Sanchayita Lahkar

The High Court of Delhi Single Bench of Justice Jasmeet Singh has set aside the order passed by the Arbitral Tribunal under Section 17 of the Arbitration and Conciliation Act, 1996. The Court held that the Tribunal had exceeded its jurisdiction by directing interim reliefs which effectively restored a terminated contract and amounted to granting final relief at the interim stage. It was observed that the agreement in question was determinable in nature, and therefore, the relief of specific performance could not have been granted even as an interim measure. Consequently, the Court quashed the Tribunal’s directions and restored the position as it existed after termination of the agreement, while directing that the arbitration proceedings continue uninfluenced by the impugned interim order

On 2 July 2010, a Concession Agreement was entered into between the National Highways Authority of India (NHAI) and the respondent company for the six-laning, operation, and maintenance of a stretch of National Highway-7 in Tamil Nadu. The project, titled the “Hosur-Krishnagiri Section,” extended from KM 33.130 to KM 93.00, covering a total length of approximately 59.87 kilometers. The agreement granted the respondent exclusive rights to operate the project highway and collect tolls from road users for a concession period of 24 years.

Also Read: Arbitral tribunal can proceed against party though not served with Section 21 notice or named in Section 11 application as consent is key to jurisdiction : Supreme Court

The appointed date under the agreement was declared to be 7 June 2011. A Substitution Agreement involving Canara Bank and a Common Rupee Loan Agreement were subsequently executed to finance the project. A Supplementary Agreement was later signed on 17 June 2014 permitting deferment of premium payments by the concessionaire. A Provisional Completion Certificate (PCC) was issued on 5 April 2016 by the Independent Engineer (IE), acknowledging completion of construction obligations under the agreement.

Issues emerged in December 2020 when NHAI issued a notice directing the respondent to address maintenance defects. A second notice followed on 25 June 2021 regarding rectification of deficiencies under Operation and Maintenance (O&M) obligations. On 5 August 2021, the IE recommended the imposition of INR 10.24 crores in damages for breach of maintenance responsibilities, based on monthly inspection reports. The respondent replied on 12 August 2021, providing supporting documentation and progress reports, and requested a review. NHAI responded by referring the documents back to the IE.

On 1 September 2021, NHAI initiated recovery proceedings based on the IE’s recommendations, instructing that damages be recovered from the project's escrow account. The respondent contested this, citing ongoing rectification works. On 8 October 2021, NHAI issued a letter to Canara Bank requesting withdrawal of INR 10.24 crores from the escrow account. The IE subsequently recommended additional damages of INR 2.47 crores for the period ending 20 October 2021. The respondent requested NHAI to withdraw its claim and directed Canara Bank not to proceed with the payment.

On 10 January 2022, the respondent invoked the dispute resolution clause under Article 44 of the agreement. Despite this, on 14 July 2022, NHAI instructed Canara Bank to remit INR 65.06 crores in damages and premium shortfall. On 16 December 2022, the respondent again invoked arbitration.

Further demands for payment were made by NHAI for INR 13.66 crores and INR 17.43 crores for the fiscal years 2018–2019 and 2019–2020 respectively. On 13 February 2023, the respondent requested adjustment or waiver of INR 25.02 crores, which was rejected by NHAI on 29 December 2023. On 17 January 2024, a Cure Period Notice was issued by NHAI, followed by a notice of intention to terminate the agreement on 12 May 2023. The actual termination notice was issued on 22 January 2024. NHAI took over the highway and appointed a new fee collection agency.

The termination prompted the respondent to approach the Court under Section 9 of the Arbitration and Conciliation Act, 1996, seeking a stay on the termination notice, status quo directions, and escrow management. By an order dated 25 January 2024, the Court directed that the Section 9 petition be treated as an application under Section 17 and referred the matter to the arbitral tribunal.

An arbitral tribunal was constituted on 29 January 2024, and the respondent filed a Section 17 application seeking interim protection. NHAI filed its reply, and a rejoinder followed. The respondent filed its Statement of Claim (SOC) on 19 July 2024. The Arbitral Tribunal reserved its order on 3 February 2025 and passed the impugned interim order on 8 August 2024.

By the said order, the Tribunal stayed the operation of the termination notice dated 22 January 2024, directed toll revenues to be deposited in the escrow account, allowed the respondent to complete balance stage construction works, and mandated that the respondent’s security deposits be placed in a non-lien account under the Tribunal’s direction. It was also clarified that the order was prima facie and not determinative of final rights.

Aggrieved, NHAI filed the present appeal under Section 37(2)(b) of the Arbitration and Conciliation Act, 1996. NHAI contended that the relief granted by the Tribunal amounted to final relief at an interim stage, was outside the scope of Section 17, and ignored the respondent’s prior non-compliance. It was also argued that the agreement was determinable, specific performance could not be granted under the Specific Relief Act, 1963 (SRA), and the Tribunal failed to account for amendments introduced to the SRA in 2018, which barred injunctions in infrastructure projects.

NHAI submitted that it had already issued a Letter of Award to a third-party contractor and had incurred substantial costs in maintaining the highway. It was further argued that the Tribunal erred in assuming the amendment to the SRA would not apply retrospectively, based on a Supreme Court judgment that had since been recalled in review.

On the other hand, the respondent argued that 35% of the pending stage construction works had already been completed and that sufficient financial arrangements had been made. It maintained that the 2018 SRA amendments did not apply, as the contract predated the amendment and construction had completed by 2016. It further argued that the Tribunal’s order merely preserved the status quo as of the date of arbitration commencement (8 August 2023) and was a legitimate exercise of power under Section 17.

The respondent also contested the necessity of filing a Statement of Claim before seeking interim relief under Section 17, stating that there was no such requirement under the Act. It asserted that the Tribunal had full authority to grant protective measures pending final determination and that the termination notice issued by NHAI jeopardized the subject matter of arbitration, including toll collection rights.

The High Court proceeded to consider these rival contentions and the validity of the Tribunal’s interim order under the scope of Section 37(2)(b).

The Court examined the narrow scope of judicial interference under Section 37(2)(b) of the Arbitration and Conciliation Act, 1996, and noted that appellate jurisdiction in such matters is restricted to instances of “perversity, arbitrariness and a manifest illegality.” It recorded: “The appellate court will not interfere with the exercise of discretion of the court of first instance and substitute its own discretion except where the discretion has been shown to have been exercised arbitrarily, or capriciously or perversely or where the court had ignored the settled principles of law regulating grant or refusal of interlocutory injunctions.”

Referring to the principle in Wander Ltd. v. Antox India (P) Ltd., the Court stated: “If the discretion has been exercised by the trial court reasonably and in a judicial manner the fact that the appellate court would have taken a different view may not justify interference with the trial court’s exercise of discretion.”

It further noted: “The whole purpose to bring the 1996 Act is to give supremacy to the discretion exercised by the Arbitral Tribunal. The Appellate Court is not required to interfere in the arbitral orders especially a decision taken is at an interlocutory stage.”

However, the Court also observed that “an appellate court would clearly be transgressing its jurisdiction if it were to interfere with a discretionary order made by the Arbitral Tribunal merely on the ground of another possible view being tenable… The order of the Arbitral Tribunal would thus be liable to be tested on the limited grounds of perversity, arbitrariness and a manifest illegality only.”

Turning to the powers of the Tribunal under Section 17 of the Act, the Court recorded: “Section 17 empowers the Arbitral Tribunal to pass any interim order in respect of the subject matter of dispute during the arbitral proceedings… By 2015 amendment in 1996 Act, the ambit of the Arbitral Tribunal has been clarified and is given the same powers as given to the Court while exercising jurisdiction under section 9 of 1996 Act.”

It affirmed that “the interim relief can take various forms depending on the nature of the dispute,” but also clarified that “the provisions of CPC are not binding in nature, however, the same cannot be ignored.” Referring to Essar House (P) Ltd. v. ArcelorMittal Nippon Steel India Ltd., the Court quoted: “The technicalities of CPC cannot prevent the Court from securing the ends of justice.”

The Court acknowledged that the Tribunal could grant interim mandatory injunctions under Section 17, but clarified: “An interim mandatory injunction is not to be easily granted. It is an order that is passed only in circumstances which are clear and the prima facie material clearly justify a finding that the status quo has been altered by one of the parties to the litigation and the interests of justice demanded that the status quo ante be restored.”

Addressing the timing of the Statement of Claim, the Court held that “SOC is not sine qua non for consideration of Section 17 application,” relying on a prior coordinate bench decision in Sanjay Arora v. Rajan Chadha: “The arbitral protocol, under the 1996 Act is, however, somewhat peculiar… Section 9 itself envisages grant of interim protection… even before the notice of arbitration… the filing of statement of claim under Section 23 cannot be treated as a sine qua non for the maintainability of an application for interim protection under Section 17.”

However, the Court disagreed with the Tribunal’s position on the applicability of the 2018 amendments to the Specific Relief Act (SRA). It recorded: “The learned AT relied upon the judgment of Katta Sujatha Reddy… to hold that the amendment of 2018 in SRA is prospective in nature… However, the said judgment relied upon by the learned AT has been recalled by the Hon’ble Supreme Court… Hence, the law laid down in Katta Sujatha Reddy is no longer a good law.”

It further stated: “It is clear that the amendment of 2018 in SRA operates retrospectively and not prospectively… the said amendment shall apply to the facts of the present case also.”

On this basis, the Court held that the Tribunal’s reasoning under Section 20A and Section 41(ha) of the SRA was flawed, stating: “The legislature by way of 2018 amendment has made some key changes in SRA inter alia, with respect to infrastructural projects… The legislative intent clearly shows the immunity from injunctions to the infrastructural projects.”

Specifically addressing the nature of the interim relief granted, the Court concluded that:
“The relief granted by the learned AT effectively amounts to specific performance of the Agreement which in law is not permissible in view of the amended SRA.”
It further recorded: “The Agreement in question is determinable in nature… hence, specific performance cannot be granted even at final stage… much less at interim stage.”

On the question of irreparable harm and balance of convenience, the Court noted: “NHAI had already issued a tender for execution of the Stage Construction Works and issued Letter of Award to a third party… The learned AT completely failed to take this into account.”

Additionally, the Court found that the Tribunal’s order “was passed on the basis of an erroneous legal foundation and failed to appreciate the express bar under Section 20A of the SRA which prohibits granting injunctions in infrastructure projects.”

Accordingly, the Court concluded that “the interim relief granted was in the nature of a final relief, granted at an interim stage, without a complete adjudication on evidence and merits,” and that “such a relief would render the final award redundant.”

The High Court concluded that the Arbitral Tribunal’s order dated 8 August 2024, passed under Section 17 of the Arbitration and Conciliation Act, 1996, could not be sustained in law. The Court held that the relief granted was impermissible at the interim stage and was in the nature of final relief, contrary to the statutory limitations applicable to infrastructure contracts governed by the Specific Relief Act, 1963, as amended in 2018.

Also Read: “Flagrant Violation of Natural Justice”: MP High Court Quashes Sealing and Deregistration of Fertility Clinic, Slams Officials for ‘Haphazard’ Action Without Legal Backing

Accordingly, the Court directed that the impugned order of the Arbitral Tribunal be set aside. The directions staying the operation of the Termination Notice dated 22 January 2024, permitting the respondent to execute the balance Stage Construction Works, regulating escrow account management, and controlling the security deposit, were quashed. The Court restored the status prevailing after the issuance of the Termination Notice and declared that the interim arbitral order would no longer have effect.

It was further directed that the arbitral proceedings may continue before the Arbitral Tribunal uninfluenced by the observations in the interim order, and all rights and contentions of the parties would remain unaffected.

Following the pronouncement of the judgment on 17 April 2025, counsel for the respondent, Mr. Parag Tripathi, Senior Advocate, submitted a request to the Court that the judgment not be given effect for a period of ten days to enable the respondent to seek appropriate remedies in accordance with law. In response, Mr. Tushar Mehta, Solicitor General, on instructions, made a statement that status quo would be maintained for a period of ten days from the date of judgment. The Court recorded this statement and held that the National Highways Authority of India would be bound by the same.

Advocates Representing the Parties

For the Petitioners: Mr. Tushar Mehta, Solicitor General of India with Mr. Anil Soni, Central Government Standing Counsel and Mr. Harsh Vardhan Rai, Advocates

For the Respondents: Mr. Parag Tripathi, Senior Advocate with Mr. Zameer Nathani, Mr. Gaurav Goel, Mr. Rohan Talwar, Mr. Arka Mookerjee, Mr. Shubhankar Tiwari and Mr. Ashwin Dhar, Advocates

Case Title: National Highways Authority of India v. HK Toll Road Pvt. Ltd.

Neutral Citation: 2025:DHC:2679

Case Number: ARB. A. (COMM.) 43/2024 & I.A. 36399/2024, I.A. 44028/2024

Bench: Justice Jasmeet Singh

[Read/Download order]