Rajasthan High Court Quashes ₹198.04 Cr. Award Against JDA, Says Arbitrator Rewrote Concession Agreement

The Rajasthan High Court on 17 August set aside an arbitral award granting Rs. 198.04 crore to Rohan Rajdeep Rajasthan Infra Project Limited against the Jaipur Development Authority (JDA) and the Rajasthan Government in connection with the Ghat Ki Guni BOT tunnel project.

A Division Bench comprising Justices Arun Monga and Sandeep Taneja allowed JDA and the State's appeal and held that an arbitrator cannot shift contractual risks allocated to a developer or award compensation without identifying a corresponding contractual breach. The judges observed:

“Once the parties had consciously allocated the risk of investigation, survey and design to the concessionaire under the aforesaid clauses, the learned Sole Arbitrator could not have invoked the mandate of Section 28(3) of the Act of 1996 and thus, fastened the financial consequences of redesign upon JDA without first locating a contractual stipulation displacing burden of that allocation. The award identifies no such stipulation, and the effective transfer of the design risk from the respondent to the appellants runs counter to the express terms of the Concession Agreement.”

The dispute arose from a 27 November 2009 Tripartite Concession Agreement between the Rajasthan Government, JDA and Rohan Rajdeep Rajasthan Infra Project Limited for constructing and operating an alternate route to Ghat Ki Guni through a tunnel in Jaipur's Jhalana Hills on a Design-Build-Finance-Operate-Transfer basis. The agreement placed investigation, design, financing, construction and operation of the project on Rohan Rajdeep at its own cost and risk.

Rohan Rajdeep later alleged deficiencies in the Detailed Project Report (DPR), alignment constraints and additional works that increased project costs. It raised claims for cost escalation, toll revenue losses, demonetisation-related losses and denial of advertising rights.

On June 25, 2023, the sole arbitrator allowed claims totalling Rs. 198.04 crore with a 20.33% Internal Rate of Return (IRR). A July 31, 2023 corrigendum removed the Rs. 198.04 crore ceiling, allowing the IRR to operate without that cap. Rohan Rajdeep subsequently sought Rs. 544.43 crore in execution.

The Rajasthan Government and JDA challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996, which permits a party to seek setting aside of an arbitral award on specified grounds. After the Commercial Court, Jaipur dismissed their objections on January 27, 2025, they approached the High Court under Section 37.

JDA argued that the agreement placed investigation, survey and design risks on Rohan Rajdeep, while the DPR was only a reference document. It also contended that the contract contemplated extension of the concession period for specified disruptions and that the 20.33% IRR was merely a project-appraisal metric, not agreed interest.

Rohan Rajdeep defended the award, arguing that judicial interference was narrow, the IRR formed part of the contractual cash-flow projections and monetary compensation was not expressly barred.

Accepting JDA's case, the High Court held that the DPR could not be converted into a binding design benchmark when the agreement expressly placed investigation, survey and design responsibility on Rohan Rajdeep. It observed that making JDA financially responsible for redesign on that basis amounted to “rewriting the bargain between the parties”.

It further held that compensation could not be awarded without identifying a contractual obligation breached by JDA. The arbitrator, it found, had “presupposed” an obligation not contained in the agreement and then awarded damages for its supposed breach.

On the 20.33% IRR, the Bench held that it was a project-appraisal metric, “neither a promised return nor a rate of interest”, and that nothing in the agreement converted it into a guaranteed return. Rohan Rajdeep's actual borrowing cost, it noted, was 13.5%.

It also noted that the award had inflated an admitted project-cost escalation of about Rs. 57.87 crore into a liability claimed in execution at over Rs. 500 crore, apart from other claims. It held that the result “shocks the conscience of the Court”.

Further, the judges held that the July 31, 2023 corrigendum exceeded the limited correction power under Section 33 of the Arbitration and Conciliation Act, 1996, by substantively altering the award rather than merely correcting a clerical or typographical error.

Accordingly, the High Court set aside the arbitral award and the corrigendum were set aside.

Appearances for appellants (Jaipur Development Authority and State): Advocate General Rajendra Prasad with Advocates Tanay Goyal, Sheetanshu Sharma, Harshita Thakar and Dhriti Sharma.

Appearances for respondent (Rohan Rajdeep Rajasthan Infra Project Limited): Senior Advocate Sudhir Gupta with Advocates Sweta Chauhan, Tarak Ahuja, Ishan Khanna, Aditya Shandilya and Rachit Somani.