You Cannot Revive a Dead Contract by Interim Relief: Delhi High Court Sets Aside Arbitral Tribunal’s Order Restoring Terminated Highway Concession Agreement

“A Determinable Contract Cannot Be Specifically Enforced—Not Even Temporarily” – In a landmark judgment with deep implications for arbitration in infrastructure disputes, the Delhi High Court has ruled that an Arbitral Tribunal (AT) exceeded its powers under Section 17 of the Arbitration and Conciliation Act, 1996 by granting interim relief that effectively revived a terminated concession agreement between the National Highways Authority of India (NHAI) and HK Toll Road Pvt. Ltd.

Justice Jasmeet Singh categorically held: “The directions passed by the learned Arbitral Tribunal in the impugned order are contrary to the settled law and the bar created by the provisions of the Specific Relief Act. With greatest respect... the Tribunal has rewritten the terms of the Agreement and has overstepped its jurisdiction.” [Para 97]

“Once Terminated, the Contract Cannot Be Reinvoked—Even If Termination Was Wrong”

The controversy arose from a 2010 Concession Agreement between NHAI and HK Toll Road for construction and toll operation on a 59.87 km stretch of NH-7 in Tamil Nadu. Following disputes over non-performance, maintenance lapses, and premium defaults, NHAI issued a Termination Notice on 22 January 2024 and took over the highway, appointing a new agency to collect toll.

Subsequently, the respondent filed an application under Section 17 of the Arbitration Act seeking interim protection, which led to a startling interim order by the Tribunal on 8 August 2024, wherein it:

• Stayed the Termination Notice;

• Directed completion of pending construction by the concessionaire;

• Allowed continued toll collection into escrow; and

• Restored financial instruments and highway access to the respondent.

Justice Singh found this tantamount to granting final relief at an interim stage, something the law does not permit.

“Even if the termination is ultimately found to be illegal, the only remedy is compensation, not revival of the contract.” [Para 96]

“Determinable Contracts Cannot Be Enforced—Especially Not by Injunction”

The Court held that the concession agreement was “determinable in nature” as per Clause 37, which allowed either party to terminate the agreement upon default.

“Both parties had a right to terminate. Hence, by virtue of Section 14(d) of the Specific Relief Act, the agreement is incapable of specific performance, and by virtue of Section 41(e), no injunction can be granted.” [Para 90]

The Court relied on well-settled precedent including Rajasthan Breweries Ltd., Inter Ads Exhibition, and Supreme Panvel Indapur Tollways, reiterating:

“Once a contract is terminated, Courts (and by parity, Arbitral Tribunals) cannot restore it even at final stage, let alone at interim.” [Para 91–94]

“Arbitral Tribunal Cannot Rewrite the Agreement” – Status Quo Ante Was an Overreach

The High Court rejected the argument that the Tribunal's order was merely to maintain status quo. Instead, it held:

“The direction to complete the construction work and collect toll was not preservative—it restored rights that had already ceased to exist.” [Para 97–98]

The Court found that the Tribunal ignored the fact that the project was already taken over by NHAI and re-awarded to a new agency, SD Infra Private Limited, whose engagement had been duly recorded by the Tribunal itself.

“Infrastructure Contracts Are Immune from Injunctions” – Sections 20A and 41(ha) of SRA Apply

The Court delivered a significant pronouncement on the applicability of the 2018 amendments to the Specific Relief Act, holding that even for contracts signed before 2018, if the performance continued thereafter (as in the case of ongoing construction and O&M), the amended bar on injunctions applies.

“The legislature has clearly mandated that no injunction shall be granted in infrastructure contracts if it delays progress or interferes with continuous services.” [Paras 108–109]

The Tribunal’s reliance on the now-recalled judgment in Katta Sujatha Reddy was expressly rejected as bad law in light of the Supreme Court’s 2024 ruling in Siddamsetty Infra Projects.

“Interim Relief Cannot Become Final Outcome” – AT’s Order Was Legally Unsustainable

In emphatic terms, the Court observed:

“The Arbitral Tribunal has effectively passed an interim award under the guise of interim relief. The discretion under Section 17 is not unbounded and cannot be exercised in a manner that rewrites the contract.” [Para 97]

“The Tribunal erred in converting a limited, protective mechanism into a substantive direction that reshaped the contractual relationship.” [Para 114]

Conclusion: Tribunal’s Interim Order Quashed—Appellate Court’s Intervention Justified

In conclusion, Justice Jasmeet Singh exercised the High Court’s limited appellate jurisdiction under Section 37(2)(b) to set aside the impugned interim order:

“I am constrained to interfere... as the directions are contrary to settled principles of law, and particularly, to the Specific Relief Act.” [Para 114]

The Court, however, clarified that these findings would not prejudice the merits of the arbitral proceedings, which must continue independently.

“These observations are for the purpose of the appeal only and shall not affect the arbitration on merits.” [Para 115]

Date of Decision: 17 April 2025