Supreme Court Dismisses MPRDC's Challenge to Arbitral Award, Upholds Termination Payment to Jabalpur Corridor

A bench of Justices J.K. Maheshwari and Atul S. Chandurkar dismissed Madhya Pradesh Road Development Corporation's civil appeal, affirming a 2014 arbitral award directing termination payment to a Malaysian-backed road concessionaire.

The Supreme Court has dismissed a civil appeal filed by Madhya Pradesh Road Development Corporation Ltd. (MPRDC) against a majority arbitral award of August 2014 that directed it to pay termination payment to M/S Jabalpur Corridor Pvt. Ltd. (JCPL), a special purpose vehicle incorporated by a Malaysian construction company to execute a 176-km BOT road project. The judgment, authored by Justice J.K. Maheshwari and decided on 29 May 2026, affirms concurrent findings of the Arbitral Tribunal, the Additional District Judge, Bhopal, and the High Court of Madhya Pradesh. The Court used the occasion to caution against judicial overreach in arbitration, opening with the observation that “arbitration in India has not failed, however Courts sometimes have failed arbitration in India.” The appeal had been pending since 2018, with the underlying dispute stretching back to MPRDC's termination of the Concession Agreement in July 2007.

The BOT Project and the Termination

In November 2002, MPRDC invited tenders for the design, financing, construction, operation, and maintenance of the Sagar-Damoh-Jabalpur Road on SH-37 and SH-14 on a Build-Operate-Transfer basis. Tiara Dhaya Maju Constructions (M) SDN BHD, a Malaysian company, was the successful bidder. To implement the project, JCPL was incorporated as an SPV under the Companies Act, 1956. MPRDC, TDM Constructions, and JCPL entered into a Concession Agreement on 11 April 2003 for a concession period of 5,440 days, inclusive of an 18-month construction period, covering 176 km of road.

JCPL obtained a loan of ₹80.85 crores from EXIM Bank Malaysia in July 2004 to finance the project. By March 2007, the project had stalled because MPRDC had not handed over vacant possession of land required for construction. JCPL filed Writ Petition No. 4450 of 2007 before the High Court seeking handover of land. On 12 July 2007, MPRDC issued a termination letter under Clause 32.2 of the Concession Agreement. By that date, JCPL had already spent ₹49.47 crores of the loan amount on the project. JCPL challenged the termination as unlawful and, in 2011, initiated arbitration proceedings against MPRDC.

The Jurisdictional Battle Over the Adhiniyam

Before the Arbitral Tribunal could proceed, MPRDC mounted a sustained challenge to its jurisdiction. It argued that the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983 — a state law governing works contracts — conferred exclusive jurisdiction on the tribunal constituted under that statute, ousting both private arbitration under the Arbitration and Conciliation Act, 1996 and civil courts.

The Arbitral Tribunal rejected the Section 16 application in April 2012, reserving detailed reasons for the final award. MPRDC simultaneously filed an application under Section 14 of the 1996 Act before the Additional District Judge, Bhopal, which initially succeeded: the District Court in February 2013 terminated the arbitrators' mandate and directed JCPL to approach the Adhiniyam tribunal. JCPL challenged that order before the High Court. In December 2013, the High Court set it aside, holding that the Concession Agreement was not a “works contract” within the Adhiniyam and that the dispute had to be resolved under the 1996 Act. The High Court also noted that MPRDC itself had entered into seventeen concession agreements providing for arbitration under the 1996 Act, demonstrating that it understood the distinction between a concession agreement and a works contract.

MPRDC's Special Leave Petition against that High Court order was dismissed in October 2015. A Review Petition was dismissed in March 2016. The jurisdictional question was thus settled between the parties before the arbitral award was even challenged under Section 34.

Before the Supreme Court in the present appeal, MPRDC sought to revive the Adhiniyam argument by relying on a subsequent Full Bench judgment of the Madhya Pradesh High Court in Viva Highways Ltd. v. Madhya Pradesh Road Development Corporation Ltd. (2017), which overruled the December 2013 judgment. The Court declined to permit this. It held that the jurisdictional issue had attained finality between the parties through the dismissal of the SLP and the review petition, and that a subsequent change in the law or overruling of the earlier judgment could not reopen a question conclusively settled inter-se the parties. The Court also noted that this ground was raised for the first time in a rejoinder affidavit filed in 2017 — not in the Section 34 application, not before the High Court under Section 37, and not even in the SLP — making it impermissible at that stage.

The Majority Award and the Section 34 Challenge

A three-member Arbitral Tribunal delivered a majority award on 22 August 2014. The majority, comprising the Presiding Arbitrator and one co-arbitrator, allowed JCPL's claims and dismissed MPRDC's counter-claims. The majority found that MPRDC's termination of the Concession Agreement was unlawful, invalid, and arbitrary, and awarded termination payment under Clause 32.6 of the Concession Agreement. Post-award interest was fixed at 18% per annum. The dissenting arbitrator dismissed both the claim and the counter-claim, awarding costs of ₹5 lakhs to MPRDC.

MPRDC filed an application under Section 34 of the 1996 Act before the Additional District Judge, Bhopal (Arbitration Case No. 2 of 2015). The District Court dismissed it on 22 February 2016, finding that the award was lawful, that the arbitrators had not acted beyond the scope of reference, that there was no bias, and that MPRDC itself had created obstacles in the execution of the contract and had filed unnecessary applications to delay the proceedings. MPRDC appealed under Section 37 to the High Court, which dismissed the appeal on 21 December 2016, finding no ground for interference within its limited jurisdiction. Civil Appeal No. 10877 of 2018 followed.

MPRDC's Arguments Before the Supreme Court

The Attorney General of India, Mr. R. Venkataramani, appeared for MPRDC and confined the merits challenge to “Dispute 2” in the arbitral award — the claim for value of work done. He advanced three substantive grounds.

First, MPRDC argued that the Arbitral Tribunal had exceeded the scope of reference under Section 34(2)(a)(iv) of the 1996 Act. JCPL had claimed ₹48,48,11,310 as reimbursement for value of work done, but the Tribunal awarded ₹49,47,77,236 as “termination payment” under Clause 32.4.2 of the Concession Agreement — a head that was never claimed and an amount that exceeded the claim itself. The Tribunal also awarded ₹4,92,61,477 for share capital equity spent on the project.

Second, MPRDC argued that Clause 32.4.2 was inapplicable because it governs termination by the concessionaire on account of an MPRDC event of default, whereas in this case it was MPRDC that had terminated the agreement. A conjoint reading of Clauses 1.1.29, 1.1.111, 32.4.2, and 32.6, MPRDC submitted, showed that termination payment was payable only when the concessionaire terminated, and even then, debt due was payable to the lender, not to JCPL.

Third, MPRDC challenged the interest rates as exorbitant — 14.75% pre-award and 18% post-award — and urged the Court to reduce them.

For JCPL, Senior Counsel Dr. Abhishek Manu Singhvi and Mr. Vivek Tankha submitted that there were three concurrent findings in JCPL's favour, that the scope of interference under Sections 34 and 37 is narrow, that the interest was contractually agreed and MPRDC had itself claimed the same rate in its counter-claim, and that JCPL — as an SPV backed by Malaysian investment — had been kept waiting for nineteen years since the termination. Counsel also drew the Court's attention to the India-Malaysia Bilateral Investment Treaty, 1995, and to diplomatic exchanges between the Malaysian High Commission and the Ministry of External Affairs regarding the delayed adjudication.

The Court's Reasoning on Scope of Interference

The Court set out at length the principle of minimal judicial interference in arbitration. It held that the jurisdiction under Section 34 is narrowly circumscribed and cannot be equated with ordinary appellate jurisdiction. The Arbitral Tribunal is the master of evidence and of interpretation of contractual terms. Where the tribunal has applied its mind and reached a plausible view, that view is ordinarily to be accepted. Even if two views are possible, it is beyond the scope of Section 34 for a court to reappraise evidence and substitute its own view.

The Court described the structure of challenge as a “narrowing pyramid”: the higher the court, the lesser the propensity to interfere and the higher the threshold a party must meet. Since the present appeal arose under Article 136 of the Constitution, the Court's scope was even more limited. It cited Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd., Consolidated Construction Consortium Ltd. v. Software Technology Parks of India, and its own recent judgment in Municipal Corpn. of Greater Mumbai v. R.V. Anderson Associates Ltd. to restate these principles.

Rejection of the Merits Challenge

On the question of whether the Tribunal had gone beyond the scope of reference, the Court found against MPRDC. It noted that the Attorney General had expressly conceded before the Court that MPRDC was not challenging the Tribunal's finding that the termination of the Concession Agreement was illegal. That finding — that MPRDC's termination was arbitrary, unlawful, and void — was therefore final. Given that the termination was unlawful, JCPL was entitled to invoke Clause 32.4.2, which governs termination on account of an MPRDC event of default. MPRDC's failure to provide land for construction was a material breach that justified invocation of that clause. Consequently, JCPL became entitled to remedies under Clause 32.6.

The Court held that Clause 32.6 is an independent clause that makes termination payment mandatory once due under the contractual terms, and is not contingent on which party terminated. The Tribunal's view that Clause 32.6 operates independently of Clauses 32.4.2 and 32.3 was described by the Court as “not only a plausible view, but the only possible view.” The concurrent findings of the Tribunal, the District Court, and the High Court on this point were entitled to great deference.

On the argument that debt due was payable to the lender rather than to JCPL, the Court held that Clause 1.1.111 is definitional while the payment obligation itself arises under Clause 32.6, which directs payment to the concessionaire. The lender had no privity with respect to the Concession Agreement. The Tribunal's interpretation was based on evidence and privity of contract and warranted no interference. In any event, the Court observed, a merely different possible interpretation does not bring a challenge within Section 34(2)(a)(iv).

Interest Rates Upheld

The Court rejected the challenge to interest rates. The pre-award rate of 14.75% was the contractual rate under Clause 32.6 (SBI PLR plus 2%). The post-award rate of 18% was the statutory rate under the unamended Section 31 of the 1996 Act as it stood before the 2016 amendment. The Court noted that MPRDC had itself claimed the same rate of 14.75% in its counter-claim before the Arbitral Tribunal. Party autonomy, the Court held, is the backbone of alternative dispute resolution, and the Court's role is to uphold the bargain between the parties, not to go behind it, “unless the interest rate is so perverse and so unreasonable as to shock the conscience of this Court.” The Court also took into account MPRDC's conduct throughout the dispute, describing it as “deplorable” and noting that nineteen years had passed since the project was terminated.

The Court referred to the Constitution Bench judgment in Gayatri Balasamy v. ISG Novasoft Technologies Ltd. on the Court's power to reduce post-award interest, but declined to exercise that power given the facts, including the existence of diplomatic exchanges between the Malaysian High Commission and the Ministry of External Affairs about the delayed adjudication.

Outcome

Civil Appeal No. 10877 of 2018 was dismissed. All interim applications were disposed of. The Registry of the High Court was directed to release the amount deposited before it, along with accrued interest, to JCPL within two weeks from the date of the judgment. MPRDC was directed to pay the remaining amount along with accrued interest to JCPL within three months.