National Highway Authority Of India vs M/S Gmr Pochanpalli Expressways Ltd on 6 April, 2022

[Cites 13, Cited by 1]

Delhi High Court

National Highway Authority Of India vs M/S Gmr Pochanpalli Expressways Ltd on 6 April, 2022

Bench: C. Hari Shankar

$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI

Reserved on: 16th November, 2021
Decided on: 6th April, 2022

+ O.M.P. (COMM) 433/2020, IA 4775/2020 and IA 8408/2021

M/S GMR POCHANPALLI
EXPRESSWAYS LTD ..... Petitioner
Through Mr. Atul Sharma, Ms. Milanka
Chaudhury, Mr. Abhinav Agnihotri and Ms.
Harshita Agarwal, Advs.

versus

NATIONAL HIGHWAY
AUTHORITY OF INDIA ..... Respondent
Through Mr. Dayan Krishnan, Sr.
Advocate with Mr. Ankur Mittal, Mr. Abhay
Gupta and Ms. Sukrit, Advs.

+ O.M.P. (COMM) 449/2020, I.A. 6682/2020 and I.A. 6683/2020

NATIONAL HIGHWAY
AUTHORITY OF INDIA ..... Petitioner
Through Mr. Dayan Krishnan, Sr.
Advocate with Mr. Ankur Mittal, Mr. Abhay
Gupta and Ms.Sukrit, Advs.

versus

M/S GMR POCHANPALLI
EXPRESSWAYS LTD ..... Respondent
Through Mr. Atul Sharma, Ms. Milanka
Chaudhury, Mr. Abhinav Agnihotri and Ms.
Harshita Agarwal, Advs.

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CORAM:
HON'BLE MR. JUSTICE C. HARI SHANKAR

% JUDGMENT
06.04.2022

1. Both these petitions, under Section 34 of the Arbitration and
Conciliation Act, 1996, ("the 1996 Act") assail an award dated 14th
January, 2020, passed by a learned three member Arbitral Tribunal.
The award was passed by a majority of two learned members to one.
GMR Pochanpalli Expressways Ltd ("GMR") was the claimant before
the learned Arbitral Tribunal and National Highway Authority of India
("NHAI") was the respondent. GMR preferred five claims, whereas
NHAI preferred a single counter-claim for the costs of the arbitration.
Of the five claims preferred by GMR, the learned Arbitral Tribunal,
per majority, rejected Claims 1, 3 and 4 and allowed Claims 2 and 5.
As Claim 5 of GMR pertains to awarding of costs as per actuals,
allowing of the said claim also resulted in the rejection of the counter-
claim of NHAI. The minority award rejected all five claims of GMR.

2. GMR and NHAI have both assailed the impugned award, to the
extent that the award has rejected their respective claims/counter-
claims and allowed the claim of the opposite party.

A Prefatory Note

3. During the course of arguments, in this case, Mr. Atul Sharma,
learned counsel for GMR, drew the attention of the Court to the fact
that, in an earlier award dated 21st August 2019 between NHAI and
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Nirmal BOT Ltd, another contractor, in similar circumstances and
involving an identically worded contract, the very issues which
constituted subject matter of Claim 1 of GMR in the present case had
arisen for consideration before another three member Arbitral
Tribunal. The award in that case, which was rendered prior in point of
time to the impugned award, has been placed on record. Paras 8.2.9 to
8.2.20 of the said award indicate that the learned Arbitral Tribunal,
which was in seisin of the dispute in that case has interpreted the very
clauses with which the learned Arbitral Tribunal in the present case
was concerned and that the interpretations of the relevant clauses in
the two awards are diametrically opposed to each other.

4. This does not appear to be an isolated phenomenon. The
Supreme Court, in NHAI v. Progressive-MVR (JV)1, observed, in
para 15 of the report, thus:
"15. Thus, the main reason because of which the NHAI lost
in those proceedings was that two possible interpretations
could be given to the Clause in question and, therefore, the
recourse taken by the Arbitral Tribunal by adopting one
particular interpretation was not required to be interfered
with. SLP against that was dismissed. In a situation like this,
this Court would not have undertaken further exercise in the
matter. However, another Arbitral Tribunal in the case of
M/s. Ssangyong Engineering and Construction Co. Ltd. has
accepted the other view, which goes in favour of the NHAI. It
leads to an anomalous situation. The NHAI has entered into
multiple contracts with different parties containing the same
clauses of price variation. Once we find that Arbitral
Tribunals are taking different views, and the view taken in
favour of the NHAI is also one of the possible interpretations,
the effect thereof would be to uphold both kinds of awards
even when they are conflicting in nature in respect of the

1 (2018) 14 SSC 688
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same contractual provision. It may not be appropriate to
countenance such a situation which needs to be remedied.
Therefore, under this peculiar situation, we deem it proper to
go into the exercise of interpreting the said Clause so that
there is a uniformity in the approach of the Arbitral Tribunals
dealing with this particular dispute and a sense of certainty is
attached in the outcomes."

5. NHAI is possibly the only Public Sector Enterprise involved in
the largest number of arbitrations, nearly all of which involved
substantial claims and counter-claims. The possibility of diverse views
being taken by different Arbitral Tribunals in respect of identical
contractual clauses, as happened in NHAI v. Progressive-MVR (JV)1
and as has happened in the present case, always looms large. In such
circumstances, it would be the duty of the NHAI to inform a later
Arbitral Tribunal, before which the same issue as has already been
considered and decided by an earlier Arbitral Tribunal in identical
circumstances, arises, of the earlier award, so that the later Arbitral
Tribunal is aware of the view of the earlier Arbitral Tribunal. This
fosters uniformity of views, as also public faith in the administration
of arbitral justice. Of course, arbitral awards are not binding
precedents, and it is always open to the later Arbitral Tribunal to take
a different view. At the same time, the import of para 15 of NHAI v.
Progressive-MVR (JV)1, which advocates uniformity in arbitral
awards involving identical issues cannot be ignored. If, therefore, the
later Arbitral Tribunal is to depart from the view of the earlier Arbitral
Tribunal, one would expect that it would be for good and cogent
reasons, and that, if the later Arbitral Tribunal is of the view that the
earlier Arbitral Tribunal has wrongly decided the issue, the reasons for

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that view would be forthcoming in the arbitral award.

6. NHAI having failed to inform the learned Arbitral Tribunal in
the present case of the award passed in the case of Nirmal BOT, two
contradictory arbitral awards, both by three-member Arbitral
Tribunals, having come to be passed. Applying the principle in NHAI
v. Progressive-MVR (JV)1, the Court is bound to enunciate what, in its
opinion, is the correct legal position. To that extent, I am in agreement
with the submissions of Mr. Atul Sharma, learned counsel for NHAI,
that the situation envisaged in para 15 of NHAI v. Progressive-MVR
(JV)1 constitutes an exception to the general principle of rectitude and
reticence, which is required to inform the Section 34 Court.

7. Though Mr. Dayan Krishnan, learned Senior Counsel for
GMR sought to contend that NHAI v. Progressive-MVR (JV)1 was
rendered under Article 142 of the Constitution and could not constitute
a binding precedent, I cannot agree. The judgment in NHAI v.
Progressive-MVR (JV)1 does not indicate and it was rendered under
Article 142 of the Constitution. It is well settled that courts lower in
the judicial hierarchy should not desist from following decisions of the
Supreme Court by regarding them as having been rendered in the
context of Article 142, unless the precedent in question unmistakably
so indicates. Madras Bar Association v. U.O.I.2, in fact, goes to the
extent of holding that "the directions issued under Article 142 of the
Constitution, are binding on every Court in terms of Article 141 of the
Constitution". NHAI v. Progressive-MVR (JV)1 does not purport to
have been rendered under Article 142. The contention of Mr. Dayan

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Krishnan that NHAI v. Progressive-MVR (JV)1 should be treated as
having been rendered under Article 142 of the Constitution and is not,
therefore, binding, is, accordingly, rejected.

Facts

8. With the above prefatory note, one may proceed to the facts in
which the present dispute arises.

9. The present dispute involves a contract for "Design,
Construction, Development, Finance, Operation and Maintenance of
k.m. 367.000 (Adloor Yellareddy) to k.m. 447.000 (Kalkallu) covering
85.745 kilometres, and Improvement, Operation and Maintenance of
k.m. 447.000 (Kalkallu) - 464.000 (Gundla Pochanpali) covering
17.000 kilometres on National Highway No.7 (NH·7) in the State of
Andhra Pradesh" ("the Project", hereinafter).

10. A notice, inviting proposals from contractors interested in
undertaking the Project was issued by NHAI on 27th May, 2005.
Letter of Acceptance was issued to a consortium of GMR Energy Ltd
and GMR Infrastructure Ltd on 30th December, 2005. GMR
Pochanpalli Expressways Ltd was incorporated as a Special Purpose
Vehicle (SPV) to undertake the project.

11. Consequent thereupon, a Concession Agreement (CA), dated
31st March, 2006 was executed between GMR and NHAI. The
following clauses of the Concession Agreement are relevant to the
present dispute:

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"1.2 In this Agreement, unless the context otherwise
requires:
*****

(k) the Schedules to this Agreement form an
integral part of this Agreement and will be in full force
and effect as though they were expressly set out in the
body of this Agreement;

*****

2.1 The Project shall be executed on the Site; which is
described in Schedule 'A' of this Agreement. The scope of the
Project shall include performance and execution by the
Concessionaire of all design, engineering, financing,
procurement, construction, completion, operation and
maintenance of the Project-Hjghway as described in Schedule
'B' and Schedule 'C' of this Agreement. It shall Include (brief
description of the project) in accordance with the
Specifications and Standards set forth in Schedule 'D' and
operation and maintenance thereof in accordance with
Schedule L. It shall also include the performance and
fulfillment of other obligations by the Concessionaire under
this Agreement.

The Concessionaire shall undertake its obligations at its own
cost and risk.

*****

6.4 Payment Mechanism

(a) Submission of Invoice

The Concessionaire shall at least month prior to the
relevant Annuity Payment Date submit to the
Independent Consultant, its invoice (addressed to
NHAI) for payment of Annuity duly adjusted for Non-
availability, if any, in accordance with the preceding
Article 6.3. The independent Consultant shall after
verification and certification of the amount claimed in

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the invoice forward the invoice to NHAI with
necessary recommendation for payment thereof so as
to reach NHAI at least one week prior to the relevant
Annuity Payment Date.

(b) Payment of Annuity

Upon receipt of the invoice together with
recommendation for payment forwarded by the
Independent Consultant, 'NHAI shall take all necessary
steps and ensure payment of Annuity on the relevant
Annuity Payment Date. The mode of payment of
Annuity shall be as provided in Article 23.

For avoidance of doubt, the Parties agree that
notwithstanding arty dispute which either of them may
have as to the amount of invoice/Annuity certified and
recommended for payment by the Independent
Consultant; the Annuity payable on the relevant
Annuity Payment Date shall be that certified by the
Independent Consultant. Provided such payment shall
be without prejudice to a final adjustment according to
the terms on which such dispute is resolved whether
amicably or through arbitration in accordance with the
provisions of Article 39.

*****

18.2 The Concessionaire shall in consultation with the
Independent Consultant prepare not later than 180 (one
hundred and eighty) days before the Scheduled Project
Completion Date, the repair and maintenance manual (the
"Maintenance Manual") for the regular and periodic
maintenance, and shall ensure and procure that at all times
during the Operations Period, the Project Highway is
maintained in a manner that it complies with the
Specifications and Standards and the minimum maintenance
requirements set forth in Schedule L. The Concessionaire
shall supply, at least two months before the COD, 10 (ten)
copies of the Maintenance Manual to NHAI and 3 (three)
copies each to Government of Andhra Pradesh and
Independent Consultant. Copies of the Maintenance Manual
shall also be made available by the Concessionaire for public
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inspection during office hours at a conspicuous place on the
Project Highway.

*****

18.12 In the event the Concessionaire does not maintain
and/or repair the Project Highway or a part thereof upto and
in accordance with the Specifications and Standards and/or in
accordance with the Maintenance Programme or the
Maintenance Manual, and shall have failed to commence
remedial works within 30 (thirty) days of receipt of notice in
this behalf from NHAI or the Independent Consultant, or the
O&M Inspection Report, as the case may be, NHAI shall,
without prejudice to its rights under. this Agreement,
including Termination thereof, be entitled to undertake the
repair and maintenance Of the Project Highway at the risk
and cost of the Concessionaire and to recover the same from
the Concessionaire. In addition to recovery of the aforesaid
cost of repair and maintenance by NHAI, a sum equal to 25%
(twenty five per cent) of such cost shall also be recovered by
NHAI from the Concessionaire as Damages. NHAI· shall
have the right and the Concessionaire hereby expressly grants
to NHAI the right to recover the same directly from the
Escrow Account and for that purpose the Concessionaire
hereby expressly authorises NHAI and hereby gives
irrevocable instructions to the Escrow 'Bank to make payment
from the Escrow Account in accordance with the instructions
of NHAJ under this Clause.

18.13 In the event NHAI does not exercise its option to
undertake the required repair and maintenance after expiry of
the 30 (thirty) days period stipulated in Clause 18.12 it shall
recover Damages from the Concessionaire for default in
operating and maintaining the Project Highway in conformity
with this Agreement. Such Damages shall be payable after the
aforesaid period 30 (thirty) days and until the default is cured.
The amount of Damages shall be calculated for each day of
default at the higher of the following, namely (a) Rs.10,000
(Rs. Ten thousand), and (b) 0.1% (zero point one per cent) of
the cost of such repair as estimated by the Independent
Consultant. Recovery of such Damages shall be without
prejudice to the rights of NHAI under this Agreement,
including Termination thereof.
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18.14 If the Concessionaire commences any works for curing
any defects or deficiencies in the Project Highway, it shall
complete such works expeditiously in accordance with Good
Industry Practice. If such works are carried out in a manner
that results in a delay of more than 30 (thirty) days as
compared to the time required in accordance with Good
Industry Practice, NHAI shall recover Damages from the
Concessionaire as if a default had occurred under Clause
18.13.

*****

XIX MONITORING AND SUPERVISION DURING
OPERATION

19.1 The Concessionaire shall undertake periodic (at least
once every calendar month but once every week during
monsoons) inspection of the Project Highway to determine
the condition of the Project Highway including its compliance
or otherwise with the Maintenance Manual; the Maintenance
Programme Specifications and Standards and the
maintenance required and shall submit reports of such
inspection ("Maintenance Reports") to NHAI and the
Independent Consultant.

19.2 The Independent Consultant shall review the
Maintenance Reports and inspect the Project Highway at least
once a month during the Operations Period and make out an
Inspection Report of such inspection (the "O&M Inspection
Report"). The Independent Consultant shall send a copy of its
O&M Inspection Report to NHAI and the Concessionaire,
The Concessionaire shall within 30 (thirty) days of the receipt
of the O&M Inspection Report remedy the defects and
deficiencies, if any, set forth in such O&M Inspection Report
and submit its report in respect thereof to the Independent
Consultant and NHAI within the said 30 (thirty) days period.
Where the remedying of such defects or deficiencies is likely
to take more than 30 (thirty) days in accordance with Good
Industry Practice, the Concessionaire shall undertake the
works in accordance with such practice and submit progress
reports of such works every fortnight. The O&M Inspection
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Report may also require the Concessionaire to undertake such
tests as may be specified by the Independent Consultant for
the purpose of determining that the Project Highway is at all
times in conformity with the Specifications and Standards.
The Concessionaire shall undertake such Tests without any
delay and furnish a copy of the results thereof to the
Independent Consultant and NHAI along with a written
statement specifying in reasonable detail the measures, if any,
that it proposes to undertake for curing the defaults or
deficiencies indicated in such results. Such inspection or
submission of O&M Inspection Report by the Independent
Consultant or submission of O&M Inspection Compliance
Report by the Concessionaire shall not relieve or absolve the
Concessionaire of its obligations and liabilities hereunder in
any manner whatsoever.

*****

XX. INDEPENDENT CONSULTANT

20.1 NHAI shall appoint a consulting engineering firm or
body corporate in accordance with the selection process' set
forth in Schedule 'N' to be the Independent Consultant to
undertake and perform the duties, work, services and
activities set forth in Schedule 'O'. In addition NHAI, at any
time during the Concession Period at its own cost, may
appoint a Technical Auditor in the nature of a Proof
Consultant to review the work carried out by the Independent-
Consultant.

*****
SCHEDULE 'B'

SCOPE OF THE PROJECT

1. GENERAL

The following sections of this Schedule briefly highlight the
scope of the work of the Project Highway pertaining to
construction package from km 367.00 to 447.00 for the
information of the Concessionaire. The descriptions of the
requirements for the various elements of the Project Highway
given herein under arc the bare minimum requirements that
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the Concessionaire needs to undertake/provide for
improvement of the same.

The Concessionaire shall also do the value addition for
improving safety by providing safety items and also provide
road furniture for this BOT package, after handing over to
him to bring it to specified standard· of Project Highway as
per specifications and standards mentioned in Schedule D and
Schedule L.

The designs for different Project facilities shall follow the
locations and indicative designs given in Schedule C and shall
comply with design, specifications and standards outlined in
Schedule D. The maintenance of the different elements of
Project Highway and facilities thereon shall follow the
minimum maintenance requirements as described in Schedule
L. All the designs and drawings shall be reviewed by the
Independent Consultant prior to execution.

*****

SCHEDULE 'D'

SPECIFICATIONS AND STANDARDS

1. INTRODUCTION

*****

1.6 All works related to the Project Highway shall
conform to the Guidelines and Special Publications as
applicable 10 National Highways and Ministry of Shipping,
Road Transport and Highway earlier Ministry of Road
Transport and Highway (MORT&H) Specifications and
Indian Roads Congress (IRC) standards, Codes, with all
updates till 30 days before the date of bid submission by the
Concessionaire. In the absence of any definite provisions on
any particular issue related to the Specifications and/or
standards, reference may be made to the latest codes and
Specifications of Bureau of Indian Standards, British
Standards, AASHTO, ASTM or any other International
standard in that order. But, where even these are silent, the
construction and completion of the works shall conform to
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sound engineering practice with the approval of the
Independent Consultant/NHAI.

1.7 Amendments and/or modifications carried out by the
Ministry of Road Transport and Highway in the MORT&H
Specifications and IRC standards, and codes and available to
public 30 days before the date of receipt of bids shall be
applicable.

1.8 Whenever any specific provision for any building
works is given in the MORT&H Specifications, IRC
standards and codes, those shall apply. All building works
shall conform to Central Public Works Department (CPWD)
Specifications for class 1 building works or standards given in
the National Building Code (NBC) as amended and/or
modified from time to time. For the purpose of this clause,
building works shall be deemed to include road furniture,
landscape elements and/or any other works incidental to the
building works.

*****
SCHEDULE L

OPERATION AND MAINTENANCE REQUIREMENTS

2. Operation and Maintenance (O&M) Requirements

*****

2.6 Operation and Maintenance Stage

2.6.1 This is applicable for the entire Operations Period for
the Project Highway during the entire Concession Period.
Various important activities to be carried out during this stage
are:

a) Regular periodic maintenance activities:

i) Renewal of the wearing surface of the road
pavement once every 5 years;

ii) Strengthening course to be provided on 'as
required' basis.
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b) Maintenance activities arising out of the specific
need(s) on account of the site Conditions are:

i. Strengthening course required on account at the
Benkelman Beam Deflection (B.B.D) values in
excess of the prescribed criteria obtained during
regular testing as per the Concession Agreement
requirement:

ii. Wearing course required on account of the IRI
values higher than the prescribed criteria obtained
during regular testing as per· the Concession
Agreement) requirement;

iii. Localized repairs in short lengths less than 500
m on account of pot holes, racking, subsidence in
isolated spots or in scattered areas.

*****
4. MAINTENANCE

*****

4.2 Maintenance Section of Maintenance Manual

*****

4.2.1. Regular Maintenance

It consists of the routine maintenance and periodic
maintenance throughout the Concession Period and extension
thereof, if any, for all elements of the Project Highway.

*****

4.3 Periodic Maintenance of Pavement

The framework of activities relating to pavement maintenance
and rehabilitation in respect of flexible and rigid pavement
are given in the flow charts in Appendix 3.1 and Appendix
3.2 respectively. The Concessionaire shall set forth in the
Operations and Maintenance Manual the detailed procedures
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to be followed under each of these activities and also choose
the operational and performance criteria from the
performance standards set forth in this Schedule.

*****

4.3.1 Pavement Riding Quality

The riding quality of the pavement shall be ensured by
satisfying the minimum requirements given herein under.

i) Surface roughness of the Project Highway on
completion of construction shall be 2000 mm/km as
measured by vehicle mounted Bump Integrator.

ii) Surface roughness shall not exceed 3000
mm/km during the service life of pavement at any
time. A renewal coat of bituminous concrete shall be
laid every 5 years after initial construction or where
the roughness value reaches 3000 mm/km whichever is
earlier to bring it to the initial value of2000 mm/km.

4.3.2. Structural Condition of the Pavement

I) The structural condition of the flexible
pavement of the Project Highway shall be assessed
every year by taking Benkelman Beam Deflections and
working out characteristic deflections of homogeneous
sections of the Project Highway as per IRC-81-1997.
Wherever the characteristic deflection exceeds 1.2 mm
a bituminous overlay shall be provided appropriately
designed according to IRC-81-1997 or its latest
versions or amendments to it.

II) Recycling of existing crust using milling as an
option can be explored by the Concessionaire in
consultation with the IC to maintain the FRL at the
same level throughout the concession period.
However, while adopting such measures, the residual
strength of existing pavement shall be estimated and
equivalent thickness of new material added before
laying the designed overlay. The design of profile
with altered pavement treatments shall be finalised in
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consultation with IC.

III) In the case of cement concrete pavement, joints
shall be thoroughly inspected every year and the loss
of sealing compounds made good.
*****
4.4. Minimum Requirements of Maintenance Activities
4.4.1. Major Breaches in the Roadway
Major breaches in the roadway of any type endanger safety of
traffic and cause obstruction in movement of vehicles. These
breaches shall be repaired urgently. Steps as mentioned in
O&M manual shall be followed by the Concessionaire tor
repairing the breaches.

The Concessionaire shall ensure speedy restoration of traffic
and take immediate action to repair the damages as permanent
measures for the Project Highway. The restoration of traffic
shall be made within 24 hours of its occurrence. The
permanent measures shall be completed within a period of
one week.
*****

*****
Schedule L Appendix 3

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Schedule L Appendix 3.1

Equivalent Rating Conditions

Category Status Rating
Very Good On completion as per 9
Condition specification and
standards
Good Condition no repairs needed 8
Generally good Potential exists for 7
condition minor maintenance
Fair Condition Potential exists for 6
major maintenance
Generally fair Potential exists for 5
condition minor maintenance
Marginal condition Potential exists for 4
major maintenance
Poor Condition Repair or rehabilitation 3
required immediately
Critical condition need for repair or 2
rehabilitation is urgent.
Facility should be
closed until the
indicated repair is
complete
Very Critical Facility is closed. Study 1
condition should determine the
feasibility for repair
Unserviceable Facility is closed and is 0
beyond repair

Sufficiency Rating System

1. Load Performance
2. Safety Performance
3. Remaining Life"

12. The contract was performed in time by GMR, as it is not in
dispute that the Appointed Date for the Project was 25th September,

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2006, and GMR had achieved the Provisional Commercial Operation
Date (PCOD) and obtained the Final Completion Certificate on 25th
July, 2009. The dispute pertains to the operations stage of the contract,
after obtaining of the Final Completion Certificate and, primarily, to
the interpretation of Clauses 4.3.1 and 4.3.2 read with Appendix 3.1,
vis-à-vis Clause 2.6.1, of Schedule L to the CA.

13. On 22nd October, 2012, GMR wrote to MSV International, the
Highway Maintenance Engineer/Independent Contractor ("the IC",
hereinafter), with a copy marked to NHAI, drawing attention to the
requirement of testing of the pavement riding quality, as contained in
Clause 4.3.1 of Schedule L to the CA and enclosing, with the letter,
the test reports for the year 2012-13 with respect to the project
highway. The test reports indicated that the average Roughness Index
was, at all points in the highway, found to be less than 2000 mm/km.

14. A similar letter, dated 2nd November, 2013, was addressed by
GMR to the IC, enclosing the pavement riding quality/Roughness
Index test reports for the year 2013, in respect of the Project Highway.
As in the case of the test reports for the year 2012, the Roughness
Index was found, at all stretches of the highway, to be less than 2000
mm/km.

15. The average Roughness Index for the years 2012 and 2013 were
1749 mm/km and 1788 mm/km, respectively.

16. These facts are not in dispute.

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17. Vide letters dated 24th August, 2013 and 23rd September, 2013,
the IC wrote to the Project Director, NHAI, drawing attention to
Clause 4.3.1 of the CA and pointing out that, both during 2012 and
2013, the Roughness Index of the project highway was less than 2000
mm/km. The relevant recitals, in the letter dated 23rd September, 2013,
may be reproduced thus:

"Roughness Index of the Road:

As per Schedule L of Operations And Maintenance
Requirements, Clause 4.3.1 Pavement Riding Quality, surface
roughness shall not exceed 3000 mm/km during the service
life of pavement at any time. A renewal coat of bituminous
concrete shall be laid every 5 years after initial construction or
where the roughness value reaches 3000 mm/km whichever is
earlier to bring it to the initial value of 2000 mm/km.

In compliance of above concession agreement clause
the Roughness Index of the road has been tested by the
Concessionaire on 09.08.2010 and 22.10.2012.

As per the report the maximum Roughness Index on
09.08.2010 is 1745 mm/km and on 22.10.2012 is 1889
mm/km. In general the Roughness Index of the Project Road
is within the permissible limits of 3000 mm/km as per Cl
4.3.1 of Schedule L of Operation And Maintenance
Requirements of the Concession Agreement."

18. On 31st October, 2013, the Project Director, NHAI, wrote to the
IC with the copy marked to GMR, essentially seeking to state that
Clause 4.3.1 of Schedule L to the CA mandatorily required fixing of
an application of renewal coat of bituminous concrete (alternatively
referred to as "overlay") every five years after initial construction.

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The Project Director opined that the requirement of five yearly overlay
was independent of the Roughness Index of the highway. Appendix
3.1 of Schedule L to the CA was, it was observed in the said letter,
required to be read in conjunction with Clause 4.3.1(ii), which
required five yearly mandatory laying of a renewal coat. Thus viewed,
the communication observed that the first renewal coat was required to
be laid on 25th March, 2014.

19. On 14th November, 2013, GMR wrote to the IC, with a copy
marked to the Project Director, NHAI, pointing out that the tests
conducted in October, 2013 indicated that the Roughness Index, at all
places on the project highway, was less than 2000 mm/km and that,
therefore, Appendix 3.1 of Schedule L to the CA required GMR to "do
nothing". The relevant paragraphs from the said communication may
be reproduced thus:
"With reference to the above we wish to bring the following
to your kind notice regarding the periodic maintenance:

The periodic maintenance is mentioned under clause
4.3 of Schedule "L" of Concession Agreement. Clause 4.3
says, "The framework of activities relating to pavement
maintenance and rehabilitation in respect of flexible and rigid
pavement are given in the flow charts in Appendix 3.1 and
Appendix 3.2 respectively." Hence as per 4.3, the first step
shall be as per the framework mentioned in appendix 3.1 and
3.2

As per appendix 3.1, the first step to be carried out
under periodic maintenance is the periodic inspection. The
periodic inspection should be carried out through Roughness
survey and Benkelman bream deflection measurement. Such
test measurements should be compared with the
operation/performance criteria. If the test measurements are
within the operation/performance criteria, appendix 3.1 says
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"Do nothing". If the test measurements are beyond
operation/performance criteria, appendix 3.1 says
"Renewal/Overlay".

Thus Clause 4.3.1 and the Appendix 3.1 are the same
criteria for deciding the periodic maintenance requirement.
Clause 4.3.1 and 4.3.2 only specify the performance criteria
for comparison purpose under Appendix 3.1. The
performance criteria for surface roughness are specified as
3000 mm/km under maintenance period and up to 2000
mm/km construction as well as after periodic maintenance.
Thus, if existing surface is already below 2000 mm/km, the
same is classified under "Do nothing" as per Appendix 3.1

The surface roughness as measured during Oct 13 is
below 2000 mm/km at all places. Hence there is no need to
carryout periodic maintenance as there is no need to improve
the surface roughness. Since the test is carried out regularly,
we confirm that we shall carry out the periodic maintenance
of the stretches as and when surface roughness reaches
3000mm/km under these criteria."

20. Apparently influenced by the view expressed by the Project
Director, NHAI, in his letter dated 31st October, 2013 supra, the IC,
on 18th November, 2013, wrote to GMR, echoing the view of the
Project Director to the effect that GMR was required to do
renewals/overlay of the highway every five years after construction,
irrespective of the Roughness Index of the highway. GMR was,
therefore, advised to take up the exercise of renewal/overlay of the
highway as per schedule w.e.f. 25th March, 2014.

21. The Project Director, NHAI also wrote to GMR on 5th
December, 2013, requiring GMR to submit its programme for laying
of the renewal coat on the Project stretch of about 103 km without
delay and threatening, in the alternative, to withhold the annuity
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payable to GMR for March, 2014.

22. GMR avers that thus pressurized and under duress, a
programme for laying of renewal coat was communicated by GMR to
NHAI vide letter dated 14th December, 2013, even while objecting to
the interpretation of Clause 4.3.1 of schedule L to the CA as advanced
by NHAI and reiterating that the said clause required laying of a
renewal coat only if the Roughness Index fell below 2000 mm/km.

23. This was followed by a further communication dated 18 th
February, 2014 from GMR to the IC, in which GMR informed that it
had already submitted the periodic maintenance programme for
milling and replacement vide its letter dt. 14.12.2013 (supra). Further
details, as requisitioned by the IC, were also provided. It was further
informed, in the said communication, that GMR would be disposing of
milled bituminous material away from the site of the project at
identified locations. Consent for commencement of periodic
maintenance activity, as per the programme intimated by GMR was,
therefore, sought.

24. The petition avers that, without responding to the
communications dated 14th December, 2013, 12th February, 2014 and
18th February, 2014, the IC, on 28th February, 2014, objected to GMR
having carried out the renewal work using a milling schedule without
prior consultation with the IC. It was also noted, in the said letter, that
no programme for milling had been submitted to the IC for approval.
Renewal of the bituminous coat via milling having been conducted by
GMR purportedly without the knowledge of the IC, the
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communication stated that the activity was undertaken at the risk and
cost of GMR.

25. Though the IC and the Project Director recommended release of
annuity to GMR, it is alleged that the Chief General Manager, NHAI,
in violation of Clause 6.4 (b) of the CA, stopped payment of annuity
to GMR.

26. On 27th March, 2014, NHAI wrote to GMR, objecting to the
delay, on the part of GMR, in undertaking renewal work for the entire
stretch of the project highway, which according to NHAI, would
constitute a material breach of the CA. GMR, was, therefore, granted
an opportunity to demonstrate that it was making diligent efforts in
making all arrangements to take up the renewal work in the entire
stretch of 103 km comprising the project highway, without further
delay. On the same date, GMR responded to NHAI pointing out that
renewal work on the project highway had commenced on 26 th March,
2014 and had already been completed for part of the stretch of the
Project highway. GMR, nonetheless, sought an opportunity of being
heard on the proper interpretation to be accorded to Clause 4.3.1 of the
CA, regarding the requirement of renewal/overlay work on the
highway, even where the Roughness Index was found to be less than
2000 mm/km.

27. Subsequent to the said communication from GMR to NHAI, the
annuity was released on 30th March, 2014.

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28. As a result of the above communications, GMR submits that it
was constrained to undertake overlay work without milling, despite
Clause 4.3.2 (ii) of Schedule L which granted the concessionaire an
option of milling and recycling for carrying out the renewal work.

29. On 6th May, 2014, GMR again wrote to the IC proposing a
methodology for recycling of the bituminous pavement by milling, for
the review and approval of the IC, assuring that, in the interregnum,
GMR would continue periodic maintenance as per the earlier
approved methodology. It was further stated, in the said
communication, that the date of commencement of recycling of the
bituminous pavement would be intimated to the IC.

30. By a letter dated 12th October, 2014, the IC wrote to GMR,
stating that it had never approved the proposal for recycling and
directing GMR "to continue the renewal of the wearing course of the
road pavement pursuant to Clause 2.6.1, 2.6.2 and Cl 4.3.1 under
Schedule L of the Concession Agreement of the subject project".

31. The renewal/overlay work was completed by the petitioner on
30th December, 2014, after a delay of 250 days.

32. On 8th June, 2016, the IC wrote to NHAI, recommending raising
of a demand, on GMR, of ₹ 10,31,50,520/- as delay damages for delay
in executing periodical renewal coat on the project highway. A copy
of the letter was also addressed to GMR.

33. GMR, in turn, wrote, on 19th July, 2016, to NHAI, opposing the
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proposal to charge delay damages from it. GMR, in turn, claimed an
amount of ₹ 104,47,80,462/- from NHAI, which include idling cost of
milling and recycling machinery owing to delay in grant of approval
by the IC for conducting the renewal by milling. This amount, it was
stated, principally included the expenses incurred by GMR towards
the periodic maintenance carried out, by it under duress, though,
according to GMR, Clause 4.3.1 of Schedule L to the CA did not
require it to do so.

34. Reference was made, in the said communication, to letters dated
25th August, 2014 and 10th October, 2014 from GMR to the IC,
informing the IC that it was undertaking recycling work, to which the
IC responded only on 12th October, 2014, rejecting the recycling
proposal.

35. Vide communication dated 23rd August, 2016, NHAI rejected
the claims of GMR as contained in its letter dated 19th July, 2016.

36. GMR, in the circumstances, wrote to NHAI on 9th September,
2016, raising a dispute and seeking reference of the dispute to the
Chairman, NHAI and the Chairman of the Board of Directors of GMR
for an amicable resolution in terms of Clause 39.1(b) of the CA.

37. On 15th March, 2018, K & J Projects Pvt. Ltd. (who had
replaced MSV International as the IC) wrote to the Project Director,
NHAI, conveying its opinion that Clause 18.1.3 of the CA empowered
NHAI to recover damages from the Concessionaire for default in

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operating and maintaining the project highway in conformity with the
CA. Following this, vide letter dated 27th March, 2018, addressed to
GMR, NHAI conveyed its decision to deduct, from the annuity
payable to GMR, ₹ 10.78 crores as damages.

38. GMR, in the circumstances, invoked Clause 39.2 of the CA,
which provided for resolution of disputes by arbitration, and appointed
its nominee arbitrator, while requesting the Indian Council of
Arbitration (ICA) to constitute the Arbitral Tribunal.

39. While matters stood thus, GMR petitioned this Court under
Section 9 of the 1996 Act by way of OMP (I) (Comm) 421/2018,
which came to be disposed of, by a Coordinate Bench, vide order
dated 2nd November, 2018. This Court noted, at the outset, the
contention of GMR "that the only dispute between the parties is
whether in the terms of Clause 4.3 of Schedule L to the Concession
Agreement dated 31.03.2006 executed between the parties, the
petitioner is under an application to relay the surface and bituminous
concrete only because the five years period has expired though the
surface roughness is of the prescribed measure". Having so noted, this
Court disposed of the petition with a direction to the ICA to constitute
an Arbitral Tribunal within one week, and with a direction to the
Arbitral Tribunal, so constituted, to adjudicate OMP (I) (Comm)
421/2018 treating it as an application under Section 17 of the 1996
Act.

40. Needless to say, as the learned Arbitral Tribunal has passed a

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final Award, which is under challenge, the subject matter of OMP (I)
(Comm) 421/2018 is no longer of significance.

The Award

41. Before the learned Arbitral Tribunal, GMR advanced the
following five claims:

"Claim No.1: Claim for a sum of ₹ 104,47,80,462 on account
of (i) reimbursement of costs incurred for relaying the pavement
at the end of the fifth year, and (ii) extra costs incurred due to
the decision not to allow recycling of milled material.

Claim No.2: Claim for a sum of ₹ 10,78,61,864/- in respect of
deductions made by the Respondent on account of damages.

Claim No.3: Claim for a direction to the Respondent not to
insist upon relaying of the surface in the 10th year or thereafter
if the roughness criterion as set out in the contract is met.

Claim No.4: Claim for interest @ 5% over SBI PLR on the
above claims from the due date of payment till the actual date of
payment.

Claim No.5: Claim for costs [as per actual]"

42. NHAI, per contra, advanced only one counter claim, for costs

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incurred in the arbitral process.

Contentions of GMR before the learned Arbitral Tribunal

43. GMR contended, before the learned Arbitral Tribunal, that the
clauses of the CA could not be read in isolation or dissociated from
one another and that, read in conjunction, GMR was required to do the
overlay work only if the Roughness Index of the highway, at any
point, exceeded the stipulated minimum level of 2000 mm/km.
Commercial contracts, it was submitted, were required to be
commercially construed. Clause 4.3 of Schedule L to the CA read with
Appendix 3.1 of Schedule L to the CA, submitted GMR, clearly
indicated that the stringent pre-conditions stipulated for carrying out
of overlay work had to be strictly adhered to. Where the Roughness
Index was below 2000 mm/km, there was no requirement for carrying
out overlay work every five years. As a result of such unnecessary
overlay work that GMR had, under duress, to carry out, it had suffered
huge losses which NHAI was duty bound to recompense.

44. GMR also questioned the relevance of Clause 2.6.1 of Schedule
L to the CA to the issue in controversy. It was submitted that Clause
2.6.1 merely set out the various activities to be performed by the
Concessionaire, and could not override Clause 4.3 of Schedule L to
the CA. Reliance was also placed by GMR on Clause 2.6.1 (b) (ii) of
Schedule L to the CA which provided, among the maintenance
activities to be carried out by GMR, "wearing course required on
account of the RI values higher than the prescribed criteria obtained
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during regular testing as per the Concession Agreement requirement".
Reliance was also placed on the flow chart scheme contained in
Appendix 3.1 in Schedule L to the CA, which envisaged that, while
carrying out periodic maintenance and inspection of the highway, a
roughness survey was to be conducted and, if the Roughness Index
favourably compared with the stipulated operations/performance
criteria, GMR was to "do nothing".

45. GMR further disputed the legitimacy of the objection, belatedly
raised by NHAI to the carrying out of the overlay/renewal work, by
the petitioner, using the milling process. For the entire expense that
GMR had to suffer, on the above account, GMR claimed ₹
104,47,80,462/-.

46. Additionally, GMR contested the recovery, by NHAI, of
damages of ₹ 10,78,61,864/-. Damages, under Clauses 18.12, 18.13
and 18.14 of the CA, it was submitted, could only follow on breach,
by GMR, of its obligations thereunder, and on failure, by GMR, to
rectify the breach within the period allowed by NHAI. GMR having
completed the project work within the stipulated period, it was
submitted that NHAI had no justifiable reason to levy damages. The
deducted damages of ₹ 10,78,61,864/- were, therefore, refundable to
GMR.

47. GMR, additionally, also claimed interest and costs.

NHAI's submissions before the learned Arbitral Tribunal

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48. NHAI contested the interpretation placed by GMR on Clause
4.3.1 of Schedule L to the CA. It was submitted that the said clause
did not envisage any condition precedent for carrying out renewal
work and did not contain the expression "exceeds 2000 mm/km".
Apropos Appendix 3.1 in Schedule L to the CA, NHAI submitted that
Clauses 2.6.1 and 4.3.1 of Schedule L to the CA, being substantive
provisions, could not cede place to Appendix 3.1 in Schedule L to the
CA. Besides, it was pointed out, Appendix 3.1 in Schedule L to the
CA did not stipulate any prescribed Roughness Index value, as the
basis for deciding whether renewal/overlay work was required to be
done or not. Specifically drawing attention to Clause 2.6.1 of Schedule
L to the CA, NHAI submitted that the said Clause unequivocally
required GMR to undertake maintenance using a bituminous coat for
renewal of the road pavement once every five years. Clause 2.6.1 of
Schedule L to the CA, it was submitted, was unambiguous and not
admitting of any two interpretations. It was not conditional upon the
Roughness Index of the highway. The lower the Roughness Index, the
better, it was submitted, would be the riding quality of the pavement.

49. The words "to bring it to the initial value of 2000 mm/km" in
Clause 4.3.1 of Schedule L to the CA, it was submitted, were to be
read with the immediately preceding stipulation of the Roughness
Index exceeding 3000 mm/km. Where the Roughness Index exceeded
3000 mm/km, therefore, according to NHAI, the overlay work was
required to bring the Roughness Index below 2000 mm/km. This did
not derogate from the responsibility of GMR to, in any event, carry
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out overlay work every five years. NHAI also relied on GMR's letter
dated 21st March, 2014 supra to contend that the recitals in the said
letter amounted to a concession, by GMR, to the interpretation of
Clause 4.3.1 of Schedule L to the CA, as advanced by NHAI.

50. Emphasis was laid, by GMR, on the words "whichever is
earlier" in Clause 4.3.1(ii) of Schedule L to the CA to contend that
overlay work, in any event, was to be done at the end of every 5 years.
This stipulation, as it figures in the said sub-Clause was a contractual
obligation, without any condition precedent. If, for example, the
Roughness Index was 2999 mm/km, accepting the contention of
NHAI would exempt GMR from the requirement of doing any overlay
work even under routine maintenance, which would result in the
riding quality of the road being merely 'average' whereas, periodic
renewal work carried out even when the Roughness Index was below
2000 mm/km, the roughness would be further reduced, thereby
improving riding quality.

51. Reliance was placed, by NHAI, on the 'Cash Flow Projection'
chart filed by GMR at the time of the financial bid. It was pointed out
that, under the heading 'projected periodic maintenance', the cost of
periodic maintenance had been included for June 2013, June 2018 and
June 2022, without the cost of periodic maintenance being mentioned
against any other year. As such, in the chart, the cost of carrying out
overlay work had been provided for. No occasion, it was submitted,
arose for GMR to do so, if carrying out of overlay work was subject to
the condition of Roughness Index of the highway.
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52. In fact, contended NHAI, GMR had raised the demand for
compensation only in July 2016, when damages were imposed by
NHAI. This demand, therefore, it was submitted, was essentially in the
nature of a counterblast to the imposition of damages on GMR.

53. NHAI further contended that the initial opinion of the IC could
not be regarded as sacrosanct and was subject to scrutiny. Even if,
based on the test results of 2012, the IC had not advised periodic
renewal, that, submitted NHAI, did not exonerate GMR of the
obligation to periodically carry out overlay work.

54. These submissions, contended NHAI, also discredited Claim 3
of GMR.

55. Apropos the right, of GMR, to recycle the existing crust of the
road using milling as an option, NHAI submitted that Clause 4.3.2(ii)
of Schedule L to the CA permitted GMR to do so only in consultation
with the IC, to maintain FRL. GMR could not do so unilaterally. It
had, however, proceeded to do so, as was clear from GMR's letter
dated 19th July, 2016, which draws reference to GMR's letter dated
12th February, 2014 wherein the IC was informed about the scheduled
commencement of the milling of the existing pavement from 15 th
February, 2014. The unilateral communication from GMR on 6th May,
2014, it was submitted, did not confer any right on GMR to start
recycling of the milled material. The absence of any response from the
IC did not indicate that the methodology adopted by GMR had been
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approved. Rather, vide letter dated 28th February, 2014, the IC had
categorically stated that as option of milling is exercised by the
Concessionaire without the consent of the IC, resulting in damage to
the project, the cost of damages to the project shall be borne by the
Concessionaire. Reference was also made, in this context, to the
communication dated 7th March, 2014, from the IC to GMR, wherein
the IC had clearly communicated to GMR that no milling operation
was to be done without its approval and GMR's response dated 20th
March 2014 thereto, wherein GMR had admitted that milling was not
agreed by the IC or NHAI. NHAI was, therefore, it was submitted,
entitled, under Clause 30.1 of the CA, to suspend or any of the
contractual rights of GMR, including payment of annuity.

The Impugned Award

56. The findings of the learned Arbitral Tribunal, qua the issues that
arose for determination, may be distilled, claim-wise, thus.

Re. Claim 1 - for ₹ 104,47,80,462/- towards (i) reimbursement of
costs incurred for relaying the pavement at the end of the fifth year
and (ii) extra costs incurred on account of NHAI refusing permission
to allow recycling of milled material.

57. The learned Arbitral Tribunal commences its discussion, in
Claim 1 of GMR, by referring to the basic principles regarding
interpretation of contracts and citing, in that context, various decisions
of the Supreme Court and authoritative texts. Therefrom, the learned
Arbitral Tribunal, after observing that, if there is any ambiguity in the
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terms of a commercial contract, an interpretation which accords with
business common sense is to be preferred, holds, with respect to
Clause 4.3.1 of Schedule L to the CA, that the words "to bring it to the
initial value of 2000 mm/km" did not qualify the requirement of
laying new renewal coat after every 5 years, but were, instead, used
only in respect of the phrase "where the roughness value reaches 3000
mm/km". In other words, according to the learned Arbitral Tribunal,
"if the renewal coat is required to be laid down because the roughness
value has reached 3000 mm/km, the same is laid down to bring the
surface roughness value to 2000 mm/km". The words "to bring it to
the initial value of 2000 mm/km", it was observed, were not used with
respect to the words "every 5 years after initial construction". Overlay
work was in the nature of regular periodic maintenance activity, to be
done every 5 years, and was not dependent on the surface Roughness
Index.

58. To support its interpretation, the learned Arbitral Tribunal also
places reliance on Clause 2.6.1 of Schedule L to the CA which,
according to the learned Arbitral Tribunal, unequivocally envisages
periodic renewal every 5 years with no condition precedent. The
contention, of GMR, that Clause 2.6.1 of Schedule L to the CA related
only to traffic management and land closure was rejected by relying
on Clause1.2 (d) of the CA, whereunder it was stipulated that the
Headings of the contractual clauses would not cover their contents.
Clause 1.4.2(i) of the CA, which stipulated that, in the event of
ambiguity between clauses in the CA, the specific clause would
prevail over other clauses, it was felt, would also not apply, as Clause
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2.6.1 of Schedule L to the CA could not be regarded as a specific
clause, so as to be accorded primacy. The word "after", in Clause
4.3.1(ii) of Schedule L to the CA, it was noted, was placed before
"initial construction" and not "every 5 years", thereby indicating that
the work was required to be done once every 5 years after initial
construction. The use of the word "laid", it was held, meant that the
renewal work was required to be completed once every 5 years.

59. The learned Arbitral Tribunal also held Clauses 6.1 and 6.2 of
IRC:82, on which GMR relied, not to be applicable. Reliance was,
instead, placed by the learned Arbitral Tribunal on the
communications from the Project Director, NHAI to GMR, requiring
GMR to take steps and furnish the program for immediate periodic
maintenance/renewal, "irrespective of whether the roughness reaches
3000 mm/km or not, as per Clause 2.6.1 and Clause 4.3.1 of Schedule
L of Concession Agreement". 5 yearly renewal work being part of the
contractual stipulations, the learned Arbitral Tribunal held that GMR
was not entitled to claim any extra payment therefor. The claim of ₹
100,67,80,462/- was, therefore, held to be "absolutely unsustainable".

60. The learned Arbitral Tribunal, thereafter, proceeded to deal with
GMR's claim for extra costs incurred owing to NHAI's refusal to
allow recycling of milled material. Clause 4.3.2 (ii) of Schedule L to
the CA was cited, to hold that recycling of the existing crust using
milling was permissible only in consultation with the IC, to maintain
the same level of FRL throughout the concession period. It was
observed that there was no material on record to indicate that any
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attempt at deliberation or discussion with the IC, regarding the milling
of the existing crust, had been undertaken by GMR. GMR had
commenced milling on its own. The assertion that the IC had, initially,
supervised the milling operation, it was found, was also not supported
by any material. The letter, dated 12th February, 2014, from GMR to
the IC, stating that GMR was planning to start milling work on 15th
February, 2014, did not refer to any requirement of consultation with
the IC. Further communications from GMR to the IC, too,
acknowledged the requirement of consultation. The IC, vide letter
dated 28th February, 2014, informed GMR that, while proposing
milling operations before the start of maintenance activities, GMR had
not specified the reasons therefor; also, no program for milling was
submitted to the IC. As such, the IC stated that GMR had undertaken
milling without the knowledge of the IC, contrary to the stipulations in
the CA. The learned Arbitral Tribunal held that GMR could not
unilaterally decide to carry out milling operations. In view thereof, it
was held that GMR could not claim, from NHAI, the costs incurred on
account of want of approval, by GMR, for recycling of the milled
material, or for idling of machinery on that count.

Re. Claim 2 - for ₹ 10,78,61,864/- towards deductions made by
NHAI against damages

61. The learned Arbitral Tribunal noted that Clause 18.12 of the CA
entitled NHAI to recover damages in the event of GMR failing to
maintain and/or repair the Project Highway, or any part thereof, in
accordance with the Maintenance Program or the Maintenance Manual

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and having failed to commence remedial works within 30 days of
receipt of notice in that behalf from NHAI. The learned Arbitral
Tribunal noted that no notice, as required by Clause 18.12 of the CA,
for failure to commence the work, had been served by NHAI on GMR.
The contention of NHAI that a notice to undertake periodic
maintenance activities was inbuilt in the clauses of the CA such as
Clause 2.6.1 and 4.3.1 of Schedule L to the CA was rejected by the
learned Arbitral Tribunal on the ground that a written notice was a
condition precedent for imposition of damages under Clauses 18.12,
18.13 and 18.14 of the CA. This position, it was noted, was also
acknowledged by the IC in his letter dated 15 th March, 2018, which
deducted, from the total number of days of delay to calculate
liquidated damages, the 30 day notice period. The communications
from NHAI to GMR, calling upon GMR to submit the work program
and threatening not to process annuity, too, it was observed, did not
envisage recovery of damages. These communications, specifically
the letters dated 21st August, 2013, 18th November, 2013 and 5th
December, 2013, it was held, could not be regarded as notices as
stipulated by Clause 18.12 of the CA. In fact, GMR had continued the
periodic maintenance work and completed the work by December
2014. The delay, if any, on the part of GMR, it was observed, did not
elicit any protest from NHAI. In these circumstances, the learned
Arbitral Tribunal held the imposition of damages, by NHAI on GMR,
to be unwarranted.

62. The learned Arbitral Tribunal held, additionally, that damages
could not be levied in terms of Illustration (iii) in para 4.4 of the
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Policy Circular dated 5th February, 2018 of NHAI, as it would amount
to a unilateral amendment, by NHAI, of the terms of the CA, which
was impermissible in law.

63. For all these reasons, the learned Arbitral Tribunal allowed
GMR's claim for ₹ 107,861,864/-, being the amount recovered by
NHAI by way of damages, from the annuity payable to GMR.

Re. Claim 3 - For directing NHAI not to insist upon relaying of the
surface in the 10th year or thereafter, if the Roughness Index was 2000
mm/km or less

64. In view of its preceding findings, especially with respect to
Claim 1, the learned Arbitral Tribunal directed that the second and
third cycles of overlay work be completed by the 11 th and 16th years of
the contract. The renewal work for the second cycle was directed to
commence on or before 1st April, 2020 and be completed by the end of
2020 and, for the third cycle, to be completed by 1st April, 2025.

Re. Claim 4 - For interest

65. Noting the fact that, on different occasions, Courts had granted
different rates of interest, the learned Arbitral Tribunal held that, in the
facts and circumstances of the case, it would be appropriate to award,
to GMR, interest @ 12% p.a. on the awarded amount of ₹
107,861,864/-, from the date of deduction of the said amount, by
NHAI, as damages, i.e. from 27th March 2018, till the date of payment.

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Re. Counter-claim by NHAI

66. NHAI's counterclaim, which was limited to costs, was rejected
by the learned Arbitral Tribunal.

Rival Submissions and Analysis

67. I have heard Mr. Atul Sharma on behalf of GMR and Mr.
Dayan Krishnan, learned Senior Counsel, along with Mr. Ankur
Mittal, on behalf of NHAI, at length.

Re: Claims 1 and 3

68. Mr. Sharma contends that the interpretation, placed by the
learned Arbitral Tribunal on the covenants of the CA, is, ex facie,
perverse and, not one which any person, conversant with the law,
would arrive at. On a plain reading, according to Mr. Sharma, Clause
4.3.1 (ii) of Schedule L to the CA required laying of a renewal coat of
bituminous concrete only where the Roughness Index was above 2000
mm/km.

69. This, he submits, was the purpose of laying the renewal coat.
He relies, for this purpose, on Clauses 1.2 (i) and (k) of the CA, 4.9.2
and 2.1 of the CA, Clause (1) "scope of the project" in Schedule B to
the CA and Clauses 2.6.1, 4.2 and 4.3 of Schedule L to the CA, read
with Appendices 3.1 and 3.4 thereto. Read conjointly, Mr. Sharma
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submits that these clauses left no manner of doubt that, unless and
until the Roughness Index fell below 2000 mm/km, GMR was to "do
nothing". The interpretation placed by the learned Arbitral Tribunal
on Clause 4.3.1 of Schedule L to the CA, he submits, would militate
against all other clauses in the CA and could not, therefore, be said to
be reasonably acceptable. He also submits that Clause 2.6.1(a) of
Schedule L to the CA has to be read along with Clause 4.3.1 of
Schedule L to the CA, and clearly sets out the activities which were
required to be done, the specifications in respect whereof were to be
found in Clause 4.3.1 of Schedule L to the CA.

70. Appendix 3.1 of Schedule L to the CA, Mr. Sharma submits,
requires yearly estimation of Roughness Index to be undertaken. If, on
comparison, the Roughness Index throughout the highway was in
accordance with the operation/performance criterion stipulated in
Appendix 3.4 read with Clause 4.3.1(i) and (ii) of Schedule L to the
CA, the concessionaire was to "do nothing". Periodic maintenance
was required, if at all, only where the Roughness Index exceeded 2000
mm/km.

71. Admittedly, the Roughness Index throughout the highway was,
at all times, below 2000 mm/km. The trigger point for carrying out
periodic maintenance was, therefore, never reached. "No repairs"
were, therefore, "required", as per Appendix 3.1 of Schedule L to the
CA, and GMR was required to "do nothing". The fact that the
Roughness Index was below 2000 mm/km at all points in the project
highway also stands acknowledged in the impugned award of the
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learned Arbitral Tribunal. It was, for this reason that the IC, vide letter
dated 23rd September, 2013, communicated to NHAI that renewal coat
was not necessary.

72. Clause 4.3 of Schedule L to the CA, points out Mr. Sharma,
required activities relating to pavement maintenance and
rehabilitation, in respect of flexible and rigid pavement to be
undertaken as per the flow charts in Appendix 3.1 and 3.2 to Schedule
L to the CA. This provision, being anterior to Clause 4.3.1 of Schedule
L to the CA, would prevail over Clause 4.3.1 of Schedule L to the CA,
assuming there was any ambiguity in the latter provision. Any other
interpretation, submits Mr. Sharma, would render Appendices 3.1 and
3.4 of Schedule L to the CA nugatory and redundant.

73. Mr. Sharma also faulted the learned Arbitral Tribunal for
having brushed aside the reliance, by GMR, on the IRC specifications,
which were binding on the parties under the CA.

74. Mr. Sharma points out that, in its award in Nirmal BOT, the
learned Arbitral Tribunal which was in seisin of that dispute had
interpreted the various clauses of the CA in accordance with the
submissions advanced by him in the present case.

75. As against this, Mr. Dayan Krishnan, learned Senior Counsel
for NHAI, submits that Clause 2.6.1(b) of the Schedule L to the CA
relates to regular maintenance activities, which have nothing to do
with periodic activities. He points out that Clause 2.6.1(a)(i) of the
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Schedule L to the CA, which requires five yearly renewal coat to be
laid does not condition the said requirement by any caveat. Clause
4.3.1 of Schedule L to the CA, according to Mr. Dayan Krishnan, only
stipulates a minimum criterion.

76. Mr. Dayan Krishnan submits that, in the absence of any
"operation/performance criteria", Appendix 3.1 of Schedule L to the
CA would have no application. He also disputes the applicability of
Appendix 3.4 of Schedule L to the CA, as he submits that laying of the
renewal coat did not amount to "repairs". The Roughness Index, he
submits, only tested the riding quality. Bituminous concrete overlay
served two functions. It improved the riding quality of the pavement
and also provided a protective layer protecting the underlying Dense
Bituminous Macaderm. As such, he submits that GMR is not justified
in its contention that, if the Roughness Index was above 2000 mm/km,
no overlay was required.

77. Mr. Dayan Krishnan submits that the mandate of Clause
2.6.1(a)(i) of Schedule L to the CA was clear and unequivocal, in
requiring renewal of the wearing surface of the road pavement to
mandatorily be undertaken "once every five years". Clause 2.6.1 of
Schedule L to the CA, he submits, governs Clause 4.3.1 of Schedule L
to the CA and would apply as it applied throughout the contract
period. Clause 4.3 of Schedule L to the CA only referred to periodic
inspection for the purpose of maintenance. Without prejudice, Mr.
Dayan Krishnan submits that word "or" between the two parts of the
sentence, "a renewal coat of bituminous concrete shall be laid every
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five years after initial construction" and "where the Roughness value
reached 3000 mm/km, whichever is earlier, to bring to the initial value
of 2000 mm/km", clearly indicated that the two parts of the clause
were to be read disjunctively and that, irrespective of whether the
second part of the sentence applied, or did not apply, a renewal coat of
bituminous concrete was mandatorily required to be laid every five
years after initial construction. Any other interpretation, he submits,
would be unrealistic and would amount to ignoring normal wear and
tear that the highway surface would suffer. The findings of the learned
Arbitral Tribunal, submits Mr. Dayan Krishnan, were entirely in order,
and did not call for any interference by this Court.

78. In such circumstances, Mr. Dayan Krishnan submits that no
occasion arises for this Court to interfere with the impugned award.
He relies, for this purpose, on the judgment of the Supreme Court in
Delhi Airport Metro Express Pvt. Ltd. v. Delhi Metro Rail
Corporation Ltd2. Mr. Dayan Krishnan has, in this context,
specifically invited my attention to Section 34(2A)3 of the 1996 Act
which permits, interference by a Court, with the arbitral award, only in
the case of "patent illegality".

79. The interpretation postulated by him, submits Mr. Dayan
Krishnan, was in line with the view expressed by a coordinate Bench

2 (2022) 1 SCC 131
3 34. Application for setting aside arbitral awards. -
*****
(2A) An arbitral award arising out of arbitrations other than international commercial
arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent
illegality appearing on the face of the award: Provided that an award shall not be set aside merely
on the ground of an erroneous application of the law or by reappreciation of evidence.
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of this Court in NHAI v. Patel KNR Infrastructure Ltd.4 (Mr.
Sharma, on the other hand, seeks to distinguish the decision in Patel
KNR Infrastructure Ltd.4 on facts). He points out that, in para 28 of
the report, the coordinate Bench has clearly observed that the intent of
the parties was to ensure that the riding quality of the pavement does
not fall below the specified minimum standard. Besides, para 20 of
the report in that case indicated that the de minimis Roughness Index
was 3000 mm/km and not 2000 mm/km.

Analysis

80. Ordinarily, a Section 34 Court would not interfere with the
interpretation adopted by an Arbitral Tribunal with respect to a
contractual covenant. This proscription is, however, not absolute.
Where it appears to the Court that the interpretation placed by the
Arbitral Tribunal on the contractual clauses is not one which can be
adopted by any reasonable person, the Court can interfere. In deciding
whether the interpretation, placed by the learned Arbitral Tribunal on
the contractual covenants is, or is not, reasonable, the Court would be
required to examine all relevant covenants in the contract. An
interpretation of a particular clause, which stands alone and is
unconditioned by any other clause in the contract would be less
vulnerable to interference by a Court, apropos the interpretation that
an Arbitral Tribunal may choose to place on it. Where, however, a
contractual covenant is interlinked to other covenants in the contract,
or where there are more than one covenants in a contract dealing with

4 2021 SCC Online Del 4152
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a particular exigency, then, if the Arbitral Tribunal interprets one of
the covenants in such a manner as would frustrate the intent of the
other covenants, or in a manner in which is not in sync with the other
covenants, a Court would be bound to interfere.

81. Equally, if an Arbitral Tribunal does not consider a particular
relevant covenant, despite its attention having been invited thereto, the
Court would be justified in interfering. In this context one may refer to
para 61 of the report in Ssangyong Engg. & Construction Co. Ltd. v.
NHAI5 in which the Supreme Court addressed the question of the
amenability to interference of an arbitral award, on the ground that a
contention raised by a party was not considered. The Supreme Court
approved the following passage from the decision of the Singapore
Court of Appeal in CRW Joint Operation v. PT Perusahaan Gas
Negara (Persero) TBK6 which, in turn, relied on the following
enunciation of the law in "Redfern and Hunter on International
Arbitration" (Oxford University Press, 5th Edn., 2009):

"The significance of the issues that were not dealt with has to
be considered in relation to the award as a whole. For example,
it is not difficult to envisage a situation in which the issues that
were overlooked were of such importance that, if they had been
dealt with, the whole balance of the award would have been
altered and its effect would have been different."

The Court, faced with a submission by an aggrieved litigant that the
Arbitral Tribunal had failed to consider a contention advanced before

5 (2019) 15 SCC 131
6 2011 SGCA 33

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it is, therefore, required to examine whether, if the Arbitral Tribunal
would have considered the contention, the outcome may have been
different. If the answer to this query is in the negative, no cause for
interference exists, merely because the Arbitral Tribunal has not
considered the contention. If, however, the Court comes to the
conclusion that, were the contention to be considered, the outcome of
the proceedings might have been different, the failure, on the part of
the Arbitral Tribunal, in considering the contention, would imperil the
award.

82. An important decision, in this context, is the pronouncement of
the Supreme Court, through Ramana J (as the Hon'ble Chief Justice
then was) in South East Asia Marine Engineering & Constructions
Ltd. v. Oil India Ltd.7 The issue before the Supreme Court was with
respect to the interpretation, by the Arbitral Tribunal, with a "change
in law" clause in the contract, in which event Oil India Ltd (OIL), the
respondent before the Supreme Court, became liable to re-imburse
South East Maritime Constructions Ltd. (SEAMEC), the appellant
before the Supreme Court. SEAMEC claimed that the increase in price
of High Speed Diesel (HSD), an item essential to carry out the
contract, constituted "change in law" and, thereby, entitled SEAMEC
to re-imbursement. The learned Arbitral Tribunal, per majority,
allowed the claim, albeit by holding that the increase in price of HSD
was not a "change in law" stricto senso. Nonetheless, the learned
Arbitral Tribunal held that it had the "force of law" and was also,

7 2020 5 SCC 164
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therefore, covered by the "change in law" clause.

83. The High Court, however, reversed the decision of the learned
Arbitral Tribunal, holding that the manner in which the learned
Arbitral Tribunal had interpreted the clauses of the contract was
contrary to public policy and amounted to patent illegality.

84. The Supreme Court, in appeal, first noted the position, in law,
as enunciated in Dyna Technologies Pvt. Ltd v. Crompton Greaves
Ltd.8, that the mere possibility of an alternative interpretation of the
contractual covenants would not justify interference with arbitral
award under Section 34 of the 1996 Act. The need for deference and
caution, by Courts seized with Section 34 challenges, was also
underscored in the said decision.

85. Having so noticed, the Supreme Court in South East Asia
Marine Engineering & Constructions7, in para 14 of the report,
framed the issue arising before it for consideration as "whether the
interpretation provided to the contract in the award of the tribunal was
reasonable and fair, so that the same passes the muster under Section
34 of the Arbitration Act".

86. Having thus framed the issue that arose for consideration, the
Supreme Court disapproved the interpretation of the contract, both by
the learned Arbitral Tribunal as well as by the High Court. In so far as

8 (2019) 20 SCC 1

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the reasoning of the learned Arbitral Tribunal was concerned, the
Supreme Court held, significantly, that "although the Arbitral
Tribunal correctly held that a contract needs to be interpreted taking
into consideration all the clauses of the contract, it failed to apply the
same standard while interpreting Clause 23 of the contract".

87. Having thus set out the legal position, the Supreme Court held
that, while interpreting the "change in law" clause in the contract, the
Arbitral Tribunal was required to take into account other contractual
terms such as Item 1 of List II which indicated that fuel would be
supplied by the contractor at his expense. If other contractual terms
were taken into account, the Supreme Court held that the
interpretation, accorded to the "change in law" clause in the contract
by the Arbitral Tribunal, could not sustain.

88. While examining the vulnerability of the decision of the learned
Arbitral Tribunal, on Claim 1 of GMR, to interference under Section
34 of the 1996 Act, this Court would, applying the law enunciated in
South East Asia Marine Engineering & Constructions 7, have to
examine whether the interpretation of the covenants of the CA, by the
learned Arbitral Tribunal, is reasonable and fair. In doing so, no doubt,
the Court is required to bear in mind the constraints that operate on it,
as a Court exercising jurisdiction under Section 34 of the 1996 Act, in
the matter of interference with the manner in which the Arbitral
Tribunal has chosen to interpret the contract. If, however, the Court
finds that the learned Arbitral Tribunal has not taken into account all
relevant clauses, or that the manner in which the learned Arbitral
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Tribunal has interpreted the contract is disharmonious with other
clauses, the Court would have necessarily to interfere.

89. This is apart from the fact that applying the law in NHAI v.
Progressive-MVR (JV)1, the same clauses having been subjected to
mutual conflicting interpretations by two Arbitral Tribunals, this Court
would, in any case, be duty bound to set out what, in its estimation, is
the correct interpretation.

90. A bare reading of the impugned award reveals that it proceeds
on two basic premises. The first is that the requirement of renewal of
the wearing surface of the road pavement every five years was, as per
Clause 2.6.1(a)(i) of Schedule L to the CA, mandatory and non-
negotiable, irrespective of the Roughness Index of the Project
Highway.

91. The second is that the words, "to bring it to the initial value of
2000 mm/km", in Clause 4.3.1(ii) of Schedule L to the CA would
have to be read with the latter part of the second sentence in the said
clause, i.e., with the immediately preceding stipulation which reads,
"where the roughness value reaches 3000 mm/km". According to the
learned Arbitral Tribunal, the stipulation, "to bring it to the initial
value of 2000 mm/km", in Clause 4.3.1 (ii) of Schedule L of the CA
would not apply to the initial part of the sentence which reads, "shall
be laid every five years after initial construction".

92. In my opinion, the manner in which the learned Arbitral
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Tribunal has interpreted Clause 4.3.1(ii) of Schedule L to the CA
appears to be contrary to the wording of the clause itself. The clause
states that "a renewal coat of bituminous concrete shall be laid every 5
years after initial construction or where the roughness value reaches
3000 mm/km whichever is earlier to bring it to the initial value of
2000 mm/km".

93. The question is as to how this clause would apply in a case such
as the present when the roughness value/Roughness Index never
exceeded 2000 mm/km. Laying of a renewal coat of bituminous
concrete, in such a situation, would result in the Roughness Index
falling even below the level at which it already stood. In the facts of
the present case, for example, the Roughness Index was found, on two
tests, to be 1749 mm/km and 1788 mm/km. At all times, therefore, the
Roughness Index was in any event below 2000 mm/km. Laying of a
renewal coat could never, therefore, bring the roughness value to 2000
mm/km. In fact, laying of a renewal coat would reduce the roughness
value even further away from the standard of 2000 mm/km stipulated
in Clause 4.3.1(ii) of Schedule L to the CA. Requiring GMR to
undertake overlay work in such circumstances, therefore, ex-facie,
violates Clause 4.3.1(ii) of Schedule L to the CA which envisages
bringing of the roughness value, as a consequence of such overlay
work, "to the initial value of 2000 mm/km".

94. The learned Arbitral Tribunal has, however, chosen to interpret
Clause 4.3.1(ii) of Schedule L to the CA by reading the initial part of
the second sentence of the said clause, which reads "a renewal of
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bituminous concrete shall be laid every 5 years after initial
construction" as a stand-alone stipulation, completely unrelated to the
latter part of the same sentence and, particularly, unrelated to the
stipulation that the roughness value is to be brought to the initial value
of 2000 mm/km.

95. There is, prima facie, substance in the contention of Mr. Sharma
that, at the very least, according to such an interpretation would result
in reducing, to a superfluous redundancy, the words "to bring it to the
initial value of 2000 mm/km".

96. Even if one were to read the stipulations, in Clause 4.3.1(ii) of
Schedule L to the CA of the requirement of laying the renewal coat
"every 5 years after initial construction" and "where the roughness
value reaches 3000 mm/km" distinctively - as the word "or" between
these two clauses would seem to indicate - the concluding stipulation
that the laying of the renewal coat is to bring the roughness value to
the initial value of 2000 mm/km would nonetheless apply to both
stipulations. The emphasis, by Mr Dayan Krishnan, on the use of the
word "or" in Clause 4.3.1 (ii) of Schedule L to the CA, between "shall
be laid every 5 years after initial construction" and "where the
roughness value reaches 3000 mm/km" does not, therefore, advance
the interpretation of the clause that he seeks to advocate. In either
case, the renewal coat is to be laid to ensure that the Roughness
Index/roughness value is brought to the initial value of 2000 mm/km.
Bringing of the Roughness Index to 2000 mm/km is the purpose of
laying the renewal coat. This stipulation would, therefore, apply to the
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entirety of Clause 4.3.1(ii) of Schedule L to the CA, and not merely to
the latter part of the second sentence therein.

97. I have deliberated on whether, in so holding, this Court would
be interfering, without due justification, with the interpretation placed
by the learned Arbitral Tribunal on Clause 4.3.1(ii) of the Schedule L
to the CA or the other contractual covenants, or would, thereby, be
breaching the boundaries of Section 34 of the 1996 Act. On a holistic
appreciation of the issue, I am inclined to feel that I would not. 2000
mm/km is the optimum Roughness Index, for maintaining good
pavement riding quality. An increase in Roughness Index,
undisputedly, reduces pavement riding quality. Overlay/renewal work
reduces Roughness Index. On these, there is no dispute; indeed, the
submissions of Mr Dayan Krishnan were predicated on these
premises. It is for this purpose that Clause 4.3.1(ii) of Schedule L to
the CA envisages laying of a renewal coat, so that the Roughness
Index remains at 2000 mm/km or below, and pavement riding quality
is optimum. Overlay work for bringing the Roughness Index to 2000
mm/km is, therefore, envisaged, by Clause 4.3.1(ii) of Schedule L to
the CA in two situations; either every five years or whenever the
Roughness Index exceeds 3000 mm/km. In either case, the objective is
to ensure that the Roughness Index of the Project Highway does not
exceed 2000 mm/km.

98. Per sequitur, where the Roughness Index is already below 2000
mm/km, on a plain interpretation of Clause 4.3.1(ii) of Schedule L to
the CA, no overlay/renewal work by the Concessionaire would be
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warranted. The manner in which the learned Arbitral Tribunal has
chosen to interpret the clause appears, with deepest respect to the
eminent members of the learned Arbitral Tribunal, opposed to
commercial common sense. Commercial contracts have, it is trite, to
be commercially construed, as the learned Arbitral Tribunal has itself
observed in the impugned Award. In Mumbai Metropolitan Region
Development Authority v. Unity Infraproject Ltd.9, Dr Chandrachud,
J. (as he then was) tellingly exposited this principle thus:
"In interpreting a contract, the Court cannot place emphasis on
an isolated provision divorced from the context and unrelated
to the other provisions which govern contractual obligations.
Contracts represent business understandings between the
parties. Commercial dealings between persons who are well
versed in the transaction of business are regulated by contracts
which parties opt to govern themselves. The law regulates
those contracts and provides an ordered framework in which
business dealings can be implemented. The duty of the Court
when called upon to assess where the balance lies in a
contractual dispute, is to read the contract as a whole in order
to understand the business meaning which the parties
attributed to their obligations. Interpretation in law must
ensure in commercial matters that the view which the Court
takes records the sense, which the parties to an arms length
transaction attribute to the terms which they incorporate. The
law is not divorced from business realities nor can the vision of
the Judge who interprets the law be disjointed from the modem
necessities to make business sense to business dealings."

(Emphasis supplied)

99. The emphasis laid by the learned Arbitral Tribunal on Clause
2.6.1(a)(i) of Schedule L to the CA cannot, either, be said to be
justified. A bare reading of Clause 2.6.1 of Schedule L to the CA
indicates that the various clauses that follow merely set out the

9 2008 (4) Arb LR 313 (Bom)
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activities which are required to be carried out by GMR. Amongst the
activities envisages in the CA is, undoubtedly, renewal of the wearing
surfaces of road pavements once every 5 years. It is obviously for that
purpose that the said activity finds mention in Clause 2.6.1(a)(i) of
Schedule L to the CA.

100. The specifications and stipulations relating to the manner in
which, and the circumstances in which, such activity would have to be
undertaken, however, specifically finds place in Clause 4.3.1 of
Schedule L of the CA. Clause 2.6.1 of Schedule L of the CA would,
therefore, have to be read subject to Clause 4.3.1 of Schedule L to the
CA and not vice-versa. More specifically, the circumstances in which
renewal coat would be required to be laid have necessarily to be
gleaned from Clause 4.3.1 of Schedule L to the CA, and not from
Clause 2.6.1(a) of Schedule L to the CA.

101. Clause 1.4.2(i) of the CA specifically provides that, in the event
of ambiguity between clauses, the specific clause would prevail over
other clauses. This is the contractual avatar of the generalia
specialibus non derogant principle of statutory interpretation.

102. The learned Arbitral Tribunal has dismissed the reliance, by
GMR, on Clause 1.4.2 (i) by a simple finding that Clause 4.3.1 of
Schedule L to the CA could not be regarded as specific in nature. No
reason for this finding is forthcoming in the impugned award. On a
bare reading of Clause 2.6.1 and Clause 4.3.1 of Schedule L to the
CA, it is apparent, ex facie, that the latter is specific and the former
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general, clause and that, therefore, in the event of any ambiguity
between the two, Clause 4.3.1 of Schedule L to the CA would prevail.

103. Had these been the only issues, perhaps, it might have been
possible to argue - though I sincerely doubt whether the argument
would be sustainable - that the matter related to the realm of arbitral
interpretation of contractual covenants and may not, therefore, be
amenable to Section 34 interference.

104. The matter, however, does not rest there. The manner in which
the learned Arbitral Tribunal has chosen to interpret Clause 4.3.1 (ii)
of Schedule L to the CA is directly contrary to other relevant clauses
of the CA, the most important among them being Appendix 3.1 read
with Clause 4.3 of Schedule L to the CA. Clause 4.3 of Schedule L to
the CA clearly states that the framework of activities relating to
pavement, maintenance and rehabilitation in respect of flexible and
rigid pavement are given in the flow charts in Appendix 3.1 and
Appendix 3.2 of Schedule L to the CA respectively.

105. The flow chart in Appendix 3.1 of Schedule L to the CA ordains
that, in the matter of periodic maintenance of the highway surface,
apropos Roughness Survey, the Concessionaire is required to compare
the Roughness Index with the operation/performance criteria and
either "do nothing" or renew the surface. It is obvious that, if the
Roughness Index of the highway surface was in accordance with the
operation/performance criteria, GMR was to do nothing.

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106. Mr Dayan Krishnan has sought to contend that there were no
stipulated "operational/performance criteria" for the Roughness Index,
to enable a comparison, as envisaged by Appendix 3.1 to Schedule L
of the CA, to be made. I am unable to agree. The stipulated Roughness
Index, as per Clause 4.3.1(i) of Schedule to the CA, was 2000 mm/km.
The NHAI itself contends, during arguments, that the lower the
Roughness Index, the higher would be the riding quality of the
pavement. Where, therefore, the Roughness Index was already below
2000 mm/km, and the stipulated operation/performance criterion was
2000 mm/km, Appendix 3.1 to Schedule L to the CA is categorical in
envisaging that the Concessionaire would "do nothing". Appendix 3.1
of Schedule L to the CA was binding on GMR in view of Clause 4.3
of Schedule L to the CA. Clause 4.3.1 of Schedule L to the CA, being
a sub-clause of Clause 4.3, would necessarily have to be read in
accordance with Clause 4.3, and not contrary thereto. Thus read, the
Roughness Index of the highway having been always below 2000
mm/km, there could be no question of the CA having required GMR
to carry out further overlay work on the highway surface.

107. This is also supported by Appendix 3.4 to Schedule L of the
CA, reproduced supra. The said appendix clearly states that, if the
condition of the road is "good", no repairs were needed. Mr. Dayan
Krishnan has sought to contend that overlay work/laying of the
renewal coat on the surface, would not constitute "repair work". There
is, however, nothing to support this submission.

108. The CA does not define "repair work". In Sir Shadi Lal and
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Sons v. IT Commissioner10, the Supreme Court has held that
"restoration of stability or safety of subordinate or subsidiary part of a
portion of a building is repair but not the reconstruction of the entirety
of the building". In Hansraj Tiratharam Hans v. Jammu
Municipality11, the High Court of Jammu & Kashmir had refined
"repair" thus:

"The expression 'repair' signifies restoration to the original
condition. Anything which substantially improves or materially
alters a thing from its original condition cannot be said to be
merely a repair of that thing."

"Restoration of the stability or safety of a subordinate or subsidiary
part of a building" has also been held to be repair by the High Court of
Mysore in Ullal Dinkar Rao v. M. Ratna Bai12.

109. Clause 4.3.1(ii) of Schedule L to the CA envisages laying of a
renewal coat of bituminous concrete to bring the Roughness Index to
the original value of 2000 mm/km. Clearly, therefore, the activity
constitutes "repair".

110. Where the condition of the road is "good", therefore, such
overlay work would not be required as per Appendix 3.4 of Schedule
L of the CA.

111. The Roughness Index of the project highway, as per roughness

10
AIR 1988 SC 424
11 AIR 1963 J&K 18
12
AIR 1958 Mys. 77
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survey carried out during the period 22 nd to 27th January, 2020, using
bump integrator, available on record, specifically certifies that, at all
points on the highway, "as per the obtained values at site, the road
condition is good". That being so, even applying Appendix 3.4 to
Schedule L to the CA, there was no requirement for any overlay work
to be done on the project highway by GMR.

112. The dismissal of the learned Arbitral Tribunal, in para 90 of the
impugned award, of the prescribed IRC standards as having "no
relevance to the determination of the controversy at hand" is also, in
my opinion, not sustainable in law. No reason is forthcoming on
record as to why the IRC standards have no relevance to determining
the controversy at hand. Clause 4.2.1.1 of the Schedule L to the CA,
on the other hand, makes the IRC standards binding on the
Concessionaire.

113. Clause 6 of IRC: 82 (reproduced in para 88 of the impugned
award) specifically deals with periodic renewals of pavements and
maintenance of pavement quality and read thus:

"6. Periodic Renewals

6.1 Need and importance of Periodic renewals

Periodic renewals consist of the provisions of a
surfacing layer over the pavement at regular intervals of time,
so as to preserve the required characteristics of the pavement
and the offset the wear and tear caused by traffic, weathering,
etc. In effect, periodic renewals represent preventive
maintenance which is needed to prevent deterioration of the
pavement of characteristics and to ensure that initial qualities

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are kept up for the future requirement of traffic during the
design life of the pavement. Early detection and repair of
noticeable defects can prevent a major break-down of the
surface. For example, if symptoms like hungry surface,
ravelling etc. are noticed at an early stage and suitable
preventive action by way of renewal of surface is taken to
arrest further deterioration, the life of pavement can be
prolonged.

6.2 Planning and Programming of Renewals

The general practice in this country is to finalise
renewal program on an annual basis. In order that necessary
steps leading to the laying of renewal layer on the road could
be taken in proper time, the renewal programme for each
section of a road should be decided well in advance. Once the
programme is finalised, steps could be taken to secure the
required allocations and start the preliminary filed action such
as collection of material etc.

While the nomenclature "Periodic Renewal" would
imply that the renewal treatment be carried out a fixed and
pre-determined frequency, it would neither be practicable nor
desirable to follow implicitly any specified frequency
irrespective of the condition of the road surface proposed to
be renewed. The most effective way to plan a renewal
programme is to carry out inspections of the road surface at
suitable intervals. Visual inspection of the road as detailed in
Section 3 of this Code should be carried out. In addition,
special inspections also are necessary before and after the
rains as to assess the need for patching and other remedial
measures required to be carried out either in advance or
together with the renewal treatment"
(Emphasis supplied)
Clearly, therefore, IRC: 82 envisages periodic renewals, to prevent
deterioration of the pavement and to ensure maintenance of initial
qualities for future traffic requirements during the design life of the
pavements. The IRC is binding as per Clause 4.2.1.1 of Schedule L to
the CA. The relevance of the IRC cannot, therefore, be gainsaid.

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Clause 5, 5.1 and 5.2 of IRC:SP:16:2004 read thus:

"5. Recommended Standard for roughness values

5.1 The maximum permissible values of surface roughness
measured with a bump integrator for different surfaces are
given in Table 3.

5.2 Newly constructed surfaces are expected to given
roughness values corresponding to 'Good' category while the
values under 'Average' and 'Poor' category indicate level-of-
service and intervention level for maintenance. Surfaces with
very low roughness value skid resistance and are not desirable
from safety considerations. Such surfacing should receive
prompt attention for restoring frictional resistance."

(Emphasis supplied)

114. Clause 5.2 of IRC:SP:16:2004, therefore, envisages
intervention, for maintenance, where the roughness values of newly
constructed surfaces was "average" or "poor" and specifically
discountenances the need for such intervention where the surface
quality was "good". This harmonises, in its entirety, with Appendix
3.4 of Schedule L to the CA. The learned Arbitral Tribunal has,
without returning any finding on the said standards, merely held them
not to be relevant to determination of the controversy before it. This,
in my considered opinion, cannot sustain.

115. As has already been noted hereinabove, where submissions
advanced by the parties before it are either not considered or
considered and rejected without any reasons, the Section 34 court
would be justified in interfering where consideration of the said

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submissions would result in materially altering the outcome of arbitral
process. The learned Arbitral Tribunal, in the impugned award,
confined its consideration to its interpretation of Clause 4.3.1(ii) of
Schedule L to the CA, in support of which it has relied on Clause
2.6(1)(a)(i) of Schedule L to the CA. The interpretation accorded, by
the learned Arbitral Tribunal, to Clause 4.3.1(ii) of Schedule L to the
CA, is, even on a reading of the said clause, not reasonable or an
interpretation which is in accordance with the wording of the clause.
Moreover, such an interpretation would also be contrary to Clause
4.3.1 (i) of Schedule L to the CA.

116. The interpretation accorded by the learned Arbitral Tribunal to
Clause 4.3.1(ii) of Schedule L to the CA would also be out of sync
with Clause 4.3 of Schedule L to the CA read with Appendix 3.1
thereto, Appendix 3.4 and Clause 5.2 of IRC:SP:16:2004 read with
Clauses 6.1 and 6.2 of IRC:82 which, as per Clause 4.2.1.1 of the
Schedule L to the CA, had necessarily to govern the execution of
operations by the concessionaire i.e., GMR.

117. I cannot, therefore, concur with the finding, of the learned
Arbitral Tribunal, that, though the Roughness Index, at all points of
time, below 2000 mm/km, GMR was, nonetheless, required to carry
out renewal/overlay work.

118. The manner in which the learned Arbitral Tribunal has come to
the said conclusion is, in my respectful opinion, contrary to several
binding clauses of the CA and is also not sustainable on a plain
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reading of Clause 4.3.1 (ii) of Schedule L to the CA itself. It is,
therefore, "patently illegal" within the meaning of Section 34(2A) 4 of
the 1996 Act.

119. GMR was constrained to carry out overlay work on the
insistence of NHAI which, from time to time, threatened to withhold
its annuity payment in the event the work was not carried out. Even
otherwise, once the work was carried out at the insistence of NHAI,
despite GMR protesting, in writing, in that regard, if the work was not
within the work contemplated by the contract, GMR is entitled, in law,
to additional payment.

120. Claim 1 also covered a claim for extra costs incurred by GMR,
on account of NHAI refusing permission to allow recycling of milled
material. The learned Arbitral Tribunal, in this context, held that
milling, as an option, was available, under Clause 4.3.2 (ii) of
Schedule L to the CA, only in consultation with the IC. It is
specifically held that there was no material on record to indicate that
any attempt or deliberation or discussion with the IC, regarding
milling of the existing crust, had been undertaken by GMR, which had
proceeded to commence milling on its own. The letter dated 12 th
February, 2014, from GMR to the IC, stating that GMR was intending
to carry out milling activity, did not seek any consultation with the IC,
as per the impugned award. GMR having undertaken the milling
exercise without consultation with the IC, learned Arbitral Tribunal
has found GMR not to be entitled to the expense involved in recycling
of the milled crust.
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121. The finding, of the learned Arbitral Tribunal, that the milling
exercise have been undertaken without due consultation with the IC
and that, therefore, GMR would not be entitled to any expense
incurred on account of recycling of the milled crust has to be
examined in the light of the actual situation on ground and the
communications exchanged between the parties.

122. In its letter dated 5th December, 2013, addressed by NHAI to
GMR, NHAI specifically stated thus:

"4. Since the 5 years period is getting completed by
25/03/2014 after construction, the first surface overlay is to
be provided immediately, irrespective of whether the
Roughness reaches 3000 mm/km or not, as per CL. 2.6.1 &
CL 4.3.1 of Schedule 'L' of Concession Agreement.

5. As the project stretch is about 103 km and carrying out
renewal coat on 4 lanes takes significant time, it is requested
to furnish the programme as sought by PD, NHAI & IC, to
take up the renewal coat with BC and complete by
25/03/2014, within 10 days positively, otherwise your next
annuity (10th) which is due in March 2014 will not be
processed."

123. In view of the urgency expressed by NHAI, GMR with its
response dated 14th December, 2013, submitted the schedule for taking
up periodic maintenance by carrying out overlay work, as required by
NHAI. Clause 4.3.2 (ii) of Schedule L to the CA clearly permits, the
exploring, by the Concessionaire, of recycling of the existing crust
using milling as an option, only requiring that the Concessionaire has
to consult with the IC before doing so. The entitlement, of the
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Concessionaire to, recycle the crust used by milling cannot, therefore,
be gainsaid and is an entitlement of the Concessionaire under the CA.

124. The learned Arbitral Tribunal has, nonetheless, held GMR not
to be entitled to the extra costs incurred for recycling of the milled
material on the ground that, before carrying out renewal work by
milling, there was no "consultation" with the IC. The communications
from GMR to the IC, according to the learned Arbitral Tribunal, did
not propose any "consultation".

125. How sustainable is this finding?

126. As has already been noticed, consequent to the Project Director
of NHAI writing, to GMR, on 5th December, 2015, requiring GMR to
immediately undertake overlay work and threatening GMR with the
possibility of withholding of annuity payable to it in the alternative,
GMR submitted its work programme to the IC vide its communication
14th December, 2013. The programme annexed to the communication
clearly shows that renewal would involve "milling of BC surface" for
a period of 61 days, from 1st February, 2014 to 2nd April, 2014.

127. Following this, on 12th February, 2014, GMR again wrote to
IC, informing IC that it was commencing milling work on 15th
February, 2014 and enclosing, with the letter, the plan for diversion of
traffic, which would be occasioned as a result of the work. Following
this, on 18th February, 2014, GMR again wrote to IC, seeking its
approval for milling activity undertaken by it and seeking, further,
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approval for disposal of milled bituminous material. A copy of the
said letter was also forwarded to NHAI.

128. NHAI remained silent throughout, not condescending to
respond to any of these communications. It was only on 28th February,
2014, that the IC wrote to NHAI, with a copy to GMR, objecting to
GMR having carried out renewal work by milling without prior
consultation with it. Immediately on this communication being
received by GMR, it discontinued milling, as the method for overlay
work.

129. In the backdrop of these communications, the finding, of the
learned Arbitral Tribunal, that GMR would not be entitled to the
expenses incurred for recycling of the mild material, I am constrained
to observe, is patently unreasonable. The communication dated 5th
December, 2013 compelled GMR, under threat of withholding annuity
payable to it, to immediately commence overlay work. In order to
comply with the requirement of consultation with the IC, GMR
addressed as many as three communications to the IC on 14th
December, 2013, 12th February, 2014 and 18th February, 2014,
informing the IC of carrying out of the renewal work using milling as
an option. The IC, at no point, disapproved this course of action.
Having compelled GMR to carry out renewal work immediately and
GMR having communicated, to NHAI, its intent to carry out the work
by milling, NHAI cannot, either in law or in equity, be permitted to
take advantage of its silence and refusal to respond to the
communications of GMR as a ground to fault GMR for having carried
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out milling without proper consultation. This would amount to NHAI
being permitted to take advantage of its own wrong which, it is well
settled in law, is not permissible. The learned Arbitral Tribunal has, in
my view, erred in failing to take stock of the fact that, given the
urgency expressed by NHAI in its communication dated 5th December,
2013 and the threat held out therein, GMR could not have waited for
approval of the IC before carrying out the renewal work using milling,
which was an option contractually available to GMR vide under
Clause 4.3.2 (ii) of Schedule L to the CA. Significantly, GMR ceased
renewal work using milling immediately on being informed by the IC
that it was not permissible.

130. In these circumstances, the finding, of the learned Arbitral
Tribunal, that GMR would not be entitled to the costs incurred on
account of the recycling of the mild material is also, in my view,
"patently illegal" within the meaning of Section 34(2A) 4 of the 1996
Act.

131. The offshoot of the above discussion is that GMR would be
entitled to be recompensed for carrying out the overlay work by
renewal of the highway coat using bituminous concrete, as, under the
CA, this was not required to be done. It qualifies, therefore, as "extra
work", for which GMR is entitled to extra payment. GMR is also
entitled to the costs of recycling of the mild material.

132. In view thereof, the finding of learned Arbitral Tribunal, qua
the claim of GMR for ₹ 104,47,80,462/-, that it was not entitled to the
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said claim, as the overlay work carried out by it, under the instructions
of NHAI, was within the work contemplated by the CA, cannot
sustain and has necessarily to be set aside.

133. Having said that, it is not open to this Court to, straightway,
allow Claim 1 of GMR on this ground alone, as the quantification of
the said claim by GMR has not been examined by the learned Arbitral
Tribunal, which proceeded on the basis that the claim itself was not
allowable.

134. As this Court has held the claim to be allowable, the
quantification of the claim would necessarily have to be assessed
afresh, for which purpose this Court intends to appoint a suitable
arbitrator.

Re. Claim 3

135. As I have held that GMR was not contractually required to carry
out renewal/overlay work of the project highway, as the roughness
index was, at all points, on the highway, below 2000 mm/km, Claim 3
of the contractor, which sought an injunction against NHAI from
insisting of relaying of the surface every five years, if the roughness
index was 2000 mm/km or less, would have to be allowed. The award
of the learned Arbitral Tribunal qua the said claim is also, therefore,
set aside.

Re: Claim 2
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136. The learned Arbitral Tribunal has allowed Claim 2 of GMR, for
₹ 10,78,61,864/-, recovered by NHAI towards damages. The damages
were recovered, by NHAI, under Clause 18.12 of the CA. GMR, vide
Claim 2 before the learned Arbitral Tribunal, sought reimbursement of
the damages. A reading of letter dated 8th June, 2016 from the IC to
the Project Director of NHAI, which proposes recovery of damages
from GMR, makes it clear that the recovery was on account of GMR's
perceived default in carrying out overlay work by renewal of the
bituminous coat on the highway surface. The learned Arbitral Tribunal
has held that NHAI was entitled to recover damages, but has allowed
GMR's claim on the ground that, prior to recovering damages, NHAI
had not issued, to GMR, the requisite notice under Clauses 18.12 and
18.13 of the CA.

137. That issue, however, pales into insignificance, in view of the
finding, hereinabove, that GMR was not, in fact, required, under the
CA, to carry out the overlay/renewal work as desired by NHAI. The
delay in carrying out the said work was, as is apparent from the
communications between GMR and NHAI, only because of the
repeated attempts of GMR to convince NHAI that, as the roughness
index of the highway was, at all points, less than 2000 mm/km,
overlay/renewal work was not required to be done, and NHAI's stoic
refusal to accede to this position. As the work that NHAI called upon
GMR to do was itself outside the CA, and the delay in performing the
work was only because of NHAI's refusal to accept this plain
contractual position, it is obvious that NHAI could not claim any
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damages from GMR for the said delay.

138. As such, the question of issuance of notice under Clauses 18.12
and 18.13 of the CA does not arise for consideration, NHAI not
having been entitled in law, at all, to recover damages from GMR.
The decision of the learned Arbitral Tribunal to allow Claim 2 of
GMR has, therefore, to be upheld, albeit on different grounds.

Re: Claim 4 - Award of interest to GMR

139. The only ground on which NHAI has, in OMP(Comm)
449/2020, challenged the award of interest to GMR by the learned
Arbitral Tribunal is that, as GMR had delayed completion of overlay
work by almost nine months and had, therefore, breached its
obligations under the CA, no interest could have been awarded to it.

140. In view of the finding, hereinabove, that there was, in fact, no
breach of contract by GMR, carrying out of overlay/renewal work not
being a contractual obligation under the CA, the submission of NHAI,
in response of the award of interest to GMR, cannot sustain.

141. The award of the learned Arbitral Tribunal with respect to
Claim 4 of GMR is, therefore, upheld.

Re: Claim 5 of GMR and Counter-claim 1 of NHAI

142. GMR and NHAI, by their respective Claim 5 and Counter-claim
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1, claimed the costs of the arbitration. The learned Arbitral Tribunal
awarded costs to GMR. NHAI's contention, against the said decision
is that, having rejected GMR's principal Claim 1 for ₹ 104,47,80,462/-
, the costs of the arbitration should not have been awarded to GMR.

143. As the decision to reject GMR's Claim 1 for ₹ 104,47,80,462/-
has been reversed by me hereinabove, no occasion arises for this Court
to interfere with the impugned award of the learned Arbitral Tribunal
insofar as it deals with Claim 5 of GMR and Counter-claim 1 of
NHAI.

Conclusion

144. In view of the aforesaid, these petitions are disposed of in the
following terms:

(i) OMP(Comm) 449/2020 is dismissed.

(ii) The award of the learned Arbitral Tribunal, qua Claims 2,
4 and 5 of GMR, is upheld.

(iii) The award of the learned Arbitral Tribunal qua Claims 4
and 5 is set aside, holding that GMR was entitled to extra
payment for having carried out overlay work over the project
highway by renewal of the bituminous surface, as the said work
was not required, contractually, to be carried out under the CA,
the roughness index of the project highway, at all points, and at

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all times, having been below 2000 mm/km. The decision of the
learned Arbitral Tribunal, with respect to Claims 1 and 3 of
GMR, holding GMR was not entitled to extra payment for
carrying out the said overlay/renewal work is, therefore, set
aside, as suffering from patent illegality.

(iv) This Court requests Hon'ble Mr Justice D.K. Jain, an
eminent former judge of the Supreme Court of India, to arbitrate
on the sustainability of the claim of GMR to the extent of ₹
1,04,47,80,462/-, claimed by it, as there has been no prior
arbitral adjudication of the quantum of the said claim or
entitlement of GMR thereto, to the extent claimed. It shall be
open to NHAI, in the said arbitral proceedings, to contest the
quantification of the claim by GMR, though GMR's entitlement
to extra payment would not be open for debate, having been
concluded by this judgement.

(v) The learned arbitrator is requested to furnish the requisite
disclosure under Section 12(2) of the 1996 Act within a week of
entering on reference.

(vii) The learned sole arbitrator would be entitled to the fees
which were being paid to the learned presiding arbitrator in the
proceedings which culminated in the rendition of the impugned
award, or as otherwise finalized by the learned Arbitrator in
consultation with the parties.

Signature Not Verified O.M.P. (COMM) 433/2020 & contd. matters Page 71 of 72
Digitally Signed By:SUNIL
SINGH NEGI
Signing Date:07.04.2022
21:28:14
(viii) OMP(Comm) 433/2020 stands allowed in the aforesaid
terms.

145. There will be no order as to costs. Miscellaneous applications
also stand disposed of.

C. HARI SHANKAR, J.

APRIL 6th, 2022 r.bararia/kr/SS/dsn Signature Not Verified O.M.P. (COMM) 433/2020 & contd. matters Page 72 of 72 Digitally Signed By:SUNIL SINGH NEGI Signing Date:07.04.2022 21:28:14

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