NATIONAL HIGHWAYS AUTHORITY OF INDIA  Vs PUNJAB NATIONAL BANK & ANR.

OMP (COMM.) 442/ 2020 Page 1 of 56
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 7th
Pronounced on: 4 August, 2020
th
January , 202 1
+ O.M.P. (COMM) 442/2020 & I.A. 6166/2020
NATIONAL HIGHWAYS AUTHORITY OF INDIA
….. Petitioner
Through: Ms. Maninder Acharya,
Sr. Adv. wi th Mr. Viplav
Acharya, Mr. Sumit Gupta and
Ms. Neetica Sharma, Advs.

versus

PUNJAB NATIONAL BANK & ANR. ….. Respondents
Through: Ms. Ginny Rautray,
Ms.Ya shika Sarvaria and Ms.
Mitansha Chopra, Advs. for R –
1, Mr. Dharmendra Rautray and
Ms. Tara Shahani, Advs. for R –
2

CORAM:
HON’BLE MR. JUSTICE C. HARI SHANKAR

% 04.01.2021 JUDGMENT
(Video-Conferencing)

1. The National Highways Authority of India (NHAI) seeks, by
means of this petition, under Section 34 of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as “the 1996 Act”), to
challenge the Award, dated 24th March, 2020, of the learned Arbitral
2021:DHC:7OMP (COMM.) 442/ 2020 Page 2 of 56
Tribunal. The extent, to which NHAI is aggrieved by the impugned
Award, would become appare nt from the recital that follows.

Facts
2. NHAI invited bids, for construction, operation and maintenance
of the Jetpur -Somnath section of NH -8D, spanning 127 km, in the
state of Gujarat, on Design, Build, Finance, Operate and Transfer
(DBFOT) basis. The b id of a consortium, comprising IDFC Projects
Ltd and PLUS Expressways Berhad, of which IDFC Projects Ltd was
the lead member, was accepted, and a letter of award, dated 13th

September, 2010, was issued in favour of the said consortium. The consortium, subsequently, incorporated a Special Purpose Vehicle, i.e. Jetpur Somnath Tollways Pvt. Ltd. (Respondent No 2 herein, and
referred to, hereinafter, as “JST”), for executing the contract.
3. A Concession Agreement, dated 7
th February, 2011, followed,
between JST and NHAI. Article 3.1 of the Concession Agreement
granted the exclusive right, licence and authority to construct, operate
and maintain the Project Highway, for 30 years from the A ppointed
Date, to JST. Subsequently, the Appointed Date was fixed, with
consent of all parties, as 31st March, 2012, as recorded in the Minutes
of the Meeting held, among the parties, on 27th
March, 2012. Among
the covenants of the Concession Agreement were the following:
(i) Article 14 dealt with the “Completion Certificate”.
Clause 14.2 stipulated that, upon completion of the c onstruction
2021:DHC:7OMP (COMM.) 442/ 2020 Page 3 of 56
works, and on tests, carried out thereon, being successful, the
Independent Engineer would issue, to the Concessionaire and NHAI, a Completion Certificate, in the form set forth in
Schedule J to the Concession Agreement. Clause 14.3 provided
for issuance of a Provisional Certificate, and read, with its sub –
Clauses, thus:

“14.3 Provisional Certificate

14.3.1 The Independent Engineer may, at the request
of the Concessionaire, issue a provisional certificate of
completion substantially in the form set forth in
Scheduled- J (the “Provisional Certificate”) if the
Tests are successful and the Project Highway can be
safely and reliably placed in commercial operation
though certain works of things forming part thereof are
outstanding and not yet complete. In such an event, the Provisional Certificate shall have appended thereto
a list of outstanding items signed jointly by the
Independent Engineer and the Concessionaire (the
“Punch List”); provided that the Independent
Engineer shall not withhold the Provisional Certificate
for reason of any work remaining incomplete if the
delay in completion thereof is attributable to the
Authority.
14.3.2 The Parties hereto expressly agree that
Provisional Certificate under this Clause 14.3 may,
upon request of the Concessionaire to this effect, be
issued for operating part of the Project Highway, if at
least 75% (seventy -five percent) of the total length of
the Project Highway has been completed. Upon the
issue of such Provisional Certificate, the provisions of
Article 15 shall apply to such completed part.”

The Punch List items were required to be completed in terms of
Clause 14.4, which read as under:
2021:DHC:7OMP (COMM.) 442/ 2020 Page 4 of 56

“14.4 Completion of Punch List items

14.4.1 All items in the Punch List shall be completed
by the Concessionaire within 90 (ninety) days of the
date of issue of the Provisional Certificate and for any
delay thereafter, other than for reasons solely
attributable to the Authority or due to Force Majeure,
the Authority shall be entitled to recover Damages
from the Concessionaire to be calculated and paid for
each day of delay until all items are completed, at the
lower of (a) 0.1% (zero point one percent) of the
Performance Security, and (b) 0.2%(zero point two
percent) of the cost of completing such items as
estimated by the Independent Engineer. Subject to
payment of such Damages, the concessionaire shall be
entitled to a further period not exceeding 120 (one
hundred and twenty) days for completion of the Punch
List items. For the avoidance of doubt, it is agreed that if completion of any item is delayed for reasons solely
attributable to the Authority or due to Force Majeure,
the completion date thereof shall be determined by the
Independent Engineer in accordance with Good
Industry Practice, and such completion date shall be
deemed to be the date of issue of the Provisional
Certificate for the purposes of Damages, if any, payable for such item under this Clause 14.4.1.
14.4.2 Upon completion of all Punch List items, the
Independent Engineer shall issue the Completion
Certificate. Failure of the Concessionaire to complete
all the Punch List items within the time set forth in
Clause 14.4.1 for any reason, other than conditions constituting Force Majeure or for reasons solely
attributable to the Authority, shall entitle the Authority
to terminate this Agreement.”

(ii) Article 26 dealt with “Concession Fee”. Clause 26.1,
thereunder, required JST to pay, to NHAI, a concession fee of
Re. 1 per annum, along with the premium specified in Clause
26.2. Clause 26.2 read thus:
2021:DHC:7OMP (COMM.) 442/ 2020 Page 5 of 56

“26.2 Additional Concession Fee

26.2.1 Without prejudice to the provisions of Clause
26.1, the Concessionaire agrees to pay to the
Authority, on the COD Date, a Premium in the form of
an additional concession fee equal to ₹ 22.71 crore
(Rupees Twenty Two Crore and Seventy One Lakhs
Only) as due to the authority during that year, due and
payable for the period remaining in that year; and for
each subsequent year of the Concession Period, the
premium shall be determined by increasing the amount
of Premium in the respective year by an additional 5%
(five percent) as compared to the immediately
preceding year. For the avoidance of doubt, the
Premium for all subsequent years shall be determined
by increa sing the amount of premium by 5% as
compared to the immediately preceding year.

For avoidance of doubt it is clarified that the term
‘Premium’ as referred to in para above shall be as
applicable for one financial year. In accordance with
and in compliance with the terms of this agreement, if
payment of such ‘Premium’ is due and payable only
for part of such financial year, then only pro-rata
payments @1/12th of such premium shall be payable
for each month of such part financial year for which such Premium payments is due as payable. For the
purpose of assessing the amount due for payment on
such payment of Premium, part of a month shall be
deemed to be a full month. In such circumstances the
subsequent year as referred to in para above, for the
purpose of 5% annual escalation, shall fall to
commence on 1
st
of April of the immediately
succeeding financial year.
26.2.2 The Premium payable under Clause 26.2.1 shall
be deemed to be part of the Concession Fee for the
purposes of this Agreement.”

2021:DHC:7OMP (COMM.) 442/ 2020 Page 6 of 56
(iii) Article 37 of the Concession Agreement dealt with the
termination thereof. Clause 37.1, thereunder, dealt with
termination for default on the part of the concessionaire (i.e.
JST), and sub -clause 37.1.1 enumerated the categories of
defaults, the commission of w hich by the concessionaire, or
omission, on the part of the concessionaire, to cure the defaults
within the cure period, would deem the concessionaire to be in
default of the Concession Agreement. Sub- clause (f) covered
non-completion of the Punch List it ems within the period set
forth in Clause 14.4.1. Sub-clause 37.1.2 entitled NHAI, on the
occurrence of such a Concessionaire Default, to terminate the
Concession Agreement, by issuance of a Termination Notice to
JST, subject to 15 days’ advance communica tion of such
intention to JST, so as to enable JST to represent thereagainst. Clause 37.1.3 required the Senior Lenders, funding JST, to be
intimated of such intention, and read thus:

“37.1.3 The Authority shall, if there be Senior
Lenders, send a copy of its notice of Intention to issue a Termination Notice referred to in Clause 37.1.2 to
inform the Lenders Representative and grant 15
(fifteen) days to the Lenders’ Representative, for
making a representation on behalf of the Senior
Lenders stating the intention to substitute the
Concessionaire in accordance with the Substitution
Agreement. In the event the Authority receives such
representation on behalf of Senior Lenders, it shall, in
its discretion, either withhold Termination for a period
not exceeding 180 (one hundred and eighty) days from
the date of such representation or exercise its right of
Suspension, as the case may be, for enabling the
Lenders’ Representative to exercise the Senior
Lenders’ Right of substitution in accordance with the
Substitution Agreement:
2021:DHC:7OMP (COMM.) 442/ 2020 Page 7 of 56

Provided that the Lenders’ Representative may, instead
of exercising the Senior Lenders’ right of substitution,
procure that the default specified in the notice is cured
within the aforesaid period of 180 (one hundred and
eighty) days, an d upon such curing thereof, the
Authority shall withdraw its notice referred to above and restore all the rights of the Concessionaire :
Provided further that upon written request from the
Lenders’ Representative and the Concessionaire, the
Authority shall extend the aforesaid period of 180 (one
hundred and eighty) days by such further period not
exceeding 90 (ninety) days, as the Authority may deem
appropriate.”

Clause 37.2 dealt with termination for “Authority Default”, i.e.
any default on the part of N HAI.

(iv) Clause 37.3 dealt with “Termination Payment”. Sub –
clauses 37.3.1, 37.3.2 and 37.3.3, thereunder, merit
reproduction, thus:

“37.3.1 Upon Termination on account of a
Concessionaire Default during the Operation ,the Authority shall pay to the Concessionaire , by way of
Termination Payment, an amount equal to 90% (ninety
per cent) of the Debt Due less Insurance Cover,
provided that if any insurance claims forming part of
the Insurance Cover are not admitted and paid, then
80% (eighty per cent) of such unpaid claims shall be
included in the computation of Debt Due. For the avoidance of doubt, the Concessionaire hereby
acknowledges that no termination Payment shall be
due or payable on account of a Concessionaire Default
occurring prior to COD.

37.3.2 Upon Termination on account of an Authority
Default, the Authority shall pay to the Concessionaire,
by way of Termination Payment, an amount equal to:
2021:DHC:7OMP (COMM.) 442/ 2020 Page 8 of 56

(a) Debt Due; and
(b) 150% (one hundred and fifty per cent) of the
Adjusted Equity.

37.3.3 Termination P ayment shall become due and
payable to the Concessionaire within 15 (fifteen) days
of a demand being made by the Concessionaire to the
Authority with the necessary particulars, and in the
event of any delay, the Authority shall pay interest at
the rate equal to 3% (three percent) above the Bank
Rate on the amount of Termination Payment remaining
unpaid; provided that such delay shall not exceed 90
(ninety) days. For the avoidance of doubt, it is expressly agreed that Termination Payment shall
constitute full discharge by the Authority of its
payment obligations in respect thereof hereunder.”

4. The Project was financed by a consortium of lenders, of which
PNB, Respondent No. 1 herein, was the lead lender. Accordingly, on
16th
August, 2011, a tripartite Escr ow Agreement was executed among
NHAI, JST and PNB. Clauses 3.2 and 4.2 of the Escrow Agreement
read as under:
“3.2 Deposits by the Authority

The Authority agrees and undertakes that, as and when due
and payable, it shall deposit into and/or credit the E scrow
Account with:

(a) Grant and any other monies disbursed by the
Authority to the Concessionaire;
(b) Revenue Shortfall Loan;

(c) all Fee collected by the Authority in exercise of
its rights under the Concession Agreement; and
2021:DHC:7OMP (COMM.) 442/ 2020 Page 9 of 56
(d) Termination Payments;

Provided that, notwithstanding the provisions of Clause 4.1.1,
the Authority shall be entitled to appropriate from the
aforesaid amounts, any Concession Fee due and payable to it
by the Concessionaire and the balance remaining shall be
deposited into the Escrow Account.

4.2 Withdrawals upon Termination

Upon Termination of the Concession Agreement, all amounts
and the credit of the Escrow Account shall, notwithstanding
anything in this Agreement, be appropriated and dealt with in
the following order:

(a) all taxes due and payable by the Concessionaire
for and in the respect of the Project Highway;
(b) 90% (ninety per cent) of Debt Due excluding
Subordinated Debt;

(c) outstanding Concession Fee;

(d) all payments and Damages certified by the
Authority as due and payable to it by the
Concessionaire pursuant to the Concession Agreement
including {Premium} , repayment of Revenue Shortfall
Loan and any claims in connection with or arising out
of Termination;

(e) the retention and payments arising out of , or in
relation to, the liability for defects and deficiencies set
forth in Article 39 of the Concession Agreement;

(f) outstanding Debt Service including the balance
of Debt Due;
(g) outstanding Subordinated Debt;
(h) incurred or accrued O & M Expenses;
(i) any other payments required to be made under
the Concession Agreement; and

2021:DHC:7OMP (COMM.) 442/ 2020 Page 10 of 56
(j) balance, if any, in accordance with the
instructions of the Concessionaire:

Provided that the disbursements specified in Sub-
clause (j) of this Clause 4.2 shall be u ndertaken only
after the Vesting Certificate has been issued by the
Authority.”

(Emphasis supplied)

5. The Concession Agreement also required JST to construct 19.8
km of the Junagarh Bypass. Acquisition of land, for the said purpose,
was sub judice , and wa s cleared by the Supreme Court, vide a
judgement rendered in March, 2015. Following thereupon, JST submitted a work program to NHAI, whereunder work on the
Junagarh Bypass was to start on 1
st October 2015, and was to be
completed within 540 days, i.e. by 9th May, 2017. Accordingly, on 4th

May, 20 15, the Independent Engineer of NHAI issued a Provisional
Completion Certificate, including the Junagarh bypass in the Punch
List.
6. Article 15 of the Concession Agreement required the Highway
to be put to commercial use on 4th May, 2015. NHAI alleges that 75%
of the land, required by JST, was provided by NHAI within a
reasonable time and that, on 17th
June, 2016, NHAI wrote to JST,
informing that the entire land required was available.
7. It is alleged that JST de layed construction of the Junagarh
Bypass, which amounted to an Event of Default within the meaning of
Clause 37.1.1(f) of the Concession Agreement. Further, it is alleged that JST defaulted in paying premium, @ ₹ 1,89,25,000/ – per month,
2021:DHC:7OMP (COMM.) 442/ 2020 Page 11 of 56
as required by C lause 26.2.1 of the Concession Agreement, during the
period from May, 2015 (as the Provisional Completion Certificate was
issued on 4th May, 2015) till March 2016. During this period, it was
alleged that there was a default of payment of p remium, by JST, to the
extent of ₹ 36, 14,675/ –. According to NHAI, JST was required to pay
the said amount, along with the premium for the month of March 2016
and interest for the delay in payment of premium. Based on this
premise, NHAI addressed two cure period notices, dated 7th March,
2016 and 21st
April, 2016 to JST, granting JST 60 days, vide each
notice, to remedy the alleged defaults. Failure, on the part of JST, to
do so, it is alleged, constituted “Concessionaire Default”, within the
meaning of clause (k) of su b-clause 37.1.1 of the Concession
Agreement, which covered “breach of any of the Project Agreements
by JST”, which “caused a Material Adverse Effect”. According to NHAI, JST had breached the Concession Agreement by (i) failing to complete the Punch List i tems even after expiry of 60 days from the
Cure Period notices, (ii) failing to pay Premium of ₹ 1 ,89,25,000/ –,
with effect from March, 2016, thereby violating Clause 26.2.1 of the
Concession Agreement and (iii) failing to comply with its
Maintenance Oblig ations under Articles 17 and 18 of the Concession
Agreement. These defaults, allege NHAI, constitute “Events of Default”, under Clause 37.1.1 of the Concession Agreement.
8. JST, for its part, also issued a 90 day Cure Period Notice, to
NHAI, under Article 37.2.1 of the Concession Agreement, alleging defaults on the part of NHAI, on 13
th
May, 2016.
2021:DHC:7OMP (COMM.) 442/ 2020 Page 12 of 56
9. On 10th
August, 2016, NHAI again wrote to JST, evincing its
intention to terminate the project. As required by Clause 37.1.3 of the
Concession Agreement, a copy of the aforesaid Termination Notice
was also sent to the consortium of Senior Lenders, which was headed by PNB, in accordance with Clause 37.1.3 of the Concession Agreement, so as to give an opportunity, to the Senior Lenders, to
substitute JST with anoth er Concessionaire. However, the Senior
Lenders, including PNB, did not take any step to substitute JST.
10. On failure, on the part of JST, to remedy the aforesaid defaults,
and on the part of the Senior Lenders, led by PNB, to substitute JST,
NHAI terminate d the Concession Agreement, vide Termination Notice
dated 10
th
November, 2016.
11. JST responded vide a counter -Termination Notice, dated 17th

November, 2016, also seeking to terminate the Concession Agreement. Various allegations, against NHAI, were levelle d in the
said Termination Notice.
12. Consequent to termination of the Concession Agreement, by it,
allegedly for default of JST, NHAI claims that it had already
deposited, in the Escrow Account, ₹ 222.03 crores, and that the
remaining amount of Termination Payment, to be paid, was only ₹
6.14 crores, which NHAI was ready and willing to pay.
13. PNB and JST, however, maintained that the Termination
Payment, by NHAI, in the Escrow Account, was not in accordance
2021:DHC:7OMP (COMM.) 442/ 2020 Page 13 of 56
with Clause 37.3 of the Concession Agreement. OMP (I) (Comm)
221/2017, and OMP (I) (Comm) 227/2017 were, in the circumstances, preferred, before this Court, by JST and PNB, respectively. JST
contended that NHAI was required to pay a further am ount of ₹
359.19 crores into the Escrow Account, whereas PNB maintained that
NHAI had to pay a fu rther amount of ₹ 374.51 crores into the Escrow
Account, towards Termination Payment. JST prayed for a direction to
NHAI to deposit the said remainder of the Termination Payment,
whereas PNB prayed, additionally, that the lenders, including PNB, be permitted to withdraw the Termination Payment, after the default of ₹
374.51 crores was made up by NHAI.
14. Both the aforesaid petitions, i.e. OMP (I) (Comm) 221/2017
and OMP (I) (Comm) 227/2017, were disposed of, by a learned Single Judge of this Court, by a detailed and well considered judgement, on
31
st July, 2017. It is not necessary to enter into the specifics of the
findings of the learned Single Judge, as the ma tter travelled,
thereafter, to the Supreme Court, which directed the arbitral
proceedings to proceed uninfluenced by the said findings. Suffice it to
state that the learned Single Judge held that, irrespective of whether
the termination of the Concession Agreement was on account of
default of NHAI, or of JST – which was a matter which would be
adjudicated in the arbitral proceedings – NHAI was, in any event,
bound to pay, into the Escrow Account, by way of Termination
Payment, at least 90% of the “Debt Due ”. The “Debt Due ” being ₹
640 crores ( even as per the Concession Agreement), NHAI, held the
learned Single Judge, was bound to pay at least ₹ 576 crores,
2021:DHC:7OMP (COMM.) 442/ 2020 Page 14 of 56
constituting 90% thereof. The learned Single Judge held that NHAI
was not entitled to adjust, from the said payment , any amount
allegedly due to it, and that it could only recover any such amount by
raising a claim in the arbitral proceedings. NHAI , held the learned
Single Judge, was bound, in the first instance, to deposit 90% of the
Debt Due, thereafter to raise a dispute claiming the amounts allegedly
payable by JST to it, and proceed to arbitration to secure its claim . As
an amount of ₹ 222.03 crores was already deposited by NHAI in the
Escrow account, the learned Single Judge disposed of the OMPs with
the following directions to NHAI, PNB and JST (which, in the judgement of the learned Single Judge, is referred to as “JETPUR”):

“(i) JETPUR is directed to furnish an unconditional and
irrevocable cap bank Guarantee, in favour of NHAI,
undertaking to pay to NHAI an amount not exceeding Rs.
348.604 crores [i.e. 90% of 640.86 = 576.774 (minus) 222.03
{already paid} (minus) 6.14 {agreed to be payable by NHAI}
= 348.604]; and

(ii) on deposit of the Bank Guarantee, NHAI shall
forthwith deposit in the Escrow Account the sum of Rs.
354.744 crores (i.e. 348.604 + 6.14); and

(iii) the encashment of the Bank Guarantee shall be subject
to the final award of the Arbitral Tribunal; and

(iv) JETPUR shall keep the bank guarantee alive for unto
a period of four months after the making of the final award by
the Arbitration Tribunal; and

(v) Parties shall comply with the provisions of Section
9(2) of the Act.”
(Emphasis supplied)

2021:DHC:7OMP (COMM.) 442/ 2020 Page 15 of 56
15. At this juncture, it may be noted that the basic controversy,
before me, relates to the interpretation of directions (iii) to (v) of the
judgement of the learned Single Judge supra , specifically to the
interpretation of the expression “final award of (or by) the Arbitral Tribunal”. This is because two arbitral proceedings came to be initiated, both connected, one way or the other, to the aforesaid Concession Agreement and Escrow Agreement. One has been
concluded, by the passing of the impugned Award, whereas the other
is still continuing. The impugned Award has directed return of the
Bank Guarantee furnished by JST, to it, on the ground that the arbitral
proceedings stood concluded. NHAI contends that the afore -extracted
directions of the learned Single Judge required the Bank Guarantee to be kept alive till the conclusion of the presently pending arbitral proceedings. PNB and JST, per contra , contend that the “arbitral
proceedings”, to which the afore -extracted directio ns of the learned
Single Judge refer , are the arbitral proceedings which stand c oncluded
by the impugned Award and that, therefore, the learned Arbitral Tribunal was justified in directing release of the Bank Guarantee. Much, therefore, turns on what the learned Single Judge intended to
convey, when he referred to the “making of the final award by the
Arbitral Tribunal”. This direction has not been disturbed, though the
matter was carried to the Supreme Court. To that extent, therefore, it would be necessary to appreciate the true import of the directions issued by the learned Single Judge – but at the appropriate stage.

16. NHAI challenged the aforesaid judgement, dated 31st May,
2017, of the learned Single Judge, before the Division Bench of this Court, by way of FAO (OS) 165/2017 and FAO (OS) 166/2017.
2021:DHC:7OMP (COMM.) 442/ 2020 Page 16 of 56

17. Both these FAOs came to be dismissed, by the Division Bench
of this Court, vide judgement dated 27th October, 2017. NHAI carried
the matter, further, to the Supreme Court by way of SL P (C)
3508 7/2017 , whic h was disposed of, vide order dated 5th
January,
2018, with the following directions:
“(i) The finding by the High Court with regard to
encashment of bank guarantee is affirmed.

(ii) The petitioner shall pay a sum of Rs. 348.604 crores
within a span of six weeks from today.

(iii) If the bank seeks arbitration and the petitioner seeks
arbitration against the Bank, the same shall be arbitrated
upon.

(iv) The amount shall be kept in the Escrow Account as
directed by the High Court.

(v) Any finding record ed by the learned Single Judge or
the Division Bench on the merits of the claim shall not be relied upon in the arbitration proceedings.”
(Emphasis supplied)

18. On 29
th
January, 2018, NHAI deposited ₹ 341,63,19,200/ – (net
of TDS) in the Escrow Account , by way of compliance with the
directions of the Supreme Court.
Arbitral Proceedings
19. On 17th July, 2017, during the pendency of FAO (OS) 165/2017
and FAO (OS) 166 /2017 before the Division Bench of this Court, JST
invoked arbitration, for resolution of its disputes with NHAI, arising
2021:DHC:7OMP (COMM.) 442/ 2020 Page 17 of 56
from the Concession Agreement, under Clause 44.3 of the General
Conditions of Contract , which constituted a part thereof. The said
arbitral proceedings continue to remain pending before a learned
Arbitral Tribunal comprising three members. The composition of the
said learned Arbitral Tribunal is different from the composition of the learned Arbitral Tribunal which has passed the presently impugned
award , as there was no co nsensus , between the parties, to both
arbitrations being decided by the same learned Arbitral Tribunal.
20. The arbitral proceedings, from which the present petition
emanates, were initiated by notice invoking arbitration issued by PNB
on 28
th
August, 2017, under Clause 10.1 of the Escrow Agreement and
Clause 8.1 of the Substitution Agreement. PNB was, therefore, the
claimant before the learned Arbitral Tribunal, whereas NHAI and JST were Respondents Nos 1 and 2.
21. For the sake of convenience, the arbitration initiated by notice
dated 17
th July, 2017, of JST, would be referred to, hereinafter, as “the
first arbitration”, or the “first arbitral proceedings”, whereas the
arbitration initiated by notice dated 28th
August, 2017 of PNB would
be referred to as “the present arbitration”, or “the present arbitral proceedings”.
22. Consequent to PNB, NHAI and JST appointing their respective
Arbitrators, the learned Arbitral Tribunal, thus constituted, entered into the reference on 12
th
March, 2018.
2021:DHC:7OMP (COMM.) 442/ 2020 Page 18 of 56
23. During the pendency of the present arbitral proceedings, JST,
on 30th June, 2018, paid, to PNB, the balance 10% of the “Debt Due”.
Further, on 10th
August, 2018 , JST submitted a Bank Guarantee, to
NHAI, for ₹ 354.74 crores. The said Bank Guarantee stands extended
by JST. The impugned Award, of the learned Arbitral Tribunal,
directs NHAI to return this Bank Guarantee to JST. NHAI is
aggrieved thereby. As such, it is this Bank Guarantee which
constitutes the fulcrum of the controversy in the present proceedings.
24. PNB, vide it s Statement of Claim, prayed for the learned
Arbitral Tribunal to (i) declare that PNB was entitled to be paid 100% of the
Debt Due, under Clause 37.3.2 of the Concession Agreement,
“pursuant to an award passed in favour of” JST in the 1
st
(ii) direct NHAI, “upon an order passed in favour of (JST) in
the aforesaid arbitration proceeding”, to deposit into Escrow
Account the 100% Debt Due in accordance with Clause 3.2 of the Escrow Agreement, and
arbitral procee dings, pending before a different Arbitral
Tribunal (as already noted hereinabove),
(iii) direct NHAI to pay pre -arbitration, pendente lite and
future interest, till the date of realisation, for the delay in payment of 100% Debt Due .

25. At a bare glance, it is apparent that the reliefs, claimed by PNB
in the present arbitral proceedings, were conditional on the outcome of
the first arbitral proceedings. What, essentially, PNB sought, in the
2021:DHC:7OMP (COMM.) 442/ 2020 Page 19 of 56
present arbitration, was to secure its entitlement to payment, in the
event of JST succeeding in the first arbit ral proceedings .

26. As against this, NHAI, in its Statement of Defence, filed in the
present arbitration, prayed that PNB be held to be disentitled to any
relief, that its claims be dismissed, and that the amount of ₹
3,48,60,40,000/ –, deposited by NHAI in the Escrow Account, be
reimbursed to it.
27. JST filed its Statement of Defence, along with a counter -claim,
seeking an award, against NHAI, for all arbitration costs, legal fees,
venue costs and other expenses, together with interest.

28. In the present arbitration, JST, on 9
th January, 2019, moved an
application, praying for an interim award, inter alia directing NHAI to
(i) pay 100% of the Debt Due , of ₹ 1 ,21,76,43,327/ –, along with
interest on the 10% of Debt Due paid by JST on 28th June, 2018 and
30th June, 2018 and (ii) release the Bank Guarantee, dated 10th
August,
2017, submitted by JST for an amount of ₹ 348.604 crores.
29. PNB, vide application dated 11th January, 2019, amended its
Statement of Claim, for a declarati on, by the learned Arbitral
Tribunal, that NHAI was liable to pay 90% of the Debt Due towards
Termination Payment under Clause 37.3.1 of the Concession
Agreement, which stood secured by Bank Guarantee furnished by JST
in terms of the directions contained i n the judgement dated 27th
October, 2017, of the Division Bench of this Court in FAO (OS)
2021:DHC:7OMP (COMM.) 442/ 2020 Page 20 of 56
165/2017 and FAO (OS) 166/2017, and the order, dated 5th
January,
2018, of the Supreme Court in SLP (C) 35087/2017. The objection, by
NHAI, to the aforesaid amendment, on the ground that the amended
prayer was beyond the scope and ambit of the present arbitration, was
dismissed, by the lea rned Arbitral Tribunal which went on to frame
the following additional issue, consequent on the said amendment:
“Whether the Claima nt is entitled and Respondent No.
1/NHAI is liable to pay 90% of the Debt Due towards
Termination Payment in respect of which the Claimant has
received payment pursuant to a Bank Guarantee submitted by
Respondent No 2/JSTPL and consequential reliefs.”

The Award, the Challenge and the Analysis thereof

30. The learned Arbitral Tribunal went on to decide the claims, of
PNB, thus.

31.1 Re. Claim (a)

PNB sought, by this claim, a declaration, from the learned Tribunal that, consequent to the possible award, in the first arbitration, being in
favour of JST, PNB would be entitled to be paid 100% of the Debt
Due. Noting the fact that, in any case, PNB had already received
payment of 100% of the Debt Due , the learned Arbitral Tribunal held,
correctly, that no awa rd could be passed on this claim, as it was
dependent on the award in the first arbitration being in favour of JST.
The claim was disposed of in the said terms. There is no challenge to
this part of the impugned Award, by either party.
2021:DHC:7OMP (COMM.) 442/ 2020 Page 21 of 56

31.2
Re. Claim (b)
31.2.1 Claim (b), of PNB, was for a declaration that NHAI was liable ,
under Clause 37.3.1 of the Concession Agreement, to pay 90% of the
Debt Due towards Termination Payment, against which Bank
Guarantee already stood submitted by JST. The learned Tribu nal has,
initially, noted the prevarication, on the part of NHAI, on its undertaking to pay 90% of the Debt Due under Clause 37.3.1 and how
it was only after the order, dated 5
th January, 2018, that the said
amount of ₹ 3,48 ,60,40,000/– was released by it, on 29th January,
2018. Strictly speaking, these details are not of much relevance, insofar as the claim of PNB is concerned. The learned Arbitral
Tribunal has held, unexceptionably, that Clause 37.3.1 of the
Concession Agreement was plain and unequivoca l, and clearly
required NHAI to pay 90% of the Debt Due , even in the case of
default on the part of the Concessionaire. The learned Single Judge, in his judgement dated 31
st May, 2017 supra , and the Division Bench,
in its judgement dated 27th October, 201 7 supra, rationalise d this
dispensation, as contained in the Concession Agreement, on two
grounds, i.e., firstly, that the entire investment, in the Project, was made by JST by loans from the lenders (led by PNB) and by equity sourcing, with no contributio n by NHAI and, secondly, that once the
commissioned work was undertaken, NHAI obtained full advantage
of the constructed Highway, practically free of cost. Both lines of
reasoning are appealing, and I am respectfully inclined to agree
therewith. In any e vent, whatever be the philosophy behind Clause
2021:DHC:7OMP (COMM.) 442/ 2020 Page 22 of 56
37.3.1 of the Concession Agreement, the dispensation contained in the
said Clause is clear and unambiguous. Even where the Concessionaire, i.e. JST in the present case, was at fault, NHAI was
bound to pay 90% of the Debt Due less Insurance Cover, as
Termination Payment, into the Escrow Account.

31.2.2 The learned Arbitral Tribunal has held that NHAI was not
entitled to deduct any amount from the Debt Due, and that it would have to agitate any claim, that it may have had against JST, in the first
arbitral proceedings. In so holding, the learned Arbitral Tribunal echoed the views of the learned Single Judge and the Division Bench,
in their judgement s dated 31
st May, 2017 and 2 7th October, 2017
supra . I find n o reason to differ therewith. The Concession
Agreement did not permit any deduction from the amounts payable by
NHAI under Clause 37.3.1. NHAI could not, of its own, tinker with the covenants of the Concession Agreement, to which it was a willing
signato ry. Even assuming, arguendo , that NHAI’s claims, against
JST, were in excess of the amount of 90% of the Debt Due, which it
was required to deposit under Clause 37.3.1 of the Concession Agreement, it would be for NHAI to establish its entitlement, to such
claims, against JST, in the first arbitral proceedings. As the learned
Single Judge correctly held in his judgement dated 31
st
May, 2017
supra , NHAI was required, as a consequence of the termination of the
Agreement, whether on account of the breach of N HAI or of JST, to
pay, at least 90% of the Debt Due, to PNB and other lenders. No
deductions, therefrom, were permissible.
2021:DHC:7OMP (COMM.) 442/ 2020 Page 23 of 56
31.2.3 The learned Arbitral Tribunal has correctly held that any
deductions, from the amount to be deposited, by NHAI into the
Escrow account in terms of Clause 37.3.2 of the Concession
Agreement, would infract Clause 3.2 (d) of the Escrow Agreement.
This is, in fact, obvious from a reading of the said clause, which obliges NHAI to deposit into, and/or credit the Escrow Account with, the Termination Payment, as and when due and payable. In fact,
Clause 3.2 requires NHAI to so undertake. There can be no question,
therefore, of any amount being deducted from the Termination Payment, to be deposited by NHAI into the Escrow Account, consequent on termination of the Concession Agreement.
31.2.4 That the alleged recoveries, to which NHAI claimed entitlement
from JST, were still inchoate, till the first arbitral proceedings reached
fruition, is also relevant. No pecuniary liability of JS T, towards
NHAI, could be said to have materialised, at any point prior thereto,
and the judgements cited by the learned Single Judge in his judgement
dated 31
st May, 2017 supra , are precisely on the point.1
31.2.5 Besides, the debt had been extended, by the le nders, led by
PNB, to JST, for the project forming subject matter of the Concession Agreement. Once the Concession Agreement itself stood terminated, the loaned amount was required to be returned. The lenders, led by
PNB, had no concern with the i nter se disputes between NHAI and
JST. It is for this reason that the Concession Agreement, rightly,

1 Iron and Hardware (India) Co. v. S hamlal & Bros., AIR 1954 Bom 423, successively approved in
U.O.I. v. Raman Iron Foundry, (1974) 2 SCC 231 and Gangotri Enterprises Ltd v. U.O.I., (2016) 11
SCC 720 ; Indian Oil Corporation Ltd v. S.P.S. Engineering Ltd, (2011) 3 SCC 507 and J. G. Engineers
Pvt Ltd v. U.O.I., (2011) 5 SCC 758
2021:DHC:7OMP (COMM.) 442/ 2020 Page 24 of 56
made deposit by NHAI , into the Escrow Account, as well as the
withdrawal, thereby, by the lenders, the inevitable sequitur to
termination of the Concessio n Agreement. The amounts claimed by
NHAI from JST were subject matter of the inter se dispute between
NHAI and JST. The right of NHAI to claim these amounts from JST cannot be gainsaid. That, however, was rightly made subject matter of a separate arbitr al proceeding, which is presently pending.
Whatever be the outcome of the arbitral proceeding, the fact that the Concession Agreement stands terminated and that, thereby, NHAI became liable to deposit, into the Escrow Account, at least 90% of the Debt Due , is an undeniable, even if uncomfortable (to NHAI),
contractual reality. The attempt of NHAI to “adjust”, from the said figure, the amounts which, according to it, are liable to be paid by JST, amounts to taking, from Peter, what is due from Paul. NHAI and Paul may be at loggerheads in the first arbitral proceeding; that cannot
delegate from the right of Peter, to the return of the debt extended by
it.

31.2.6 Which leaves us with the direction, by the learned Arbitral
Tribunal, to return, to JST, the B ank Guarantee of ₹ 354.74 crores,
furnished by it. The finding of the learned Arbitral Tribunal, in this regard, reads as under:

“68.6 (a) *****

(b) *****

(c) With regard to the later part of the aforesaid
issue of consequential reliefs and Respondent No 2’s
prayer made vide its submission dated 09.01.2019,
there appears to be no reason, in view of the AT’s
2021:DHC:7OMP (COMM.) 442/ 2020 Page 25 of 56
decision in respect of the first part of the issue, to keep
the aforesaid BG by the Respondent No 1 or to keep
the same alive by the Respondent No 2 beyond the
period of 4 months after taking the final award by AT
(refer Para 106 (iv) of Hon’ble High Court’s order dt.
31.07.2017 – Ann C-46, pg. 2445 – 2480 of CD-11).

*****

68.8 This Claim is decided in favour of the Claimant and as
against the Respondent No. 1. The Claimant is entitled in the
Respondent No. 1 is liable to pay 90% of Debt Due amount
towards termination payment. In view of this award, there
appears to be no reason to keep the aforesaid BG by the
Respondent No. 1 or to keep the BG alive by the Respondent
No. 2.”

31.2. 7 Huge stakes do not necessarily make out an arguable case. I
am completely unable to understand how NHAI can claim to be
aggrieved, in any manner, by the direction, of the learned Arbitral
Tribunal, to return the Bank Guarantee furnished by JST. The dispute
has nothing to do with the issue of breach of the Concession
Agreement, or as to the entity responsible for such breach. Whe ther
the breach of the Concession Agreement, if it occurred, was
attributable to NHAI or to JST, Cl ause 37.3. 1 of the Concession
Agreement cast on NHAI the liability, consequent on termination of
the Concession Agreement, to pay, into the Escrow Account, at least
90% of the Debt Due. There was no escaping this liability. 90% of the Debt Due, i.e. ₹ 3,48 ,60,40,000/ – was deposited, into the Escrow
Account, by NHAI. ₹ 6.14 crores, additionally, were required to be
paid, which NHAI undertook to pay. The learned Arbitral Tribunal correctly held that NHAI was liable to pay the said amount, re jecting
its contention that it was entitled to adjust, thereagainst, amounts
2021:DHC:7OMP (COMM.) 442/ 2020 Page 26 of 56
allegedly due, to it, by JST. The Bank Guarantee, furnished by JST,
was to secure the said deposit, to be made by NHAI. Once the deposit
stood made, the liability of NHAI to dep osit the said amount was
confirmed by the learned Arbitral Tribunal, and the entitlement, of PNB, to withdraw the said amount from the Escrow Account, was also confirmed, there was no justification, whatsoever, to permit NHAI to continue to hold on to the Bank Guarantee furnished by JST.
As the learned A rbitral Tribunal correctly observes, there was “no
reason” to keep the said B ank Guarantee by NHAI, or to insist on the
Bank Guarantee being kept alive by JST. The pendency of the first
arbitration can ha ve no bearing on the said Bank Guarantee, as the
Bank Guarantee was never furnished by JST to secure the claim of NHAI in the said arbitral proceeding. In case NHAI is award ed any
amount in the said arbitral proceeding, it would be entitled to
recovery, t hereof, from JST, but not by invocation or encashment of
the Bank Guarantee of ₹ 348.604 crores, furnished by JST. A bare
reading of directions (i) and (ii), in para -106 of the judgement, dated
31
st May, 2017, of the learned Single Judge in OMP (I) ( Comm)
221/2017 and OMP (I) (Comm) 227/2017, makes it clear that the furnishing of the Bank Guarantee, of ₹ 348.604 crores, by JST, was
essentially to counterbalance the deposit, by NHAI, into the Escrow
Account, of ₹ 354.744 crores. This is clear even from the figures
reflected in the said two directions, as the figure of ₹ 354.744 crores
has been arrived at by adding the figures of ₹ 348.604 crores and ₹
6.14 crores, representing the total amount which, even according to
the calculations of NHAI, constituted 90% of the Debt Due. In fact, a conjoint and juxtaposed reading of directions (i) to (iii) of the
2021:DHC:7OMP (COMM.) 442/ 2020 Page 27 of 56
judgement of the learned Single Judge make s this clear, beyond any
shadow of doubt. For ready reference, and at the cost of repetition,
these directions are reproduced as under:

“(i) JETPUR is directed to furnish an unconditional and
irrevocable Bank Guarantee, in favour of NHAI, undertaking to pay to NHAI an amount not exceeding Rs. 348.604 Crores
[i.e. 90% of 640.86 = 576.774 (minus) 222.03 {already paid} (minus) 6.14 {agreed to be payable by NHAI} = 348.604];
and

(ii) on deposit of the Bank Guarantee, NHAI shall
forthwith deposit in the Escrow Account the sum of Rs.
354.744 Crores (i.e. 348.604 + 6.14); and

(iii) the encashment of the Bank Guarantee shall be subject
to the final award of the Arbitral Tribunal; and ”

Clearly, what the learned Single Judge has done is to enforce Clause
37.3.1 of the Concession Agreement, by directing payment, in terms
of the said Clause, by NHAI, into the Escrow Account, and securing
the said payment by directing JST to furnish an equivalent Bank
Guarantee. Direction (iii) in para 106 of the judgement of the learned
Single Judge has to be understood in this context. So understood, the
hyper -semantic argument, regarding the exact ambit of the expression
“final award of the Arbitral Tribunal”, and as to whether the Bank
Guarantee is required to be kept alive to the rendition of the final award in the first arbitration, substantially loses significance. Seen in
the backdr op of directions (i) and (ii), direction (iii), in para 106 of the
judgement of the learned Single Judge clearly envisages keeping of the Bank Guarantee for ₹ 348.604 crores, to be furnished by JST in
accordance with the direction (ii), alive and unencashe d, only subject
to, and pending the decision on, the “final award” which adjudicates
2021:DHC:7OMP (COMM.) 442/ 2020 Page 28 of 56
on the entitlement of PNB to withdraw 90% of the Debt Due, and the
liability of NHAI to pay the said amount into the Escrow Account .
Once these aspects stood decided, i. e. once the liability of NHAI to
deposit, into the Escrow Account, 90% of the Debt Due, and the
entitlement of PNB to withdraw the said amount from the Escrow
Account, stood adjudicated by the learned Arbitral Tribunal, the
judgement of the learned Single Judge does not, in my view, envisage
keeping alive, of the Bank Guarantee of ₹ 354.74 crores, furnished by
JST, for a moment more. Whether the decision s on these aspects,
were arrived at in the present arbitral proceedings, or in the first arbitral procee dings, is totally irrelevant. To reiterate, t he “final
award”, to which dir ections (iii) and (iv), in para 106 of the judgement
of the learned Single Judge, refers, is obviously the final award which adjudicates the liability, of NHAI, to deposit 90% of t he Debt Due,
into the Escrow Account, and the entitlement of PNB to withdraw the
said amount from the Escrow Account. That final award has been
passed, and is under challenge in these proceedings. The decision, of
the learned Arbitral Tribunal, that NHAI was contractually obligated
to deposit, in the Escrow Account, ₹ 348.604 crores, and that PNB
was entitled to withdraw, from the said Escrow Account, the said
amount, is, in my view, unexceptionable and deserving of acceptance.
Requiring JST to continue to keep the Bank Guarantee for ₹ 348.604
crores, furnished by it, alive thereafter would, in my view, in fact do
violence to the directions of the learned Single Judge. This would,
additionally, also infract the directions issued by the Supreme Court,
as the very first direction was by way of affirmation of the findings of
this Court “with regard to encashment of bank guarantee”.
2021:DHC:7OMP (COMM.) 442/ 2020 Page 29 of 56

31.2. 8 The attempt, by NHAI, to link the Bank Guarantee for ₹
348.604 crores, furnished by JST, to the inter se dispute betwee n
NHAI and JST regarding the breach of the Concession Agreement and liabilities that arose as a consequence thereof is, in my view, completely misguided. This submission was advanced by Ms.
Maninder Acharya, learned Senior Counsel for NHAI, and is also
reflected in the “Note on Arguments”, filed by NHAI, which asserts
that “the issue with regard to the Bank Guarantee is between
Petitioner/NHAI and Respondent No 2/Concessionaire”. This, in my view, is incorrect. To repeat, the “issue with regard to the Ba nk
Guarantee” had nothing to do with the dispute between NHAI and JST. That dispute, which constitutes the subject matter of the first
arbitral proceeding, relates to breach of the Concession Agreement. Regardless of such breach, or of whether the breach was attributable
to NHAI or to JST , the termination of the Concession Agreement
resulted in liability, on the part of NHAI, to deposit, forthwith, 90% of the Debt Due , into the Escrow Account. The entitlement, of PNB, to
withdraw the said amount, also followed as an inevitable sequitur thereto. No requirement of continuing the Bank Guarantee, furnished
by JST as a security against the deposit by NHAI into the Escrow
Account could, conceivably, remain thereafter. It is, therefore, not correct on the part of NHAI to contend that the issue with regard to
the Bank Guarantee was between NHAI and JST.
31.2. 9 Para 7 of the Note on Arguments, submitted by NHAI
contends that “the Bank Guarantee issued by the Respondent No.
2021:DHC:7OMP (COMM.) 442/ 2020 Page 30 of 56
2/Concessionaire is to safeguard the i nterests of the Petitioner/NHAI”.
I am unable to agree . The purpose of directing JST to furnish the
Bank Guarantee for ₹ 348.604 crores was to secure the money
deposited by NHAI in the Escrow Account. That requirement, even
as per the directions issued by the learned Single Judge, which were affirmed, positively, by the Supreme Court, continued only till the stage of determination of the liability of NHAI to deposit the said
amount, and the entitlement of the lenders, led by PNB, to withdraw the said amount. It is, therefore, fallacious, on the part of NHAI, to contend that the Bank Guarantee was directed to be furnished, by JST, by the learned Single Judge, to safeguard the interests of NHAI.
31.2. 10 Ms. Acharya also sought to contend that, once 90% of the
Debt Due was deposited by NHAI, PNB had no surviving claim
against it. This submission, too, is not acceptable , as the deposit of
90% was, as per NHAI, required to be made only after adjusting the
amounts which, according to it, were payable by JST. The quantum
of the said amount was, therefore, in dispute, which was why PNB
had to initiate arbitral proceedings. It is apparently for this reason that the Supreme Court expressly reserved liberty to PNB to have its
entitlement adjudicated by arbitrati on. In this view of the matter, in
fact, the objection, of NHAI, to the maintainability of the present arbitral proceedings also stands revealed as misguided. It was only
consequent to initiation of arbitral proceedings by PNB, pursuant to
the liberty gr anted by the Supreme Court, an d adjudication of the rival
contentions, advanced before the learned Arbitral Tribunal, by the
impugned award, that the entitlement of PNB, to receive 90% of the
2021:DHC:7OMP (COMM.) 442/ 2020 Page 31 of 56
Debt Due from NHAI, could be said to stand crystallised. JST wa s
also a party to the present arbitral proceedings, and cannot be treated
as a stranger. The Bank Guarantee of ₹ 348.604 crores was furnished
by JST, as directed by the learned Single Judge, only to secure the deposit by NHAI into the Escrow Account of ₹ 354.644 crores . Once
the liability of NHAI in that regard stood concluded by the learned Arbitral Tribunal, and the entitlement of PNB to withdraw the said
amount also stood decided, JST was entitled, as of right, to return of
the Bank Guarantee furnished by it. This is all that the learned
Arbitral Tribunal has held, and I find no reason, whatsoever, to interfere therewith.
31.2.1 1 Ms. Acharya also sought to contend that, with the
payment, into the Escrow account, by NHAI, of 100% of the Debt Due, nothi ng survives for adjudication in the present arbitration. I am
unable to agree with this contention either. PNB had specifically
sought, in the present arbitration, a declaration, to the effect that
NHAI was liable to pay 90% of the Debt Due. The mere pa yment, by
NHAI, into the Escrow Account, of ₹ 354.744 crores (which was also
consequent to the affirmation, by the Supreme Court, of the directions
issued by the learned Single Judge in his judgement dated 31
st May,
2017 supra), could not extinguish the right of PNB, to seek such a
declaration. Payment of the amount, into the Escrow Account did not,
ipso facto, finalise, conclusively, the issue of liability of NHAI to
make the said payment, which would stand finalised only on the
declaration, to the said effe ct, by a competent adjudicating authority –
in the present case, by the learned Arbitral Tribunal. The contention,
2021:DHC:7OMP (COMM.) 442/ 2020 Page 32 of 56
of Ms . Acharya, that, with the payment of 100% of the Debt Due, into
the Escrow Account by NHAI, the grievance in the present arbitral
proce edings did not survive for consideration is not, therefore,
acceptable.
31.2.1 2 Every right, accruing to one party has, in law, to be
counterbalanced by a liability on another. Right and liability are two
sides of one coin. It was for this reason, appa rently, that PNB sought,
by way of an amendment to the prayer clause in its Statement of
Claim, a declaration that NHAI was liable to pay 90% of the Debt Due. Inasmuch as the right of PNB, to the said amount, was subject
matter of the present arbitration, the learned Arbitral Tribunal rightly
allowed the said amendment and, accordingly, framed a specific issue,
regarding the liability, of NHAI, to pay 90% of the Debt Due. There is, in fact, no challenge, in these proceedings, to the order, dated 1
st

July, 2019, of the learned Arbitral Tribunal, framing the said separate
issue. Once the issue was framed and, in deciding the same, the learned Arbitral Tribunal concluded that the liability to pay 90% of
the Debt Due was contractually of NHAI, no exception, i n my view,
can be taken to the consequent direction, of the learned Arbitral
Tribunal, to return the Bank Guarantee furnished by JST.
31.2.1 3 Ms. Acharya also sought to contend that JST had not
prayed, in its Statement of Defence filed before the learned Arbitral
Tribunal, for return of the Bank Guarantee of ₹ 348.604 crores,
deposited by it. Superficially seen, this submission may be correct, on
facts. The impugned Award notes, however, that, on 9
th January,
2021:DHC:7OMP (COMM.) 442/ 2020 Page 33 of 56
2019, a specific application was made, by JST, praying, inter alia, for
release of the aforesaid Ban k Guarantee for ₹ 348.604 crores. It may
not be strictly accurate, therefore, to urge that no such claim was made
by JST before the learned Arbitral Tribunal.
31.2.1 4 Moreover, the claimant before the learned Arbitral
Tribunal, in the present proceedin gs, was PNB, not JST. As such, the
principle that, in awarding claims to the claimant, the Arbitral Tribunal is not allowed to grant relief in excess of that claimed, may not directly apply. More closely viewed, it becomes apparent that, in directing the return of the Bank Guarantee to JST, the learned Arbitral
Tribunal has merely effectuated the directions contained in para 106 of the judgement, dated 31
st
May, 2017 supra , of the learned Single
Judge, which also received the unequivocal approval of the D ivision
Bench and, subsequently, of the Supreme Court. Furnishing of the Bank Guarantee had been directed, by the learned Single Judge, to
secure the deposit, by NHAI, into the Escrow Account, of ₹ 354.644
crores. Once the liability of NHAI, to make suc h deposit stood
decided, affirmatively, by the learned Arbitral Tribunal, and the right
of PNB, to the said amount, also stood confirmed, no further
requirement, of securing the deposit, remained. The direction to
return the Bank Guarantee to JST was, the refore, merely an inevitable
sequitur to the determination of the liability of NHAI, and of the right
and entitlement of PNB, and no exception can, therefore, be taken
thereto, on the ground that the learned Arbitral Tribunal granted relief,
to JST, in exc ess of that sought by it.
2021:DHC:7OMP (COMM.) 442/ 2020 Page 34 of 56
31.2.1 5 It has been further urged, by NHAI, that the learned
Arbitral Tribunal placed reliance on the judgement, dated 31st
May,
2017 supra, of the learned Single Judge, which was in contravention
of the directions issued by the Supreme Court. Ms. Acharya points
out that the Supreme Court had specifically proscribed the learned
Arbitral Tribunal from relying, in the arbitration proceedings, on the findings recorded by the learned Single Judge and the Division Bench
of the merits of the claim. Undoubtedly, the Supreme Court did so
direct. I am not, however, in agreement with Ms. Acharya in her
contention that the learned Arbitral Tribunal has relied on the findings
of the learned Single Judge or of the Division Bench. A holistic
reading of the impugned Award reveals that the learned Arbitral
Tribunal has arrived at its own conclusion regarding the final findings recorded by it. The reasoning and analysis, by the learned Arbitral Tribunal, for arriving at its findings regarding C laim No. (b) of PNB,
are to be found in as many as 17 sub- paras [numbered (a) to (q)] of
para 66 and, thereafter, in paras 68.1 to 68.8, of the impugned Award.
Paras 68.6 (c) and 68.8 already stands reproduced in para 31.2.6
supra . For ready reference, p aras 66 (e), (i) and (p), and paras 68.3 to
68.5, which are self -speaking, may also be reproduced, thus:
“66. From the above contractual provision reproduced
hereinabove as well as the correspondence exchanged
between the parties the following points emerged:

*****

(e) The Claimant, after issuance of the termination
notice on 10.11.2016 by Respondent No. 1 had
intimated the amount of Debt Due as on 10.11.2016
amounting to Rs. 640,85,99,733/– vide their letter
2021:DHC:7OMP (COMM.) 442/ 2020 Page 35 of 56
dated 16.11.2016.The 90% of this amount, as
calculated hereinabove, comes to ₹ 576.77 crores. The
Respondent No. 1 was just required to pay an amount
of ₹ 576.77 crores to the Claimant by
25.11.2016/05.12.2016 (as noted hereinabove).

*****

(i) The Respondent No. 1 had communicated the
Respondent No. 2 about their own calculations with regard to sum of 90% Debt Due. These calculations
were not according to the contractual provision. As
such, the calculations done by the Respondent No. 1
were uncalled for and deserve rejection. AT holds that
the calculations done by the Claimant for the sum of ₹
576.77 crores as 90% of Debt Due are correct and
have to be applied.

*****
(p) This action of the Respondent No. 1 to make
alleged recoveries, which had neither been ascertained
nor determined nor agreed by the Respondent No. 2
was not justified. If the Respondent No. 1 had any
grievance and claims against the Respondent No. 2,
they could have invoked the Dispute Resolution
Mechanism as per Article 44 of CA. In the absence of
this, the recovery of any amount from the 90% Debt
Due was clearly in breach of Clause 3.2(d) of Escrow
Agreement as well as the agreement agreed amongst
all the parties on 05.09.2016. Even otherwise, as per
various terms and conditions of CA, Escrow
Agreement and Substitution Agreement this amount of
90% Debt Due towards termination payments
belonged to the Claimant and as such any recovery by
the Respondent No. 1 towards any dispute claim with
Respondent No. 2 was not permissible to be made.

*****

68.3 The calculations submitted by the Respondent No. 1
with regard to the calculations of Debt Due were not correct as noted hereinabove as well as by Hon’ble High Court of
Delhi (Division Bench) in its order dated 31.10.2017.
2021:DHC:7OMP (COMM.) 442/ 2020 Page 36 of 56

68.4 The Respondent No. 1 is not entitled to effect any
recoveries from the 90% Debt Due amount payable to the
Respondent No. 2. The sum of 90% Debt Due belonged to
the Claimant in accordance with various provisions of
Escrow Agreement and Substitution Agreement. As such the
Respondent No. 1 could not have effected any recovery from
this sum which it has done, the Respondent No. 2. These recoveries are yet to be asserted that determined by any
Competent Forum in accordance with law, before they can be
enforced against the Respondent No. 2. The Respondent No.
1 has to get these recoveries adjudicated in accordance with
Article 44 of CA. Even the Respondent No. 1 was conscious
of the fact that these recoveries if any, have to be made from
the Respondent No. 2, as such the calculations of the Debt
Due and the proposed recoveries were sen t by the Respondent
No. 1 2 Respondent No. 2 and only a copy of the same had
been endorsed to the Claimant for information.”
(Emphasis supplied)

These, quite obviously, are findings of the learned Arbitral Tribunal,
and not mere echoes of the views expressed by the learned Single
Judge and the Division Bench. The mere reference, by the learned
Arbitral Tribunal, to the fact that the Division Bench had also taken a similar view, does not amount to “reliance”, by the learned Arbitral Tribunal, on the judgem ent of the Division Bench. In fact, in para
68.5 of the impugned Award, the learned Arbitral Tribunal goes on to
“hold” that PNB was entitled, and NHAI was liable to pay 90% of the
Debt Due towards termination payment, “in view of the findings as recorded hereinabove” – not, significantly, in view of the findings
recorded by the learned Single Judge, or by the Division Bench, of
this Court. It cannot, therefore, be said that the learned Arbitral
Tribunal proceeded in defiance of the directions of the Supr eme
Court.

2021:DHC:7OMP (COMM.) 442/ 2020 Page 37 of 56
31.3
Re. Claim (c)
31.3.1 Claim (c), of PNB, was for direction, to NHAI, to pay
interest, on the Debt Due, for the delay in payment thereof, reckoned
from 17th November, 2016, i.e. immediately after the details of the
Debt Due were furnishe d by PNB to NHAI, on 16th November, 2016.
Inasmuch as Claim (a), for being awarded 100% of the Debt Due, was
itself made conditional to the award in the first arbitration, the learned
Arbitral Tribunal held that it was not possible to award interest, in t he
present arbitral proceedings, to PNB, on 100% of the Debt Due.
Interest could, at best, be awarded on 90% of the Debt Due.
Accordingly, the learned Arbitral Tribunal awarded interest, on ₹
576.77 crores, representing 90% of the Debt Due, from 5th December,
2016 till the date of award @ 9% p.a. (amounting to ₹ 15.93 crores),
and pendente lite on the unpaid amount of ₹ 354.77 crores from 27th
March, 2017 to 29th
January, 2018 @ 9% p.a. (amounting to ₹ 27.03
crores), totalling ₹ 42.96 crores. Similarly, future interest, from the
date of the impugned Award till the date of actual payment of the
aforesaid amount of ₹ 42.96 crores has been awarded, by the learned
Arbitral Tribunal @ 9% p.a. The requirement of payment of this 9%
future interest component has, however, been deferred, by the learned
Arbitral Tribunal, by a period of 90 days from the date of award. In
other words, the learned Arbitral Tribunal has held that, if NHAI fails to pay ₹ 42.96 crores to PNB within three months from the passing of
the impugned Award, the said amount would carry interest @ 9% p.a.
2021:DHC:7OMP (COMM.) 442/ 2020 Page 38 of 56
31.3.2 No specific submissions were advanced, before me, by NHAI,
challenging the award of interest by the learned Arbitral Tri bunal.
The written submissions, filed by way of a “Note of Argument”, too,
do not address the issue of awarded interest. The only substantive
challenge to the award of interest, by the learned Arbitral Tribunal, is to be found in Ground Q in the petition , in which NHAI contests the
award of interest on the ground that ₹ 348.604 crores was paid, by it,
on 29
th January, 2018, within the period stipulated by the Supreme
Court in its order dated 5th
January, 2018.
31.3.3 Section 31(7)(a) of the 1996 Act empowers the Arbitral
Tribunal to include, in the sum for which the award is made, interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on
which the cause of action arose and the date on which the award is
made. The learned Tribunal has held, in the present case, that the
cause of action arose, in favour of PNB, on 17
th November, 2016, and
this finding has not been traversed by NHAI. Section 31(7)(a),
therefore, empowere d the learned Arbitral Tribunal to award interest,
to PNB, from 17th November, 2016 till the date of making of the
award. No jurisdictional error can, therefore, be said to have been committed by the learned Arbitral Tribunal in doing so. The learned Arbitral Tribunal has computed interest, on the entire quantum of 90%
of the Debt Due, from 5
th December, 2016 till 26th March, 2017 and,
thereafter, on ₹ 354.77 crores (being the amount remaining unpaid
after 5th December, 2016) till the date of the award, i.e. pre -arbitral
2021:DHC:7OMP (COMM.) 442/ 2020 Page 39 of 56
and pendente lite interest. No occasion arises for this Court to
interfere with such computation either.

31.3.4 Section 31(7)(b) provides that any sum, directed to be paid by
the arbitral award, would carry interest at a rate 2% higher than the
current interest rate prevalent on the date of the award, from the date
of the award till the date of payment, unless otherwise directed in the
award. In other words, this is a statutory dispensation, which is to
ordinarily apply, unless and until the arbitral award direct s to the
contrary. The rule, therefore, is that the awar ded amount would carry
interest at 2% higher than the prevalent ra te of interest, from the date
of award till the date of payment, and the exception is where the arbitral award directs otherwise. NHAI has not been able to make out, in the present proceedings, in any case, as would merit extending, to it, the benefit of the exception, in preference to the rule. The award of
interest, by the learned Arbitral Tribunal, from the date of award till
the date of payment, @ 9% p.a., being 2% above the prevalent
ordinary rate of interest on the date of passing of the impugned arbitral award does not, therefore, call for interference.

31.3.5 The impugned award, qua Claim (c), too, therefore, deserves to
be upheld.

32.

Re. Claim (d)
Though Ms . Maninder Acharya did contend that NHAI was
challenging the impugned Award in its entirety, the present petition
2021:DHC:7OMP (COMM.) 442/ 2020 Page 40 of 56
does not contain any ground of challenge, insofar as the award of
costs, by the learned Arbitral Tribunal, is concerned. Costs have been awarded by the learned Arbitral Tribunal in accordance with Section
31(8) of the 1996 Act, read with Section 31A thereof. The extent of
costs to be awarded, under the regime contained in the 1996 Act is, essentially, a matter of discretion of the learned Arbitral Tribunal and,
if it is sought to be challenged, it is for the challenger to make out a
case of erroneous exercise of discretion, as would merit interference
by the Court in exercise of the jurisdiction vested in it by Section 34. No effort, to make out any such case, has been expended by NHAI. I
find no reason, therefore, to interfere with the award of costs by the
learned Arbitral Tribunal.

33. The scope of interference, by Courts, under Section 34 of the
1996 Act, is extremely limited. In another decision being pronounced
today, I have culled out the following princi ples from Ssangyong
Engineering and Construction Co. Ltd v. N.H.A.I.The eventuate

2
(i) The expression “pu blic policy of India” would have to be
understood as the “fundamental policy of Indian Law”, as , to govern the
scope of interference by Courts with arbitral awards, under Section
34, after its amendment by the Arbitration and Conciliation
(Amendment) Act, 2016:

2 (2019) 15 SCC 131
2021:DHC:7OMP (COMM.) 442/ 2020 Page 41 of 56
explained in paras 18 and 27 of the earlier decision in Associate
Builders v. D.D.A.3
“18. In Renusagar Power Co. Ltd. v. General
Electric Co., 1994 Supp (1) SCC 644, the Supreme
Court construed Section 7(1)(b)(ii) of the Foreign
Awards (Recognition and Enforcement) Act, 1961:

“7. Conditions for enforcement of foreign
awards. —(1) A foreign award may not be
enforced under this Act —

***
(b) if the Court dealing with the case
is satisfied that—

***
(ii) the enforcement of the
award will be contrary to the
public policy.”

In construing the expression “public policy” in the
context of a foreign award, the Court held that an
award contrary to
(i) the fundamental policy of Indian law,
(ii) the interest of India,
(iii) Justice or morality, , which read thus:
would be set aside on the ground that it would be
contrary to the public policy of India. It went on
further to hold that a contravention of the provisions of
the Foreign Exchange Regulation Act would be
contrary to the public policy of India in that the statute
is enacted for the national economic interest to ensure
that the nation does not lose foreign exchange which is
essential for the economic survival of the nation
(see SCC p. 685, para 75). Equally, disregarding
orders passed by the superior courts in India could also
be a contravention of the fundamental policy of Indian
law, but the recovery of compound interest on interest,

3 (2015) 3 SCC 49
2021:DHC:7OMP (COMM.) 442/ 2020 Page 42 of 56
being contrary to statute only, would not contravene
any fundamental policy of Indian law (see SCC pp.
689 & 693, paras 85 & 95).

*****

Fundamental Policy of Indian Law

27. Coming to each of the heads contained in Saw
Pipes [(2003) 5 SCC 705 : AIR 2003 SC 2629]
judgment, we will first deal with the head
“fundamental policy of Indian law”. It has already
been seen from Renusagar judgment that violation of
the Foreign Exchange Act and disregarding orders of
superior courts in India would be regarded as being
contrary to the fundamental policy of Indian law. To
this it could be added that the binding effect of the
judgment of a superior court being disregarded would
be equally violative of the fundamental policy of
Indian law .”
(Emphasis supplied)

(ii) The Court cannot interfere wit h an Award on the ground
that the arbitrator has not adopted a judicial approach, as that
would amount to intervention on the merits of the award, which
was not permissible post the amendment of Section 34.

(iii) Violation of the principles of natural justice constitutes a
legitimate ground to challenge an award.

(iv) In understanding whether an award was in conflict with
the “most basic notions of morality or justice”, the Court would
have to be guided by paras 36 to 39 of Associate Builders4
“Justice :

2021:DHC:7OMP (COMM.) 442/ 2020 Page 43 of 56
36. The third ground of public policy is, if an award
is against justice or morality. These are two different
concepts in law. An award can be said to be against
justice only when it shocks the conscience of the court.
An illustration of this can be given. A claimant is
content with restricting his claim, let us say to Rs 30
lakhs in a statement of claim before the arbitrator and
at no point does he seek to claim anything more. The
arbitral award ultimately awards him Rs 45 lakhs
without any acceptable reason or justification.
Obviously, this would shock the conscience of the
court and the arbitral award would be liable to be set
aside on the ground that it is contrary to “justice”.

Morality

37. The other ground is of “morality”. Just as the
expression “public policy” also occurs in Section 23 of
the Contract Act, 1872 so does the expression
“morality”. Two illustrations to the said section are
interesting for they explain to us the scope of the
expression “morality”:

“(j) A, who is B’s Mukhtar, pro mises to
exercise his influence, as such, with B in favour
of C, and C promises to pay 1000 rupees to A.
The agreement is void, because it is immoral.

(k) A agrees to let her daughter to hire
to B for concubinage. The agreement is void,
because it is imm oral, though the letting may
not be punishable under the Penal Code, 1860.”

38. In Gherulal Parakh v. Mahadeodas
Maiya [1959 Supp (2) SCR 406 : AIR 1959 SC 781],
this Court explained the concept of “morality” thus :
(SCR pp. 445-46 : AIR pp. 797-98)

“Re. Point 3 — Immorality : The argument
under this head is rather broadly stated by the
learned counsel for the appellant. The learned
counsel attempts to draw an analogy from the
Hindu law relating to the doctrine of pious
obligation of sons to discharge their father’s
2021:DHC:7OMP (COMM.) 442/ 2020 Page 44 of 56
debts and contends that what the Hindu law
considers to be immoral in that context may
appropriately be applied to a case under Section
23 of the Contract Act. Neither any authority is
cited nor any legal basis is suggested for
importing the doctrine of Hindu law into the
domain of contracts. Section 23 of the Contract
Act is inspired by the common law of England
and it would be more useful to refer to the
English law than to the Hindu law texts dealing
with a different matter. Anson in his Law of
Contracts
states at p. 222 thus:
‘The only aspect of immorality with
which courts of law have dealt is sexual
immorality….’

Halsbury in his Laws of England
, 3rd Edn.,
Vol. 8, makes a similar statement, at p. 138:
‘A contract which is made upon an
immoral consideration or for an immoral
purpose is unenforceable, and there is no
distinction in this respect between
immoral and illegal contracts. The
immorality here alluded to is sexual
immorality.’

In the Law of Contract
by Cheshire and Fifoot,
3rd Edn., it is stated at p. 279:
‘Although Lord Mansfield laid it down
that a contract contra bonos mores is
illegal, the law in this connection gives
no extended meaning to morality, but
concerns itself only with what is
sexually reprehensible.’

In the book on the Indian Contract Act
by
Pollock and Mulla it is stated at p. 157:
‘The epithet “immoral” points, in legal
usage, to conduct or purposes which the
State, though disapproving them, is
2021:DHC:7OMP (COMM.) 442/ 2020 Page 45 of 56
unable, or not advised, to visit with
direct punishment.’

The learned authors confined its operation to
acts which are considered to be immoral
according to the standards of immorality
approved by courts. The case law both in
England and India confines the operation of the
doctrine to sexual immorality. To cite only
some instances : settlements in consideration of
concubinage, contracts of sale or hire of things
to be used in a brothel or by a prostitute for
purposes incidental to her profession,
agreements to pay money for future illicit
cohabitation, promises in regard to marriage for
consideration, or contracts facilitating divorce
are all held to be void on the ground that the
object is immoral.

The word ‘immoral’ is a very comprehensive
word. Ordinarily it takes in every aspect of
personal conduct deviating from the standard
norms of life. It may also be said that what is
repugnant to good conscience is immoral. Its
varying content depends upon time, place and
the stage of civilisation of a particular society.
In short, no universal standard can be laid down
and any l aw based on such fluid concept defeats
its own purpose. The provisions of Section 23
of the Contract Act indicate the legislative
intention to give it a restricted meaning. Its
juxtaposition with an equally illusive concept,
public policy, indicates that it is used in a
restricted sense; otherwise there would be
overlapping of the two concepts. In its wide
sense what is immoral may be against public
policy, for public policy covers political, social
and economic ground of objection. Decided
cases and authoritative textbook writers,
therefore, confined it, with every justification,
only to sexual immorality. The other limitation
imposed on the word by the statute, namely,
‘the court regards it as immoral’, brings out the
idea that it is also a branch of the common law
2021:DHC:7OMP (COMM.) 442/ 2020 Page 46 of 56
like the doctrine of public policy, and,
therefore, should be confined to the principles
recognised and settled by courts. Precedents
confine the said concept only to sexual
immorality and no case has been brought to our
notice where it has been applied to any head
other than sexual immorality. In the
circumstances, we cannot evolve a new head so
as to bring in wagers within its fold.”

39. This Court has confined morality to sexual
morality so far as Section 23 of the Contract Act, 1872
is concerned, which in the context of an arbitral award
would mean the enforcement of an award say for
specific performance of a contract involving
prostitution. “Morality” would, if it is to go beyond
sexual morality necessarily cover such agreements as
are not illegal but would not be enforced given the
prevailing mores of the day. However, interference on
this ground would also be only if something shocks the
court’s conscience.”
(Emphasis supplied)

Thus, only such arbitral awards which shocks the conscience o f
the court, can be set aside on the ground of being in conflict
with the “most basic notions of morality or justice”.

(v) “Patent illegality” appearing on the face of the award
refers to such illegality as goes to the root of the matter, but
which does not amount to be erroneous application of the law.
As such, contravention of a statute not linked to public policy
or public interest, cannot be said to amount to “patent
illegality”. Mere contravention of the substantive law of India
is no longer a grou nd available to set aside an arbitral award.

2021:DHC:7OMP (COMM.) 442/ 2020 Page 47 of 56
(vi) A Section 34 court cannot re -appreciate evidence, even
on the ground of patent illegality.

(vii) Absence of reasons is, however, a ground to set aside an
award, as it would violate Section 31(3) of the 1996 Act.

(viii) Construction of the terms of the contract is primarily for
the arbitrator to decide. Unless the arbitrator construes the
contract “in a manner that no fair -minded or reasonable person
would; in short, the view of the arbitrator is not e ven a possible
view to take”, interference is not warranted.

(ix) If the arbitrator wanders outside the contract and deals
with matters not allotted to him, he commits an error of
jurisdiction, on which ground the award could be set aside
under Section 34 (2-A). “Where an Arbitral Tribunal has
rendered an award which decides matters either beyond the
scope of the arbitration agreement or beyond the disputes
referred to the Arbitral Tribunal, as understood in paras 10 and
11 of State of Goa v. Praveen En terprises4, the arbitral award
could be said to have dealt with decisions on matters beyond
the scope of submission to arbitration”. Paras 10 and 11 of
Praveen Enterprises4
“10. “Reference to arbitration” describes various
acts. Reference to arbitration can be by parties
themselves or by an appointing authority named in the
arbitration agreement or by a court on an application read as under:

4 (2012) 12 SCC 581
2021:DHC:7OMP (COMM.) 442/ 2020 Page 48 of 56
by a party to the arbitration agreement. We may
elaborate:

(a) If an arbitration agreement provides that
all disputes between the parties relating to the
contract (some agreements may refer to some
exceptions) shall be referred to arbitration and
that the decision of the arbitrator shall be final
and binding, the “reference” contemplated is
the act of parties to the arbitration agreement,
referring their disputes to an agreed arbitrator to
settle the disputes.

(b) If an arbitration agreement provides that
in the event of any dispute between the parties,
an authority named therein shall nominate the
arbitrator and refer the disputes which required
to be settled by arbitration, the “reference”
contemplated is an act of the appointing
authority referring the disputes to the arbitrator
appointed by him.

(c) Where the parties fail to concur in the
appointment of the arbitrator(s) as required by
the arbitration agreement, or the authority
named in the arbitration agreement failing to
nominate the arbitrator and refer the disputes
raised to arbitration as required by the
arbitration agreement, on an application by an
aggrieved party, the court can appoint the
arbitrator and on such appointment, the disputes
between the parties stand referred to such
arbitrator in terms of the arbitration agreement.

11. Refer ence to arbitration can be in respect of all
disputes between the parties or all disputes regarding a
contract or in respect of specific enumerated disputes.
Where “all disputes” are referred, the arbitrator has the
jurisdiction to decide all disputes rais ed in the
pleadings (both claims and counterclaims) subject to
any limitations placed by the arbitration agreement.
Where the arbitration agreement provides that all
disputes shall be settled by arbitration but excludes
certain matters from arbitration, then, the arbitrator
2021:DHC:7OMP (COMM.) 442/ 2020 Page 49 of 56
will exclude the excepted matter and decide only those
disputes which are arbitrable. But where the reference
to the arbitrator is to decide specific disputes
enumerated by the parties/court/appointing authority,
the arbitrator’s jurisdi ction is circumscribed by the
specific reference and the arbitrator can decide only
those specific disputes.”

If an arbitrator wandered outside the contract and dealt with
matters not allotted to him, it would constitute a jurisdictional
error, correctable on the ground of “patent illegality”, but
would not amount to dealing with matters beyond the scope of
the arbitration agreement.

(x) Perversity in an award, though not a ground to challenge
the award as being contrary to the “public policy of India” ,
certainly amounts to a patent illegality appearing on the face of
the award. “Thus, a finding based on no evidence at all or an
award which ignores vital evidence in arriving at its decision
would be perverse and liable to be set aside on the ground of
patent illegality.” “A finding based on documents taken
behind the back of the parties by the arbitrator would also
qualify as a decision based on no evidence inasmuch as such
decision is not based on evidence led by the parties, and
therefore, would als o have to be characterised as perverse.”

(xi) Failure, by an Arbitral Tribunal to deal with every issue
referred to it will not ordinarily render its arbitral award liable
to be set aside. The crucial question in every case is whether
there has been rea l or actual prejudice to either (or both) of the
2021:DHC:7OMP (COMM.) 442/ 2020 Page 50 of 56
parties to the dispute. The following passage, from Redfern
and Hunter
This principle, though not directly forming part of the
enunciation of the law by the Supreme Court in Ssangyong
Engineering and Construction Co. Ltd was cited, with approval, in this regard:

“The significance of the issues that were not dealt with
has to be considered in relation to the award as a
whole. For example, it is not difficult to envisage a
situation in which the issues that were overlooked
were of such importance that, if they had been dealt
with, the whole balance of the award would have been
altered and its effect would have been different.”
(Emphasis supplied)

3, finds place in the
ruling of the Court of Appeal of Singapore in CRW Joint
Operation v. PT Perusahaan Gas Negara (Persero) TBK5,
which has been reproduced in para 61 of the report in
Ssangyong Engineering and Construction Co. Ltd3
34. These principles stand, inter alia, reiterated in the recent
decision of the Supreme Court in Anglo American Metallurgical
Coal Pty Ltd v. MMTC Ltd., obviously
with approval.

6

5 2011 SGCA 33
6 2020 SCC OnLine SC 1030 , paras 51 and 52 of which read thus:

“51. The judgment in Associate Builders (supra) examined
each of the heads set out in Renusagar Power Co. Ltd. v.
Gener al Electric Co., 1994 Supp (1) SCC 644, together with
the addition of the fourth head of “patent illegality” laid down in ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705. Since
we are concerned with the “perversity principle”, the relevant paragraphs of this judgment are set out as follows:
2021:DHC:7OMP (COMM.) 442/ 2020 Page 51 of 56

“29. It is clear that the juristic principle of a “judicial
approach” demands that a decision be fair, reasonable
and objective. On the obverse side, anything arbitrary
and whimsical would obviously not be a determination
which would either be fair, reasonable or objective.”
(page 75)

“31. The third juristic principle is that a decision
which is perverse or so irrational that no reasonable
person would have arrived at the same is important and
requires some degree of explanation. It is settled law
that where:
(i) a finding is based on no evidence, or
(ii) an Arbitral Tribunal takes into account
something irrelevant to the decision which it
arrives at; or
(iii) ignores vital evidence in arriving at its
decision, such decision would necessarily be
perverse.

32. A good working test of perversity is contained
in two judgments. In Excise and Taxation Officer-
cum-Assessing Authority v. Gopi Nath & Sons, 1992
Supp (2) SCC 312, it was held : (SCC p. 317, para 7)

“7. … It is, no doubt, true that if a finding of
fact is arrived at by ignoring or excluding
relevant material or by taking into consideration
irrelevant material or if the finding so
outrageously defies logic as to suffer from the vice of irrationality incurring the blame of being
perverse, then, the finding is rendered infirm in law.”
In Kuldeep Singh v. Commr. of Police, (1999) 2 SCC
10, it was held : (SCC p. 14, para 10)

“10. A broad distinction has, therefore, to be
maintained between the decisions which are perverse and those which are not. If a decision
2021:DHC:7OMP (COMM.) 442/ 2020 Page 52 of 56
is arrived at on no evidence or evidence which
is thoroughly unreliable and no reasonable
person would act upon it, the order would be
perverse. But if there is some evidence on
record which is acceptable and which could be
relied upon, howsoever compendious it may be,
the conclusions would not be treated as perverse
and the findings would not be interfered with.”

33. It must clearly be understood that when a court
is applying the “public policy” test to an a rbitration
award, it does not act as a court of appeal and
consequently errors of fact cannot be corrected. A
possible view by the arbitrator on facts has necessarily
to pass muster as the arbitrator is the ultimate master
of the quantity and quality of evidence to be relied
upon when he delivers his arbitral award. Thus an
award based on little evidence or on evidence which
does not measure up in quality to a trained legal mind
would not be held to be invalid on this score. Once it is
found that the arbitrators approach is not arbitrary or
capricious, then he is the last word on facts. In P.R.
Shah, Shares & Stock Brokers (P) Ltd. v. B.H.H.
Securities (P) Ltd. [(2012) 1 SCC 594], this Court held
: (SCC pp. 601-02, para 21)

“21. A court does not sit in appeal over the
award of an Arbitral Tribunal by reassessing or reappreciating the evidence. An award can be
challenged only under the grounds mentioned in
Section 34(2) of the Act. The Arbitral Tribunal has examined the facts and held that both the
second respondent and the appellant are liable.
The case as put forward by the first respondent
has been accepted. Even the minority view was
that the second respondent was liable as
claimed by the first respondent, but the
appellant was not liable only on the ground that the arbitrators appointed by the Stock Exchange
under Bye -law 248, in a claim against a non-
member, had no jurisdiction to decide a claim
2021:DHC:7OMP (COMM.) 442/ 2020 Page 53 of 56
against another member. The finding of the
majority is that the appellant did the transaction
in the name of the second respondent and is
therefore, liable along with the second
respondent. Therefore, in the absence of any
ground under Section 34(2) of the Act, it is not
possible to re-examine the facts to find out
whether a different decision can be arrived at.”

34. It is with this very important caveat that the two
fundamental principles which form part of the
fundamental policy of Indian law (that the arbitrator
must have a judicial approach and that he must not act
perversely) are to be understood.” (pages 75-77)

“42. In the 1996 Act, this principle is substituted by
the “patent illegality” principle which, in turn, contains
three subheads:

42.1. (a) A contravention of the substantive law of
India would result in the death knell of an arbitral
award. This must be understood in the sense that such
illegality must go to the root of the matter and cannot
be of a trivial nature. This again is really a contravention of Section 28(1) (a) of the Act, which
reads as under:

“28. Rules applicable to substance of
dispu te. — (1) Where the place of arbitration is
situated in India —

(a) in an arbitration other than an
international commercial arbitration, the
Arbitral Tribunal shall decide the dispute
submitted to arbitration in accordance
with the substantive law for the time
being in force in India;”

42.2. (b) A contravention of the Arbitration Act itself
would be regarded as a patent illegality – for example
if an arbitrator gives no reasons for an award in
2021:DHC:7OMP (COMM.) 442/ 2020 Page 54 of 56
contravention of Section 31(3) of the Act, such award
will be liable to be set aside.
42.3. (c) Equally, the third subhead of patent illegality
is really a contravention of Section 28(3) of the Arbitration Act, which reads as under:

“28. Rules applicable to substance of
dispute –

(1)-(2)***

(3) In all cases, the Arbitral Tribunal
shall decide in accordance with the terms of the contract and shall take into
account the usages of the trade
applicable to the transaction.”

This last contravention must be understood with a
caveat. An Arbitral Tribunal must decide in
accordance with the terms of the contract, but if an
arbitrator construes a term of the contract in a
reasonable manner, it will not mean that the award can
be set aside on this ground. Construction of the terms of a contract is primarily for an arbitrator to decide
unless the arbitrator construes the contract in such a
way that it could be said to be something that no fair-
minded or reasonable person could do.” (page 81)
52. This judgment has been consistently followed in a
plethora of subsequent judgments, including:

a. National Highways Authority of India v. ITD
Cementation India Ltd., (2015) 14 SCC 21 at
paragraph 24 (page 38);

b. Centrotrade Minerals & Metal Inc. v.
Hindustan Copper Ltd., (2017) 2 SCC 228 at
paragraph 45 (page 252);
2021:DHC:7OMP (COMM.) 442/ 2020 Page 55 of 56
c. Ventu re Global Engg. LLC v. Tech Mahindra
Ltd., (2018) 1 SCC 656 at paragraph 85 (page 687);

d. Sutlej Construction Ltd. v. State (UT of
Chandigarh), (2018) 1 SCC 718 at paragraph 11 (page
722);
e. Maharashtra State Electricity Distribution Co.
Ltd. v. Datar Switchgear Ltd., (2018) 3 SCC 133 at
paragraph 51 (page 169);
f. HRD Corpn. v. GAIL (India) Ltd., (2018) 12
SCC 471 at paragraphs 18-19 (page 493);

g. M.P. Power Generation Co. Ltd. v. ANSALDO
Energia SpA, (2018) 16 SCC 661 at paragraph 25
(page 679);

h. Shriram EPC Ltd. v. Rioglass Solar Sa, (2018)
18 SCC 313 at paragraph 34 (page 328);

i. State of Jharkhand v. HSS Integrated Sdn,
(2019) 9 SCC 798 at paragraph 7 (page 804); and j. Ssangyong Engg. & Construction Co. Ltd. v.
NHAI, (2019) 15 SCC 131 at paragraphs 20, 34-36
(pages 154, 169-170).”
(Emphasis as in original)

35. Viewed thus, and following on the above discussion, I find no
reason to interfere with the impugned arbitral award.

Conclusion
36. As a result, the challenge to the impugned Award, by NHAI,
fails. The period of 90 days, granted by the learned Arbitral Tribunal,
2021:DHC:7OMP (COMM.) 442/ 2020 Page 56 of 56
to NHAI, to make payment of ₹ 42.96 crores, in accordance with the
impugned Award, shall, however, stand reckoned from the date of
receipt, by NHAI, or the learned Counsel who represented NHAI in
the present proceedings, of a copy of this judgement by email, sent by
the Registry of this Court.
37. Subject to this modification, the present petition is dismissed,
with no orders as to costs.
38. Pending IAs, if any, stand disposed of, accordingly.

C. HARI SHANKAR, J.
JANUARY 04, 2021
HJ

2021:DHC:7