, the Appellant‟s case.

Tribunal’s construction of the Agreement was not a possible view

63. Having examined the findings of the LSJ and the contentions of

the Appellant, it remains to determine, in the context of patent

illegality, why the Tribunal‟s interpretation falls outside the

permissible limits of contractual interpretation, despite the broad

latitude ordinarily available to an arbitral tribunal in interpreting a

contract.

64. In the present case, as discussed under paragraph nos. 30 to 62

of this judgment, the Tribunal‟s construction could not be sustained

merely as an alternative interpretation of the Agreement. An arbitral

tribunal is entitled to construe contractual provisions and to adopt a

plausible interpretation where the language admits of more than one

meaning. It cannot, however, give a provision a meaning which is

inconsistent with an express limitation elsewhere in the Agreement, or

confer upon a subsequent notification a contractual effect which the

Agreement does not provide.

65. The contractual scheme, read as a whole, does not permit the

TPC to be enlarged through the Disaggregation Letter or the

subsequently approved Financial Package so as to displace the agreed

FAO(OS)(COMM) 211/2026 Page 38 of 39

ceiling. In treating the Disaggregation Letter as capable of enhancing

the TPC notwithstanding the Rs. 650 crore ceiling, the Tribunal failed

to give effect to an express contractual limitation and thereby enlarged

the Respondent‟s liability without any contractual mechanism

authorising such variation.

66. Such an interpretation cannot be reconciled with the contractual

scheme as a whole and, in effect, substitutes a different allocation of

risk for that which the parties had agreed. It therefore travels beyond a

mere disagreement on interpretation and amounts to altering, rather

than interpreting, the contractual arrangement between the parties.

67. Therefore, this Court is unable to accept that the Tribunal‟s

construction can be characterised as a possible view merely because

an arbitral tribunal ordinarily enjoys latitude in interpreting a contract.

The Tribunal‟s construction consequently falls outside the permissible

limits of contractual interpretation and attracts the ground of patent

illegality as exercised by the LSJ.

68. Before parting, we must appreciate the clarity, depth and

analytical rigour with which the LSJ has dealt with the intricate

questions of contractual construction arising in the present case. The

Impugned Judgment reflects a careful and nuanced examination of the

contractual framework, the relevant provisions and the competing

interpretations advanced by the parties and demonstrates a faithful

application of settled principles governing the interpretation of

commercial contracts.

FAO(OS)(COMM) 211/2026 Page 39 of 39

D. CONCLUSION:

69. For the reasons set out above, this Court finds no error in the

learned Single Judge‟s decision to set aside the Arbitral Award insofar

as Claim Nos. 1 and 2 are concerned. The learned Single Judge

remained within the limited scope of Section 34 and correctly found

that the Tribunal‟s construction amounted to rewriting the Concession

Agreement, rather than a permissible interpretation of its terms,

thereby attracting the ground of patent illegality.

70. The learned Single Judge was also correct in reading the TPC

definition and the Termination Payment clause harmoniously, as

complementary provisions forming part of the same contractual

scheme. This Court, while exercising jurisdiction under Section 37,

has confined its examination to the legality of the exercise undertaken

under Section 34 and has not re-appreciated the merits of the dispute.

71. Therefore, no ground for interference under Section 37(1)(c) of

the Act of 1996 is made out.

72. Accordingly, the Impugned Judgment insofar as it sets aside the

Arbitral Award on Claim Nos.1 and 2, is affirmed, and the present

Appeal, stands dismissed.

73. Pending applications stands disposed of.

ANIL KSHETARPAL , J.

SHAIL JAIN, J.

SEPTEMBER 28, 2026

jai/hr