Delhi High Court Upholds Arbitral Award Ordering NHAI To Pay ₹12.18 Crores To Toll Operator For Revenue Loss

The Delhi High Court has dismissed a challenge by the National Highways Authority of India (NHAI) against an arbitral award granted to Kochi Aroor Tollways Private Limited (KATPL), upholding a compensation amount of approximately ₹12.18 crores.

The award addressed losses KATPL sustained on the Edapally–Vyttila–Aroor road stretch in Kerala, specifically due to incorrectly fixed toll rates, delays in declaring the Commercial Operation Date, and the costs associated with issuing free monthly passes to locals.

Justice Amit Bansal ruled that NHAI failed to make out any ground for interference with the award under Section 34 of the Arbitration and Conciliation Act.

In 2015, NHAI and KATPL entered into a concession contract for the maintenance and toll collection of the Edapally-Vyttila-Aroor road section in Kerala. KATPL alleged that NHAI had set toll rates lower than permitted, resulting in daily revenue losses.

Although KATPL was ready to begin operations by June 2015, NHAI delayed the official Commercial Operation Date (COD) until September 2015, effectively preventing fee collection for nearly three months. Tensions escalated when the operator was forced to issue free monthly passes to local residents due to regional agitation—a cost for which they were not reimbursed—eventually pushing the dispute into arbitration.

In its order dated October 10, 2018, the arbitral tribunal ruled in favor of KATPL. The tribunal found that NHAI had incorrectly fixed and validated user fee rates and was responsible for the delay in declaring the COD.

Consequently, KATPL was awarded ₹9.34 crore for losses tied to incorrect toll rates and ₹1.91 crore for the delayed start. The tribunal also classified the forced issuance of free passes as a "Force Majeure" event under the Concession Agreement, directing NHAI to reimburse ₹93.89 lakh for those costs. Seeking to overturn this decision, NHAI approached the Delhi High Court under Section 34 of the Arbitration and Conciliation Act, 1996.

Before the High Court, NHAI argued that it lacked the authority to determine toll rates and insisted that the delayed start date was actually KATPL's fault. NHAI further claimed the tribunal had overstepped by rewriting the terms of their contract. KATPL countered these points, asserting that NHAI's fee settings violated statutory rules and that the company had met all obligations to declare the COD on time. They maintained that the free passes were a direct result of law-and-order disruptions, justifying the tribunal's award.

Rejecting NHAI's claim that only the Ministry could decide toll rates, the Bench headed noted that government notifications clearly empowered NHAI to "levy, determine, and collect" these fees.

The Court observed that the "Arbitral Tribunal has correctly come to the conclusion that the user fee rates notified by NHAI were not in accordance with the provisions of the Concession Agreement read with 2008 Rules and the Amendment Rules of 2011. Hence, Arbitral Tribunal worked out the user fee rates in accordance with the Concession Agreement. The finding of the Arbitral Tribunal is based on the contractual framework between the parties read with the relevant Rules and does not disclose any perversity or patent illegality". 

The Court further observed that there was no infirmity in the tribunal's findings in holding that the delay in starting operations was totally attributable to NHAI and rejected the argument that the arbitral tribunal had re-written the contract.

Consequently, finding no ground to set aside the award, it dismissed NHAI's petition and affirmed the award in its entirety. 

Appearances:

For NHAI –Parv Garg and Pawas Kulshrestha

For KATPL – Abhishek Gupta and Suyash Gupta