Termination Payments and the Arbitration Squeeze: What 2026's Infrastructure Rulings Mean for Concessionaires

By Bhaskar Subramanian, Partner, S&S Co. Advocates & Solicitors and Subhradip Roy, Partner, S&S Co. Advocates & Solicitors

Published 24 October 2026 · Law stated as on 21 October 2026 · Informational content, not legal advice: see our disclaimer

Two things happened to Indian infrastructure dispute resolution in 2026 that deserve to be read together. Courts hearing Section 34 and 37 challenges set aside, or substantially cut, several large termination-payment awards that concessionaires had won in arbitration, tightening the margin for error in how such claims are pleaded and calculated. At the same time, the National Highways Authority of India pulled its largest disputes out of binding arbitration entirely through a January 2026 circular. Concessionaires negotiating or litigating a termination today are working with a dispute resolution landscape that looks different from the one their concession agreements were drafted against.

The circular that changed where the biggest disputes go

For most of the life of India's highway concession programme, a contractor or concessionaire with a large grievance against the National Highways Authority of India knew where it was heading: arbitration, usually before a tribunal constituted under the concession or EPC agreement, with the Arbitration and Conciliation Act, 1996 governing the process end to end. The Ministry of Road Transport and Highways changed that calculus on 12 January 2026, issuing a circular that NHAI adopted through its own Policy Circular 11.82/2026 a week later. For disputes valued below Rs 10 crore, institutional forums such as SAROD or the India International Arbitration Centre remain available. Above that figure, a dispute that survives the contract's internal mechanism now goes to non-binding conciliation under the 1996 Act, and from there, if conciliation fails, to civil litigation rather than to a binding arbitral tribunal.

Two features of this change deserve particular attention from any concessionaire currently mid-dispute or weighing one. First, the threshold is not an aspiration for new contracts; it applies retrospectively to agreements already signed, with the only carve-out being for arbitrations already underway at the time of the circular. A concessionaire that priced its project on the assumption of binding arbitration for a large claim now finds that assumption altered by administrative circular rather than by negotiated amendment. Second, a February 2026 clarification, Policy Circular 11.83/2026, addressed how the changed mechanism interacts with pending matters, which suggests NHAI itself recognised the transition needed further explanation once concessionaires began asking what it meant for claims already in train.

Commentary through 2026 has been openly critical of the change, and the criticism tracks a real legal risk rather than mere inconvenience. The Supreme Court's 2019 ruling in Ssangyong Engineering & Construction Co Ltd v. NHAI, reported at 2019 SCC OnLine SC 677, set aside an arbitral award precisely because NHAI had tried to alter a contractual formula unilaterally through a circular, holding that a contract cannot be unilaterally amended over an unwilling party's objection and that doing so offends the most basic notions of justice under the public policy ground in Section 34. A circular that removes binding arbitration altogether for existing high-value contracts sits closer to that line than NHAI's commentary on the reform appears to acknowledge, and this research did not find a reported court challenge to the January 2026 circular as of this article, which means the question of whether it can lawfully bind concessionaires who contracted for arbitration is, for now, untested rather than settled.

For a concessionaire negotiating a new contract, the practical response is to treat the dispute resolution clause as a live point of commercial negotiation rather than boilerplate, since the Rs 10 crore line will determine whether a large claim gets the finality of arbitration or the longer, more public road through conciliation and civil court. For one already holding a claim above that threshold under an existing agreement, the live question is whether to test the circular's validity directly or to work within the conciliation-first path it now prescribes, and that choice should be made with the Ssangyong line of authority squarely in view.

Two termination-payment awards, two ceilings exceeded

Even before the circular took effect, 2026 had already produced a pattern worth noticing in how courts treat termination-payment awards once they reach a Section 34 challenge. In National Highways Authority of India v. M/s Kurukshetra Expressway Private Ltd, 2026:DHC:5961, the dispute arose from a concession agreement dated 13 July 2010 for four-laning the Rohtak-Bawal section of NH-71, which the concessionaire eventually terminated. An arbitral tribunal awarded Rs 911.13 crore in termination payment against a claim of over Rs 1,347 crore, calculating the figure on a Total Project Cost of roughly Rs 1,045.5 crore drawn from a disaggregation letter. The Delhi High Court set aside that part of the award, holding that the tribunal had exceeded a contractual ceiling of Rs 650 crore fixed under Article 48.1 of the agreement, and a Division Bench upheld that outcome on appeal in September 2026.

The second dispute tells a similar story with a different concessionaire. Kalpataru Projects' joint-venture vehicle had obtained an arbitral award against NHAI for termination payment after NHAI failed to pay within the time the concession agreement fixed. On 28 July 2026, the Delhi High Court set aside the termination-payment and interest components of that award while leaving the tribunal's findings on every other claim untouched, and a further order on 28 September 2026 upheld that earlier ruling. The company has disclosed its intention to appeal under Section 37, which means the final word on this specific award is not yet in.

What both rulings share is not a hostility to concessionaires as a class, since in each case the tribunal's award on claims other than termination payment survived the challenge intact. What they share is a court willing to scrutinise, specifically, whether the figure a tribunal used to calculate termination payment respected an express contractual cap, treating a departure from that cap as the kind of patent illegality a reviewing court can correct rather than a permissible, if debatable, reading of the contract. For a concessionaire preparing a termination-payment claim, the lesson is not that arbitration has become unreliable; it is that the arithmetic behind the number pleaded needs to trace back to the concession agreement's own defined terms with a precision that a sympathetic tribunal's award will not, on its own, protect on review.

How much latitude a tribunal actually has: the Somdatt Builders standard

Both Kurukshetra Expressway and the Kalpataru dispute have to be read against the backdrop of how far a court can go in second-guessing an arbitral tribunal's reading of an infrastructure contract, and the clearest recent statement of that standard comes from the Supreme Court's decision in Somdatt Builders-NCC-NEC(JV) v. National Highways Authority of India, 2025 INSC 113. The Court held there that a Section 37 appeal cannot travel beyond the limits that already bind a Section 34 court; the appellate court's job is to check whether the Section 34 court respected those limits, not to conduct its own fresh review of the arbitral record.

On patent illegality specifically, Somdatt Builders holds that the illegality asserted has to go to the root of the matter, and that a court cannot use this ground as a route to re-appreciate evidence the tribunal has already weighed. Where an arbitrator's reading of a contract clause is one plausible view among others, even if not the only one a court might have reached on its own, that plausibility is enough to insulate the award from interference. Violations of statutes that are themselves tied to public policy or public interest, or an award that disregards a binding order of a superior court, count as contrary to the fundamental policy of Indian law; an ordinary contractual or statutory disagreement without that link does not.

Set against that standard, the Kurukshetra Expressway and Kalpataru rulings are notable precisely because the courts framed the error they found as a breach of an express numerical ceiling in the contract text itself, not as a disagreement with how the tribunal weighed competing factual narratives about project cost or delay. That framing is deliberate, and it tracks the narrow room Somdatt Builders leaves open. A concessionaire's advisers reviewing a favourable award before NHAI's Section 34 petition lands, or defending one once it has, should test the award specifically against any express cap, formula or defined term the concession agreement uses for termination payment, since that is the fault line courts in this sector are actually using in 2026, rather than any broader appetite to revisit the tribunal's findings generally.

Force majeure: the same clause-driven unpredictability as ever

Force majeure claims in Indian infrastructure contracts have never produced a single predictable outcome, and 2026's rulings confirm that the clause's own drafting, not any general sympathy for pandemic-era or weather-driven losses, still decides the result. In Airports Authority of India v. Delhi International Airport Limited, 2025:DHC:1523, decided in March 2025 but continuing to shape how later claims were argued through 2026, the Delhi High Court upheld an arbitral award that had excused DIAL from its monthly concession fee for roughly two years during the pandemic and extended the concession term by the same period. The Court treated the force majeure clause as an eclipse provision, meaning the obligations it covers are suspended, or here excused outright, for as long as the qualifying event persists, and it held that whether such an event occurred and for how long is a factual question squarely for the tribunal rather than for a reviewing court applying its own view of the pandemic's severity.

The Bombay High Court reached the opposite result on a materially different clause in State of Maharashtra v. Patwardhan Infrastructure Pvt Ltd, 2026:BHC-AS:2050, decided in January 2026. That BOT bridge concession across Dharamtar Creek conditioned the State's obligation to compensate toll shortfalls on the shortfall being caused by a force majeure event and on collections falling below twenty percent of normal levels. The tribunal had instead awarded compensation for shortfalls generally, relying on minutes of a 1999 pre-contract meeting to read the clause as an unconditional revenue guarantee. The High Court set the award aside, holding that pre-contract minutes cannot be used to rewrite an express conditional clause into an unconditional one, and that doing so was perverse and contrary to public policy rather than merely a generous reading of ambiguous language.

Read together, these two rulings are not in tension; they are applying the same interpretive discipline to two different clauses and reaching different results because the clauses themselves impose different conditions. DIAL's clause, on the tribunal's and the court's shared reading, genuinely covered a pandemic-scale disruption and allowed full excusal. Patwardhan's clause conditioned relief on a specific trigger the tribunal had bypassed using extrinsic material. A concessionaire assessing its own force majeure position after a disruptive event should resist treating either ruling as a general precedent for or against recovery, and should instead map its own clause's actual conditions, including any percentage threshold, causation requirement, or defined list of qualifying events, against the facts it can prove, since that mapping, not the general mood of recent case law, is what will decide the claim.

Change in law claims sit alongside force majeure in most concession agreements but work differently in one important respect: they typically do not excuse performance outright, instead rebalancing the contract through price adjustment, cost reimbursement, or an extension of time. This research found no 2025 or 2026 High Court ruling resolving the recurring question of whether a concessionaire can claim relief under both force majeure and change in law for the same underlying event, a point commentators have flagged as unsettled since at least 2020 and one that remains open on the sources reviewed for this article.

Writ jurisdiction against a public contract termination: a genuine split, not a settled rule

Whether a concessionaire or contractor can bypass an arbitration clause and go straight to a writ court when a government authority terminates a public contract is one of the sharpest live disagreements in this area, and 2026 produced a dramatic illustration of exactly how unsettled it is. In Tata Projects Limited v. Union of India, Writ-C No. 4559 of 2025, decided on 8 July 2026, the Allahabad High Court quashed NHAI's termination of a Rs 940.68 crore EPC contract for the Garhmukteshwar-Meerut stretch of NH-709A, along with the consequential forfeiture of Tata's bank guarantees and a fresh tender NHAI had already floated for the same work. The Court held that an arbitration clause does not automatically bar writ jurisdiction where a State authority's termination is demonstrably arbitrary, ignores material contractual obligations, and carries significant public interest consequences, and it treated NHAI's failure to hand over contiguous, hindrance-free land as exactly that kind of arbitrariness.

That victory did not survive long. On 31 August 2026, the Supreme Court stayed the Allahabad judgment in National Highways Authority of India v. Tata Projects Limited, SLP(C) No. 29512 of 2026, observing that given the public interest in the project, the parties should attempt to resolve the underlying dispute rather than have the writ ruling stand unqualified while the appeal is pending. A stay is not a final ruling on the merits, and this research found no indication that the Supreme Court has yet decided the appeal itself, but the stay means a concessionaire cannot currently treat the Allahabad High Court's reasoning as settled law, however persuasively it reads on its own terms.

The opposite view has its own recent backing. The Telangana High Court's Division Bench, in GVV Constructions Private Limited v. Union of India, Writ Appeal No. 743 of 2022, decided on 16 December 2025, worked from a Single Judge's position that serious and complicated questions of fact are better resolved in arbitration than on a writ petition, particularly once arbitration has already been invoked on the same contract. The Andhra Pradesh High Court reached a broadly similar conclusion in an August 2024 ruling, treating the existence of an arbitration clause as a significant factor against entertaining a writ.

The honest position for a concessionaire or contractor facing termination today is that the writ route remains genuinely available in an appropriate case, one where the facts of arbitrariness are largely undisputed and the public interest in the underlying project is substantial, but it is no longer a reliably faster or safer alternative to arbitration simply because a sympathetic High Court exists somewhere in the country. The Supreme Court's own general doctrine, that an alternative remedy such as arbitration does not automatically oust writ jurisdiction in an appropriate case, remains good law, but 2026 has shown that even a strongly reasoned writ victory at the High Court stage can be stayed within weeks once the public authority appeals.

Who decides what counts as an 'excepted matter': the GVV Constructions clarification

A separate, narrower question runs through several of these disputes: once a writ court has said a dispute should go to arbitration, who gets to decide whether the specific grievance, often the termination itself, actually falls within the arbitration clause's scope, or whether it is instead an 'excepted matter' the contract has carved out for a different forum entirely. The Supreme Court addressed this directly in the sequel to the GVV Constructions litigation, reported at 2026 INSC 976, after the Telangana High Court's Division Bench had directed the Arbitral Tribunal to decide the contractor's claims strictly in accordance with the contract.

The Supreme Court clarified that this direction did not restrict or encroach on the Tribunal's own power under Section 16 of the Arbitration and Conciliation Act to rule on its own jurisdiction, including the question of whether the termination dispute was arbitrable at all or fell within an excepted-matters carve-out that the government had argued should send it to a civil court instead. The Court expressly declined to express any view on the merits of that jurisdictional question, leaving it for the Tribunal to decide in the first instance.

This matters well beyond the facts of one railway contract. Many Indian infrastructure and EPC contracts carry excepted-matters clauses carving out specific categories, often including termination itself, from the general arbitration agreement, and government counsel in several of the disputes discussed in this article have argued that a termination dispute falls within such a carve-out and belongs in civil court rather than before an arbitrator. GVV Constructions confirms that the Tribunal itself gets the first word on that question under Section 16's competence-competence principle, even where a writ court has already weighed in on the broader dispute, and a concessionaire facing a jurisdictional objection along these lines should expect to argue it before the Tribunal first rather than assuming a civil court filing is the only live route.

Finality and old jurisdictional objections: the lesson from Jabalpur Corridor

A further 2026 ruling, Madhya Pradesh Road Development Corporation Ltd v. M/s Jabalpur Corridor Pvt Ltd, decided by the Supreme Court on 29 May 2026 in Civil Appeal No. 10877 of 2018, adds a different kind of lesson about how long a termination dispute can run and what happens to objections a party does not press to finality the first time they are available. MPRDC had terminated the underlying concession agreement in 2007, and the resulting dispute, over roughly Rs 176 crore in claims from the concessionaire against roughly Rs 277 crore in counterclaims from the authority, took nearly two decades to reach a final Supreme Court ruling.

Part of that delay traced to a jurisdictional argument MPRDC raised and lost early on: that the dispute belonged before a tribunal constituted under the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983, rather than under the general Arbitration and Conciliation Act, 1996. A District Court initially accepted that argument in 2013, but the Madhya Pradesh High Court reversed it, holding the dispute arbitrable under the 1996 Act, and the Supreme Court in 2026 declined to let MPRDC revive the same jurisdictional objection once it had already become final in the earlier round of proceedings.

The practical point for any authority or concessionaire in a long-running infrastructure dispute is that a jurisdictional objection, including one about which statute or forum governs the dispute, needs to be pressed to a final, appealed conclusion the first time it is raised. Treating an adverse jurisdictional ruling as something to revisit later, once the merits of the underlying claim become inconvenient, is not a strategy this ruling leaves room for, and a party that lets such an objection lapse at one stage of a long dispute should expect a court twenty years later to hold it to that earlier finality rather than reopen the question.

What this means for concessionaires and authorities going into the next cycle of contracts

For a concessionaire with a live or anticipated termination dispute against a central road authority, 2026's rulings point toward three practical adjustments. Pleading a termination-payment claim now calls for an explicit, line-by-line reconciliation between the figure claimed and every defined term, formula and ceiling the concession agreement itself uses, because that is the specific seam courts have been pulling on to set aside awards that otherwise survived arbitration intact. Assessing a force majeure or change-in-law position calls for close attention to the clause's actual conditions rather than to how a different, more favourable clause fared in someone else's dispute. And deciding whether to challenge a termination by writ, rather than by invoking the contract's own arbitration clause, calls for a realistic view that even a strong High Court ruling can be stayed on appeal within weeks where the government authority is determined to litigate it further.

For NHAI and other public authorities, the harder question raised by this year's developments is whether the January 2026 circular's retrospective removal of binding arbitration for high-value disputes will itself survive a direct legal challenge once one is filed, given how closely it resembles the kind of unilateral contractual alteration the Supreme Court condemned in Ssangyong nearly seven years earlier. Authorities relying on the circular to resist a pending arbitration above the Rs 10 crore threshold should weigh that exposure carefully rather than treat the circular's validity as settled simply because no challenge has yet succeeded.

None of this year's individual rulings amounts to a wholesale retreat from arbitration as the backbone of Indian infrastructure dispute resolution, and courts have continued to uphold tribunal findings they consider plausible readings of a contract, as the surviving portions of both the Kurukshetra Expressway and Kalpataru awards show. What has changed is the margin for error on the specific numbers and clauses that decide a termination-payment claim, and, separately and more structurally, the dispute resolution path NHAI itself now prescribes for its largest contracts. A concessionaire operating in this sector should treat both developments as live inputs into how a dispute is pleaded and where it is fought, not as background noise around an otherwise unchanged arbitration regime.

The open question that will matter most over the next year is whether anyone tests NHAI's January 2026 circular directly, and on what ground. Until a court rules on that specific point, concessionaires above the Rs 10 crore threshold are negotiating and litigating in the shadow of a policy change whose own legal durability has not yet been tested.

Frequently Asked Questions

References & Further Reading

The provisions, rulings and official documents below were relied on for this article, which states the law as on 21 October 2026. The position can change with amendments, rules and later decisions, so check the current text before acting on any of it.

1. Arbitration and Conciliation Act, 1996, Sections 16, 34 and 37
2. Ministry of Road Transport and Highways circular dated 12 January 2026; NHAI Policy Circular 11.82/2026 (19 January 2026) and clarificatory Policy Circular 11.83/2026 (12 February 2026)
3. Ssangyong Engineering & Construction Co Ltd v. National Highways Authority of India, 2019 SCC OnLine SC 677 (Civil Appeal No. 4779 of 2019, decided 8 May 2019)
4. National Highways Authority of India v. M/s Kurukshetra Expressway Private Ltd, 2026:DHC:5961 (Delhi High Court); Division Bench appeal FAO(OS)(COMM) 211/2026, decided 28 September 2026
5. Kalpataru Projects (KEPL) v. National Highways Authority of India, Delhi High Court orders dated 28 July 2026 and 28 September 2026 (Section 34 proceedings)
6. Somdatt Builders-NCC-NEC(JV) v. National Highways Authority of India, 2025 INSC 113
7. Airports Authority of India v. Delhi International Airport Limited, 2025:DHC:1523 (Delhi High Court, decided 7 March 2025)
8. State of Maharashtra v. Patwardhan Infrastructure Pvt Ltd, 2026:BHC-AS:2050 (Bombay High Court, Arbitration Appeal No. 33 of 2015, decided 17 January 2026)
9. Tata Projects Limited v. Union of India, Writ-C No. 4559 of 2025 (Allahabad High Court, decided 8 July 2026)
10. National Highways Authority of India v. Tata Projects Limited, SLP(C) No. 29512 of 2026 (Supreme Court stay order dated 31 August 2026)
11. GVV Constructions Private Limited v. Union of India, Writ Appeal No. 743 of 2022 (Telangana High Court, decided 16 December 2025); Supreme Court sequel, 2026 INSC 976
12. Madhya Pradesh Road Development Corporation Ltd v. M/s Jabalpur Corridor Pvt Ltd, Civil Appeal No. 10877 of 2018 (Supreme Court, decided 29 May 2026)

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