The concessionaire wrote a letter setting out what the highway had actually cost, and the Tribunal treated it as rewriting the contract

A ₹1,347 crore termination payment claim turned on whether a contractual cost cap could be displaced by one party’s notification. The Delhi High Court upholds the setting aside of the award.

A concession agreement for a highway fixes the money that changes hands if the project ends early, and it does so by reference to a defined figure — the Total Project Cost. Define that figure one way and the termination payment is the contractual cap; define it by what the concessionaire actually spent, and the cap does no work at all.

On 28 September 2026 a Bench of Justice Anil Kshetarpal and Justice Shail Jain decided which reading the agreement bore, in an appeal under Section 37 of the Arbitration and Conciliation Act, 1996.

The claim

The appellant held a concession on a design-build-finance-operate basis for a period of 28 years from the appointed date. The concession was terminated, and the appellant claimed a termination payment of ₹1,347.53 crore together with interest — Claims 1 and 2 before the Arbitral Tribunal.

The Tribunal allowed Claim 1 and awarded the termination payment under Claim 2 at graded rates. NHAI applied under Section 34, and a Single Judge set aside the award to the extent of the relief granted on Claims 1 and 2. The concessionaire appealed.

Two clauses, and which governs

The dispute was one of construction. The Tribunal had treated the Total Project Cost and the Termination Payment as effectively synonymous, importing the definition of TPC from one article into the computation of termination payment under another.

The concessionaire's case rested on a disaggregation letter it had issued notifying its actual project costs — costs far in excess of the contractual figure. On its argument, that letter supplied the real Total Project Cost for the purpose of computing what it was owed.

The Division Bench found the answer in a proviso to the definition itself, and its reasoning is the part worth keeping.

The agreement's definition of Total Project Cost contains a proviso that expressly addresses the termination scenario, providing for modification of the figure but only to the extent of variation in the Wholesale Price Index — and, where the WPI exceeds 6% per annum, only by mutual agreement.

That proviso settles two things. First, the definition is intended to apply in a termination context and is not rendered inapplicable or repugnant for computing the termination payment: a definition which itself provides for the termination scenario cannot, in the same breath, be branded repugnant to that scenario. Second, the parties specifically contemplated that the figure might need upward revision on termination — but by a measured, index-linked mechanism, not at large.

From that the conclusion followed. Had the parties intended that actual cost notified in a disaggregation letter would displace the defined Total Project Cost entirely, there would have been no need for the proviso at all. Its very existence demonstrates that they never intended the contractual cap to be bypassed by a unilateral cost notification.

Contracts vary the way contracts say

The Court then stated the principle in terms that travel well beyond highways.

A unilateral notification by the concessionaire of its actual expenditure is not a mode of modifying the Total Project Cost recognised anywhere in the agreement. It is elementary, the Bench said, that a contract can be varied only in the manner provided in it or by mutual agreement of the parties; it cannot be varied by the unilateral act of one party.

The Tribunal's construction had given a unilateral communication the effect of an amendment to a contractually defined term. That is not interpretation of the contract but substitution of a different one — which is why it crossed from an arguable view into the territory Section 34 reaches.

The Court also approved the Single Judge's approach to the two clauses, reading the TPC definition and the Termination Payment clause harmoniously as complementary provisions forming part of the same contractual scheme, rather than treating one as overriding the other.

The limits the Court observed

A Section 37 court is at two removes from the dispute — reviewing a judge who was himself reviewing an award — and the Bench was careful to say what it had and had not done.

While exercising jurisdiction under Section 37, it recorded, it confined its examination to the legality of the exercise undertaken under Section 34 and did not re-appreciate the merits of the dispute. Its question was whether the Single Judge was entitled to interfere, not whether the claim was good.

On that question, no ground for interference under Section 37(1)(c) was made out.

The order

The impugned judgment, insofar as it sets aside the arbitral award on Claims 1 and 2, was affirmed, and the appeal dismissed with pending applications disposed of.

The judgment is a useful illustration of where the line now sits in public infrastructure arbitration. Courts have been told repeatedly not to disturb a tribunal's construction of a contract merely because another construction is possible, and this Bench does not claim to be doing so. What it identifies is different in kind: a reading that renders an express proviso redundant and lets one party change a defined term by writing a letter. A tribunal is entitled to prefer one reasonable reading of a clause to another; it is not entitled to a reading that dispenses with the clause.