A concession agreement signed on 16 December 2011 handed the four-laning of State Highway 82 to Abhijeet Meerut Karnal Toll Road Limited, on a design, build, finance, operate and transfer basis. The deal depended on the Authority clearing 90 per cent of the right of way before the concessionaire had to perform its side. Instead, the Authority issued only a Section 4 notification under the Land Acquisition Act and never followed through with the Section 6 declaration that would have actually vested the land. Years passed with the project effectively stalled. On 13 January 2014, the concessionaire pulled the plug and terminated the agreement, blaming the Authority's failure to deliver possession.
The dispute went to arbitration, and the tribunal split. A majority of the panel found the Authority in breach and awarded loss of profits, though it scaled the figure down sharply from the concessionaire's claim of Rs 640.50 crore to Rs 157.57 crore, largely built on a financial model projecting what the concession would have earned over its term. The majority also awarded Rs 25.53 crore to cover payments the concessionaire owed its own EPC contractor. The presiding arbitrator dissented on both heads, taking the view that the loss-of-profits claim was too speculative to sustain.
Challenging the award under Section 34 before the Commercial Court got the Authority nowhere, so it appealed further under Section 37 to the Allahabad High Court's Lucknow Bench. Its central argument was that a financial projection, standing alone, cannot support an award of this size; without independent corroborating evidence such as actual toll collections on comparable stretches, cost records, or traffic studies tested at trial, the model is just an exercise in assumptions dressed up as damages.
A Division Bench of Chief Justice Arun Bhansali and Justice Jaspreet Singh agreed with that specific objection but rejected the broader attempt to reopen the award on every procedural ground the Authority raised. The Bench was explicit that not every procedural irregularity in an arbitral proceeding has the effect of vitiating the award; Sections 34 and 37 of the Arbitration and Conciliation Act, 1996 set a narrow gate, and a court sitting in that jurisdiction cannot use a laundry list of process complaints to re-try the dispute on its merits. Most of what the Authority complained of fell well short of the patent illegality or fundamental policy breach that would justify interference.
Where the Bench did intervene was narrowly targeted. It held that a financial model, by itself, is only a piece of corroborative evidence; it cannot be the sole foundation for a loss-of-profits award running into hundreds of crores without something else in the record to anchor it. Because the majority had relied on the model essentially alone, the Bench severed that part of the award and remitted the loss-of-profits claim back to an arbitral tribunal for fresh determination on a proper evidentiary footing. The Rs 25.53 crore award covering the concessionaire's EPC payment obligations, and the rest of the tribunal's findings on breach and liability, were left undisturbed.
The result is a partial win dressed up as neither side's outright victory. The Authority did not escape the finding that it was itself responsible for the termination by failing to clear the right of way, a central and recurring failure in NHAI and state highway authority PPP projects across the country. But it also does not have to immediately find Rs 157.57 crore for a claim the court found insufficiently proved, at least not until a tribunal revisits the loss-of-profits question with better evidence on the table.
For concessionaires and authorities alike, the ruling draws a sharper line around what counts as adequate proof of lost profits in PPP termination disputes. A financial model remains a legitimate starting point for quantifying loss, but tribunals that rely on one without requiring supporting material, be it actual performance data from comparable projects, audited cost records, or expert testimony tested in cross-examination, are inviting exactly the kind of Section 37 intervention this award received. The underlying breach finding survives; the damages calculation has to be redone properly.