Facts of the Case

This is an arbitration law dispute and has no connection with GST. The National Highways Authority of India (NHAI) had entered into a Concession Agreement dated 05.09.2007 with Patel KNR Heavy Infrastructure Pvt. Ltd. for a Build-Operate-Transfer Annuity project covering a 53.017-km stretch of NH-75. Disputes arose over the cost of an additional 10mm thickness of Bituminous Concrete applied as a renewal coat on the highway, and over liquidated damages for delay under Clause 18.13 of the Agreement. A majority Arbitral Tribunal award dated 16.01.2023 allowed the Respondent's claim for the renewal-coat cost (awarding Rs. 12,35,18,570/- against a claim of Rs. 13,44,09,772/-) and restricted liquidated damages to Rs. 10,000 per day as a reasonable measure rather than the higher contractual figure, holding the higher figure to be penal in nature. NHAI challenged this award under Section 34 of the Arbitration and Conciliation Act, 1996.

Issues Involved

  1. Whether the Arbitral Tribunal erred in computing the cost payable for the additional thickness of renewal coat.
  2. Whether the Tribunal was correct in restricting liquidated damages under Clause 18.13 of the Agreement to Rs. 10,000 per day, treating the higher of the two contractually stipulated amounts as penal.
  3. Whether the term 'repair' in Clause 18.13(b) covered periodic renewal of the wearing surface.

Petitioner's Arguments

  • NHAI contended that the Tribunal erred in computing the period of delay and in concluding NHAI was not liable for the full extent of damages claimed.
  • It argued the Tribunal misapplied Clause 18.13 of the Agreement by not awarding the higher of the two stipulated damages amounts.

Respondent's Arguments

  • The Respondent supported the Tribunal's reasoning that a stipulation requiring the higher of two disconnected amounts, without any nexus to actual loss, was not a genuine pre-estimate of damages and was rightly treated as penal under Section 74 of the Indian Contract Act, 1872.
  • It also supported the Tribunal's interpretation that periodic 'renewal' of the wearing surface was distinct from 'repair' under the Agreement's internal structure.

Court Order / Findings

  • The Court held that the Tribunal had considered the contractual milestones, correspondence, and sequence of events, and its finding on delay was one of fact based on appreciation of evidence, not open to interference absent perversity, which was not shown.
  • On liquidated damages, the Court agreed that treating the higher amount as penal was consistent with Section 74 of the Indian Contract Act, 1872, and that the Tribunal had harmonised the contractual clause with governing law rather than rewriting the contract.
  • The Tribunal's interpretation of 'repair' as distinct from 'renewal' was found plausible and consistent with the Agreement's structure.
  • Finding no perversity, infirmity, or patent illegality, the Court dismissed NHAI's petition and upheld the arbitral award, with no order as to costs.

Important Clarification

This judgment is a straightforward application of the narrow Section 34 standard of review for arbitral awards — courts will not re-appreciate evidence or substitute their own view for a reasoned finding of the Tribunal. It has no bearing on any GST question and should not be cited on tax matters; it is relevant only to parties dealing with highway concession agreements or liquidated-damages clauses.

Sections Involved

  • Arbitration and Conciliation Act, 1996 — Section 34 (challenge to arbitral award).
  • Indian Contract Act, 1872 — Section 74 (compensation for breach where penalty stipulated).

Decision – In Favour of

Decided in favour of the Respondent, Patel KNR Heavy Infrastructure Pvt. Ltd.; NHAI's Section 34 petition was dismissed and the arbitral award upheld.

Case Details

Court: High Court of Delhi at New Delhi
Case No.: O.M.P. (COMM) 195/2023, I.A. 10225/2023 & I.A. 10226/2023
Coram: Hon'ble Mr. Justice Harish Vaidyanathan Shankar
Date of Judgment: Reserved 24.03.2026; Pronounced 21.04.2026

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