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Informist, Wednesday, May 6, 2026

 

NEW DELHI – The Delhi High Court Wednesday set aside a 2018 arbitral award that asked the National Highways Authority of India to pay INR 145.16 million to GMR Highways Ltd., a subsidiary of GMR Group, for additional cost incurred by the latter consequent to change in rates of minimum alternate tax, fringe benefit tax and service tax. 

 

The high court said that the arbitral tribunal had not discussed the material relied on by it to award the claimed amount. There is no material on record to prove the variation in rates of tax and tax deposited by GMR Highways at the enhanced rates, the court said. Allowing the claim without evidence by an unreasoned award renders the award perverse and in conflict with the public policy of India and is consequently set aside, it said.    

 

The case has its genesis in the Centre, through the National Highways Authority of India,  inviting bids for development of the stretch of a national highway from 28 km to 121 km of the Tambaram-Tindivanam section in Tamil Nadu. Through a consortium, GMR Highways was the successful bidder and was issued a letter of acceptance in 2001. The project was on a build, operate and transfer basis. 

 

The construction was completed in 2004 and the concession period was of 17 years and six months, ending in 2019. The project was successfully completed and there was no dispute relating to the completion and operation of the project. However, GMR Highways raised a claim for additional cost incurred consequent to change in rates of minimum alternate tax, fringe benefit tax and service tax.

 

In 2014, the highways authority rejected the claim for reimbursement of additional cost. The terms and conditions agreed between the parties provided for dispute resolution through arbitration. The arbitration was invoked at the instance of GMR Highways and which ruled in favour of the company.

 

The highways authority argued that the variation in rates of tax under the 1961 Act did not fall within the ambit of "additional cost" and under Article 11 of the concession agreement between the parties. The arbitral tribunal erred in reading the definition of "tax" in isolation and not along with the definition of "additional cost", said the highways authority. The arbitral award was allowed in the absence of evidence to establish that the taxes at the enhanced rates were actually paid by GMR Highways and that the tax rates varied after the proposal due date, said the petiotioner. Further, contentions raised by the highways authority in the statement of defence were not considered by the arbitral tribunal, it said.  End

 

Reported by Surya Tripathi

Edited by Avishek Dutta

 

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