The Delhi High Court partly allowed an appeal filed by the South Delhi Municipal Corporation (MCD) challenging an arbitral award in its long-standing contractual dispute with M/s PKSS Infrastructure Pvt. Ltd. over toll collection operations at Delhi’s entry points.
The dispute arose out of a three-year contract awarded in 2008 to a consortium led by PKSS, which involved toll collection, development, and maintenance of toll plazas. Disagreements emerged over integrated toll contractors’ operations and delays in providing clear land titles, among other issues. The contractor initiated arbitration proceedings, claiming losses and refund of a ₹47 crore cash security deposit and a ₹46.96 crore performance bank guarantee, along with damages and interest.
The arbitral tribunal ruled in favour of PKSS, awarding interest at 15% per annum on the withheld amounts and ₹32 lakh in costs. MCD challenged this before the Single Judge, whose dismissal of the objections was then appealed in the present case.
The Division Bench of Justices Vibhu Bakhru and Tejas Karia examined whether the arbitral award of interest on the cash security and performance guarantee violated Clause 6.4(a) of the contract, which clearly stated that “the EMD, Cash Security and the Contract Performance Guarantee shall not carry any interest whatsoever in any circumstances.” Relying on settled Supreme Court precedent including Pam Developments v. State of West Bengal, (2024) 10 SCC 715 and Union of India v. Manraj Enterprises (2022) 2 SCC 331, the Court held that the arbitral tribunal had no jurisdiction to grant interest contrary to this express bar.
Accordingly, the Court set aside the portion of the award granting interest on the security amounts. However, it upheld the award of ₹44.71 lakh towards bank charges and ₹32 lakh as partial legal and arbitration costs, finding no patent illegality in these components.
The appeal was thus partly allowed to the extent of setting aside the interest award, with each party bearing its own costs.
Appearances:
Appellant: Ms. Malvika Trivedi, Sr. Adv. with Mr. Sanjay Vashishtha, Standing Counsel for MCD with Mr. Shailendra Slaria, Mr. Siddhartha Goswami, Mr. Sujal Gupta, Ms. Geetanjali Reddy, Advocates with Mr. Sanjay Sharma, Asst. Commissioner with Mr. Bijender Singh, JSA.
Respondents: Mr. Sandeep Bajaj, Mr. Soayib Qureshi & Mrs. Chetna Alagh, Advocates.
