The Delhi High Court has partly allowed a petition filed by the National Highways Authority of India (NHAI) under Section 34 of the Arbitration and Conciliation Act, 1996, holding that an arbitral tribunal cannot grant relief beyond the claims referred to arbitration or rely on material shared by one party without affording the other an opportunity to respond.
Justice Avneesh Jhingan was dealing with NHAI’s challenge to an arbitral award arising out of a consultancy contract awarded to The Louis Berger Group Inc. JV with M/s COWI A/S for the design, construction supervision and operation and maintenance (O&M) of the cable-stayed bridge across the Chambal River at Kota, Rajasthan. The arbitral tribunal had awarded the respondent payments for the extended construction period as well as O&M charges.
Rejecting NHAI’s contention that the tribunal ought to have adjudicated responsibility for the 2009 bridge collapse, the Court observed that although NHAI had constituted a Committee of Experts and issued a show-cause notice, it ultimately continued with the respondent under the original contract without terminating the consultancy or imposing any penalty. In these circumstances, the tribunal was justified in deciding the payment disputes under the original contractual terms.
The High Court, however, found merit in NHAI’s challenge to the award of Operation and Maintenance (O&M) charges. It noted that while the respondent had sought O&M charges only up to September 2021, the arbitral tribunal awarded compensation till 19 November 2023, including payment for services that had not yet been rendered on the date of the award. Holding that an arbitral tribunal cannot grant relief beyond the disputes submitted for adjudication merely to avoid future litigation, the Court ruled that this portion of the award exceeded the scope of the reference and was liable to be set aside under Section 34(2)(a)(iv) of the Arbitration Act.
The Court also held that the arbitral tribunal violated the principles of natural justice by relying upon financial information emailed by the respondent regarding the cost implications of its O&M expert without first furnishing the material to NHAI or giving it an opportunity to rebut it. Referring to Section 18 of the Arbitration and Conciliation Act and the Supreme Court’s decision in Ssangyong Engineering & Construction Co. Ltd. v. NHAI, the Court held that reliance on material obtained behind a party’s back constitutes a valid ground for setting aside an award under Section 34(2)(a)(iii).
Rejecting NHAI’s plea that the claims were barred by limitation, the Court held that the cause of action arose only on 21 April 2020, when NHAI finally refused to release the balance payments unless the respondent executed a supplementary agreement. Since arbitration was invoked on 26 January 2021, the claims were held to be within limitation.
Relying on the Supreme Court’s decision in Gayatri Balasamy v. ISG Novasoft Technologies Ltd, (2025) 7 SCC 1, the High Court reiterated that courts can sever an invalid portion of an arbitral award where it is capable of being separated from the valid portion. Accordingly, it set aside only the portion of the award granting Operation and Maintenance (O&M) charges, while upholding the remainder of the arbitral award, and partly allowed NHAI’s petition.
