Termination payment under concession contracts cannot be reduced by unadjudicated claims, while section 9 can secure escrow deposit pending arbitration.

Under a concession agreement, termination payment was to be computed at 90% of debt due, and debt due included principal, accrued interest, finance charges and subordinated debt. Unadjudicated recovery claims could not be unilaterally set off, and the agreement did not authorise the authority to exclude accrued interest or make unsupported equity adjustments. The court also recognised that section 9 of the Arbitration and Conciliation Act permits interim measures to preserve the subject matter and secure enforceable claims, and upheld deposit of the termination amount into escrow subject to an unconditional bank guarantee and arbitral control over encashment.

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Issues: (i) Whether, while computing termination payment under the concession agreement, the authority could deduct alleged recoveries, exclude accrued interest, or adjust equity-related amounts. (ii) Whether the court could grant interim relief under section 9 of the Arbitration and Conciliation Act, 1996 directing deposit of the termination amount into the escrow account against a bank guarantee.

Issue (i): Whether, while computing termination payment under the concession agreement, the authority could deduct alleged recoveries, exclude accrued interest, or adjust equity-related amounts.

Analysis: The termination payment clause fixed payment at 90% of the debt due upon concessionaire default during the operation period. The definition of debt due covered principal, accrued interest, finance charges, and subordinated debt, and did not permit unilateral deduction of unadjudicated claims or claimed recoveries. The authority's damages claim remained uncrystallised and could not be set off without adjudication. The proviso to the total project cost definition, dealing with variation in WPI or exchange rate, did not authorise adjustment of debt or equity in the facts of the case. The equity support contemplated by the agreement was distinct from promoter equity and, on the findings recorded, no deductible equity support had been shown.

Conclusion: The deductions sought by the authority were impermissible, and the termination payment had to be computed without excluding accrued interest or making the claimed recoveries and equity adjustments.

Issue (ii): Whether the court could grant interim relief under section 9 of the Arbitration and Conciliation Act, 1996 directing deposit of the termination amount into the escrow account against a bank guarantee.

Analysis: Section 9 confers power to grant interim measures of protection, including orders analogous to those available to a civil court for preserving the subject matter and protecting admitted or legally enforceable claims. The contractual framework itself contemplated deposit of termination payments into the escrow account and protected the lenders' interests. The impugned order also balanced the competing equities by requiring an unconditional and irrevocable bank guarantee in favour of the authority and making encashment subject to the arbitral award.

Conclusion: The interim direction was within jurisdiction and warranted on the contractual and equitable framework of the dispute.

Final Conclusion: The appeals failed, and the order directing deposit into the escrow account with protective security in favour of the authority was upheld.

Ratio Decidendi: Under a contractually defined termination-payment regime, an authority cannot unilaterally deduct unadjudicated claims or make equity adjustments not authorised by the agreement, and section 9 may be used to secure the contractual payment obligation by an appropriate interim measure of protection.

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