Tribunal Cannot Deny Respondent’s Claims Solely on Ground of Non-Consideration of Relevant Material: Delhi HC Upholds GMR’s Arbitral Award

The Delhi High Court has affirmed the decision of an arbitral tribunal concerning a commercial dispute between National Highways Authority of India (NHAI) and GMR Hyderabad Vijayawada Expressways Ltd. Over financial claims triggered by a “Change in Law,” especially in relation to the bifurcation of Andhra Pradesh and changes in sand mining policies.

NHAI appealed against an arbitral award that favored GMR, arguing the tribunal improperly interpreted the concession agreement’s “Change in Law” provisions. GMR’s claims were originally dismissed by NHAI, citing insufficient substantiation regarding the adverse financial impacts stemming from legal and policy alterations that affected traffic volumes and revenue projections for a highway project. These legal changes included court orders and government policies that significantly altered the operational landscape and financial forecasting for GMR.

The Court affirmed the tribunal’s conclusion that the changes in sand mining regulations and the bifurcation of Andhra Pradesh into two states constituted a “Change in Law” under the concession agreement. The resultant regulatory changes were held to significantly impact the traffic flow and revenue projections that formed the basis of the original financial model.

The High Court emphasized the limited scope of its intervention in arbitral decisions, aligning with the principle that judicial interference is warranted only when there is an evident perversity in the arbitral process or outcome that goes to the root of the matter.

The court upheld the minority arbitral award which redirected the assessment of the claim from NHAI to an independent arbitrator, avoiding potential bias and ensuring a fair review process.

Decision: The Court dismissed the appeals by NHAI, affirming the arbitral award in favor of GMR. The tribunal’s direction for a reassessment of the financial claims by an independent arbitrator was upheld, thereby confirming the applicability of the “Change in Law” provisions to the financial adjustments claimed by GMR.

Date of Decision: May 07, 2024

National Highways Authority of India vs. GMR Hyderabad Vijayawada Expressways Ltd.