Delhi High Court
National Highway Authority Of India vs Rohtak Panipat Tollway Pvt. Ltd. on 16 February, 2023
Author: Navin Chawla
Bench: Navin Chawla
Neutral Citation Number: 2023/DHC/001137
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on:17.01.2023
Date of decision:16.02.2023
+ O.M.P. (COMM) 286/2018 & I.A. 8863/2018, I.A. 2943/2019
NATIONAL HIGHWAY AUTHORITY OF INDIA
..... Petitioner
Through: Mr.Narender Hooda, Sr. Adv.
with Mr.Arun Kumar Batta,
Ms. Neha Kumari, Mr. Abdul
Wahid, Ms. R. Ahuja,
Mr.Shaurya Lamba, Advs.
versus
ROHTAK PANIPAT TOLLWAY PVT. LTD.
..... Respondent
Through: Ms.Roopali Chaturvedi and
Ms.Sadiqua Fatima, Advs.
CORAM:
HON'BLE MR. JUSTICE NAVIN CHAWLA
1. The present petition has been filed under Section 34 of the
Arbitration and Conciliation Act, 1996 (hereinafter referred to as the
„Act‟), challenging the Arbitral Award dated 06.10.2017 passed by the
learned Arbitral Tribunal, as well as the order dated 20.02.2018
passed by the learned Arbitral Tribunal on an application under
Section 33(1)(a) and (b) of the Act.
2. The disputes between the parties arose out of the Agreement for
the work of "Four Laning of Rohtak - Panipat Section of NH-71A
from KM 0.00 (KM 63.00 OF NH 10) to KM 80.858 (KM 83.39 of
NH-1) in the State of Haryana under the NDPH Phase III on Design,
Build, Finance, Operate and Transfer („DBFOT‟) Basis" awarded by
the petitioner to the respondent.
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3. By the Impugned Award, the learned Arbitral Tribunal has
allowed the claims of the respondent herein.
SUBMISSIONS OF THE LEARNED SENIOR COUNSEL FOR
THE PETITIONER:
CLAIM NO. 1
4. Claim no.1 of the respondent was towards additional lead
required for transportation of material on site. The learned senior
counsel for the petitioner submits that the mining operation in the
State of Haryana was lying closed since 01.03.2010. He submits that
the Concession Agreement was signed between the parties on
09.03.2010 and the work commenced in April 2011, that is, after the
closure of the mining operation. He submits that, therefore, the
respondent could not have been allowed to take the benefit of Clause
41.1 of the Concession Agreement which provides for increase in
costs due to change in law.
5. He submits that the claim for additional lead was raised by the
respondent for the first time vide letter dated 13.05.2014, while the
notice claiming arbitration was issued on 11.02.2016. He submits that,
therefore, not only is the claim not maintainable in terms of the
Concession Agreement, but is also barred by the Law of Limitation.
6. Placing reliance on Geo Miller and Company Private Ltd. v.
Chairman, Rajasthan Vidyut Utpadan Nigam Limited., (2020) 14
SCC 643 and Bharat Sanchar Nigam Limited & Another v. Nortel
Networks India Private Ltd., (2021) 5 SCC 738, the learned senior
counsel for the petitioner submits that as the cause of action arose on
01.03.2010 and the notice claiming arbitration was issued only on
11.02.2016, the claim was barred by limitation. He submits that the
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learned Arbitral Tribunal has ignored these important facts in
adjudicating the claim no.1 in favour of the respondent.
7. He further submits that as per the Government Order dated
21.04.2012, sand mine in the Districts of Sonepat and Panipat and two
small stone mines in the District of Mahendergarh remained
operational even after 01.03.2010. Therefore, there was no compelling
reason for the respondent to have allegedly chosen to procure the
material from outside the State of Haryana. In any case, for this
unilateral decision of the respondent, its claim for differential in prices
was not justified and could not have been granted.
8. He submits that the learned Arbitral Tribunal has erroneously
placed reliance upon the Feasibility Report, despite the fact that the
Clause 2.13 of the RFP clearly states that the Feasibility Report is
only a preliminary document and that nothing contained therein would
be binding upon the Authority nor would it confer any right on the
bidders. He submits that the Feasibility Report was only for the
purpose of appraising the Concessionaire about the topography of the
area and other different details mentioned in the said document, which
are only indicative and not binding.
9. The learned senior counsel for the petitioner further submits
that the learned Arbitral Tribunal has also erred in placing reliance
upon the Letter dated 15.04.2013 from the Independent Engineer (in
short, the „IE‟) to the petitioner, wherein, the IE allowed the additional
carriage charges with regards to transportation of stone aggregates
from the State of Rajasthan as change of scope of work. He submits
that the said letter has no relevance to a claim under change in law.
10. He submits that even the quantification of the sum awarded
under claim no.1 cannot be sustained. He submits that assuming, but
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not admitting, that the Feasibility Report was binding on the
petitioner, even in such an event, as per the Feasibility Report, the
Granular Sub-Base Material (in short, „the GSB‟) was available at the
maximum distance of 190 Kms, and assuming that it was brought by
the respondent from the distance of 257 Kms, the respondent‟s claim
could have been maintainable only for a lead distance for
transportation of only 67 Kms. However, the learned Arbitral Tribunal
erroneously quantified the claim with respect to additional
transportation charges for GSB taking the lead distance of 134 Km on
the basis of average distance of the mine mentioned in the Feasibility
Report.
11. He submits that claim no.1 has been granted to the respondent
on notional basis and without any evidence produced by the
respondent. He submits that as the claim was of the nature of recovery
of damages, the same could not have been allowed without proof of
the same.
CLAIM NO. 2
12. Claim no.2 pertains to the alleged loss of revenue suffered by
the respondent due to delay in granting permission for collection of
toll and the Provisional Completion Certificate (hereinafter referred to
as the „PCC‟).
13. The learned senior counsel for the petitioner submits that as per
Article 14 of the Concession Agreement, PCC could be issued to the
respondent only after successful conclusion of safety tests and when
the Project Highway could safely and reliably be put to commercial
operations. He submits that the IE, with respect to safety, was to be
guided by the Safety Consultant appointed by the petitioner as per the
Article 18 of the Concession Agreement. The application made by the
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respondent vide letter dated 24.08.2013 for issuance of PCC was not
considered by the petitioner and the PCC could not have been issued.
He submits that even in the letter dated 18.09.2013, which forms the
basis for the learned Arbitral Tribunal to pass the Award in favour of
the respondent, the works mentioned in Appendix A-1 and A-2 to the
said letter were not complete and the respondent had to complete the
same before the issuance of the PCC. The IE, even vide letter dated
30.09.2013, pointed out that certain items were yet to be completed;
the respondent was instructed to complete the pending works at the
earliest and submit a Total Compliance Report. One of the most
crucial items, as pointed out in the said letter, was the compliance
regarding the metal beam crash barrier which was not completed by
the respondent. In the light of the said letter dated 30.09.2013, the
application made by the respondent for issuance of PCC was not
considered by the petitioner.
14. He submits that the IE had communicated to the petitioner, vide
letter dated 25.10.2013, that as on 25.10.2013, certain works were
pending as per the Safety Audit Report attached with the said letter
under serial no. 1, Row 5. These works were a part of the Safety Audit
Report, and as such, it was paramount for the petitioner to complete
the same before the issuance of PCC to the petitioner.
15. He submits that in view of the above, the Award passed by the
learned Arbitral Tribunal is in violation of the fundamental policy of
Indian Law as the learned Arbitral Tribunal has, arbitrarily and
without any application of mind, held that none of the items said to be
incomplete were such which may pertain to reliability and safety of
the Project Highway, even though, the said items were brought to
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notice for compliance by the Safety Consultant, as is evident from the
aforementioned letter dated 30.09.2013.
16. He submits that the learned Arbitral Tribunal has also failed to
consider the fact that in terms of the Clause 26.2.1 of the Concession
Agreement, the Concessionaire (the respondent herein) had to pay to
the petitioner, on COD date, a premium in the shape of additional
Concession Fees for the amount of Rs. 45 Crore during that year and
for each subsequent year of the Concession Period. He submits that
even if the conclusion of the learned Arbitral Tribunal on Claim no.2
is upheld, the proportionate amount of the Concession Fees of Rs. 45
Crore should be deducted from the amount awarded by the learned
Arbitral Tribunal. He submits that the learned Arbitral Tribunal failed
to deduct the proportionate amount of approximately 90 days of the
year 2013 and 8 days of the year 2014 as Concession Fees payable by
the respondent to the petitioner in terms of Clause 26.2.1 of the
Concession Agreement. The Concession Fees as such for the said
period come out to be approximately Rs. 12,08,00,000/-, which is
required to be deducted from amount awarded under the claim no.2 of
the respondent.
SUBMISSIONS OF THE LEARNED COUNSEL FOR THE
RESPONDENT:
17. On the other hand, the learned counsel for the respondent, while
reminding the Court of the limited jurisdiction that it exercises under
Section 34 of the Act, submits that the Impugned Award is based on a
proper appreciation of the contractual terms and the facts, and,
therefore, deserves no interference from this Court.
CLAIM NO. 1
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18. On Claim no.1, she submits that the request for proposal was
issued by the petitioner on 05.06.2009; the respondent submitted its
bid on 30.11.2009; and the Letter of Award (in short, the „LOA‟) was
issued to the respondent by the petitioner on 04.01.2010. She submits
that in terms of Clause 2.15.1 of the RFP, the bid could not have been
modified, substituted, or withdrawn by the respondent after the bid
date. She submits that in terms of Clause 3.3.6 of the RFP, the
respondent was not entitled to seek any deviation in the Concession
Agreement, which was to be signed between the parties after the
acknowledgement of LOA dated 04.01.2010. She submits that,
therefore, the binding Contract came into being between the parties on
04.01.2010, and as the mining activity was banned vide order dated
21.04.2012 with effect from 01.03.2010, that is, after the issuance of
the LOA, the same falls within the ambit and scope of Clause 41.1,
that is, „change in law‟.
19. On the question of limitation, she submits that in terms of
Clause 41.1, it was only where the Concessionaire suffers an increase
of cost as a result of change in law, the aggregate financial effect of
which exceeds higher of Rs.1 Crore or 0.5% Realisable Fee in the
Accounting Year, that the Concessionaire was to notify the Authority
seeking amendment of the Agreement. She submits that the work on
the project commenced on 18.04.2011; the respondent applied for
Completion Certificate for the full length of the project on 13.11.2013;
and the Provisional Certificate was issued by the petitioner on
06.01.2014. The respondent thereafter raised a claim on 13.05.2014,
which was rejected by the petitioner on 25.05.2015. The respondent
thereafter invoked the Arbitration Agreement on 11.02.2016. She
submits that therefore, the invocation was within the period of
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limitation; there was also no delay in raising of the claim before the
petitioner.
20. On the quantification of the claim, the learned counsel for the
respondent submits that the same has been done in a reasonable
manner and in terms of table numbers 8.5 and 8.8 of the Final
Feasibility Report and the letter dated 15.04.2013 issued by the IE,
which established the fact of sourcing of the materials by the
respondent from Rajasthan and also the acceptance of carriage charges
in accordance with the Haryana Schedule of Rates, Public Works
Department, Haryana. She submits that no fault can be found with the
learned Arbitral Tribunal in taking the average of the lead distance
from the Feasibility Report.
21. She further submits that, in fact, the learned Arbitral Tribunal
has rejected the respondent‟s claim for additional cost for carriage of
sand since the sand was available in the Districts of Sonepat and
Panipat in Haryana. The same cannot be said for the availability of
GSB material and Aggregates.
CLAIM NO. 2
22. On Claim no.2, she submits that in terms of Clause 14.3.1 and
14.3.2, the IE was to issue the PCC on completion of atleast 75% of
the Project Highway if the tests are successful and the Project
Highway can be safely and reliably put to commercial operations. The
PCC was to be issued by the IE even though certain works or things
forming part thereof were not yet complete and were outstanding. She
submits that the respondent applied for PCC vide letter dated
24.08.2013 for 93.7% of the Project Highway. Various test reports as
per the contractual provisions were submitted and the respondent also
undertook
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undertaking and the completion of the works as stated in the Punch
List-C that the IE vide letter dated 18.09.2013 informed the petitioner
that the Project Highway can be safely and reliably put to commercial
operation as all mandatory tests have been successfully conducted.
Despite the fact that it was the IE who was the Competent Authority
to issue the PCC, IE sought the approval of the petitioner in terms of
Clause 12 of the Terms of Reference of the Independent Engineer
Consultancy Agreement, though the same was not binding or
applicable to the respondent. She submits that the items mentioned by
the IE as incomplete were not essential to put the Project Highway
safely and reliably on commercial operation. The same were just
additional compliances sought by the Safety Consultant in its Audit
Report. In any case, the IE vide letter dated 25.10.2013 informed the
petitioner of completion of these works. She submits that, therefore,
no fault can be found in the impugned Arbitral Award on the date
when the respondent was entitled to grant of the PCC.
23. Without prejudice to the above submission, she submits that as
against 75% of the Project Highway which was required to be
completed in terms of Article 14.3 for issuance of the PCC, the
respondent had sought the PCC for 93.7% of the Project Highway.
Therefore, even if some works remained pending, the respondent was,
entitled to grant of PCC.
24. On the claim of the petitioner for deduction of proportionate
amount of Concession Fee for the period for which Claim no.2 has
been granted by the Arbitral Tribunal, the learned counsel for the
respondent submits that the same cannot be agitated at the stage of
challenge to the Arbitral Award under Section 34 of the Act. The
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petitioner having not raised this claim before the learned Arbitral
Tribunal, cannot challenge the Award on basis thereof.
ANALYSIS AND FINDINGS:
25. I have considered the submissions made by the learned counsels
for the parties.
26. At the outset, I have to remind myself of the limited jurisdiction
that I exercise under Section 34 of the Act. This Court cannot consider
the award as an Appellate Court. The scope of interference/challenge
has been explained by the Supreme Court in Ssangyong Engineering
and Construction Company Limited v. National Highways Authority
of India (NHAI), (2019) 15 SCC 131, wherein it has been inter alia
held as under:
"34. What is clear, therefore, is that the
expression "public policy of India", whether
contained in Section 34 or in Section 48,
would now mean the "fundamental policy of
Indian law" as explained in paras 18 and 27
of Associate i.e. the fundamental policy of
Indian law would be relegated to
"Renusagar" understanding of this
expression. This would necessarily mean
that Western Geco expansion has been done
away with. In short, Western Geco , as
explained in paras 28 and 29 of Associate
Builders , would no longer obtain, as under
the guise of interfering with an award on the
ground that the arbitrator has not adopted a
judicial approach, the Court's intervention
would be on the merits of the award, which
cannot be permitted post amendment.
However, insofar as principles of natural
justice are concerned, as contained in Sections
18 and 34(2)(a)(iii) of the 1996 Act, these
continue to be grounds of challenge of an
award, as is contained in para 30 of Associate
Builders.
35. It is important to notice that the ground
for interference insofar as it concerns
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"interest of India" has since been deleted, and
therefore, no longer obtains. Equally, the
ground for interference on the basis that the
award is in conflict with justice or morality is
now to be understood as a conflict with the
"most basic notions of morality or justice".
This again would be in line with paras 36 to
39 of Associate Builders , as it is only such
arbitral awards that shock the conscience of
the court that can be set aside on this ground.
36. Thus, it is clear that public policy of
India is now constricted to mean firstly, that a
domestic award is contrary to the fundamental
policy of Indian law, as understood in paras
18 and 27 of Associate Builders , or secondly,
that such award is against basic notions of
justice or morality as understood in paras 36
to 39 of Associate Builders. Explanation 2 to
Section 34(2)(b)(ii) and Explanation 2 to
Section 48(2)(b)(ii) was added by the
Amendment Act only so that Western Geco , as
understood in Associate Builders , and paras
28 and 29 in particular, is now done away
with.
37. Insofar as domestic awards made in
India are concerned, an additional ground is
now available under sub-section (2-A), added
by the Amendment Act, 2015, to Section 34.
Here, there must be patent illegality appearing
on the face of the award, which refers to such
illegality as goes to the root of the matter but
which does not amount to mere erroneous
application of the law. In short, what is not
subsumed within "the fundamental policy of
Indian law", namely, the contravention of a
statute not linked to public policy or public
interest, cannot be brought in by the backdoor
when it comes to setting aside an award on the
ground of patent illegality.
38. Secondly, it is also made clear that
reappreciation of evidence, which is what an
appellate court is permitted to do, cannot be
permitted under the ground of patent illegality
appearing on the face of the award.
39. To elucidate, para 42.1 of Associate
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Builders , namely, a mere contravention of the
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substantive law of India, by itself, is no longer
a ground available to set aside an arbitral
award. Para 42.2 of Associate Builders,
however, would remain, for if an arbitrator
gives no reasons for an award and
contravenes Section 31(3) of the 1996 Act, that
would certainly amount to a patent illegality
on the face of the award.
40. The change made in Section 28(3) by
the Amendment Act really follows what is
stated in paras 42.3 to 45 in Associate
Builders , namely, that the construction of the
terms of a contract is primarily for an
arbitrator to decide, unless the arbitrator
construes the contract in a manner that no
fair-minded or reasonable person would; in
short, that the arbitrator's view is not even a
possible view to take. Also, if the arbitrator
wanders outside the contract and deals with
matters not allotted to him, he commits an
error of jurisdiction. This ground of challenge
will now fall within the new ground added
under Section 34(2-A).
41. What is important to note is that a
decision which is perverse, as understood in
paras 31 and 32 of Associate Builders , while
no longer being a ground for challenge under
"public policy of India", would certainly
amount to a patent illegality appearing on the
face of the award. Thus, a finding based on no
evidence at all or an award which ignores
vital evidence in arriving at its decision would
be perverse and liable to be set aside on the
ground of patent illegality. Additionally, a
finding based on documents taken behind the
back of the parties by the arbitrator would
also qualify as a decision based on no
evidence inasmuch as such decision is not
based on evidence led by the parties, and
therefore, would also have to be characterised
as perverse."
27. In Delhi Airport Metro Express Private Limited v. Delhi Metro
Rail Corporation Limited, (2022) 1 SCC 131, the Supreme Court
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reiterated the limited scope of interference permitted under Section 34
of the Act, as under:-
28. This Court has in several other judgments
interpreted Section 34 of the 1996 Act to stress
on the restraint to be shown by Courts while
examining the validity of the arbitral awards.
The limited grounds available to Courts for
annulment of arbitral awards are well known
to legally trained minds. However, the
difficulty arises in applying the well-
established principles for interference to the
facts of each case that come up before the
Courts. There is a disturbing tendency of
Courts setting aside arbitral awards, after
dissecting and reassessing factual aspects of
the cases to come to a conclusion that the
award needs intervention and thereafter,
dubbing the award to be vitiated by either
perversity or patent illegality, apart from the
other grounds available for annulment of the
award. This approach would lead to corrosion
of the object of the 1996 Act and the
endeavours made to preserve this object,
which is minimal judicial interference with
arbitral awards. That apart, several judicial
pronouncements of this Court would become a
dead letter if arbitral awards are set aside by
categorising them as perverse or patently
illegal without appreciating the contours of the
said expressions.
29. Patent illegality should be illegality which
goes to the root of the matter. In other words,
every error of law committed by the Arbitral
Tribunal would not fall within the expression
"patent illegality". Likewise, erroneous
application of law cannot be categorised as
patent illegality. In addition, contravention of
law not linked to public policy or public
interest is beyond the scope of the expression
"patent illegality". What is prohibited is for
Courts to reappreciate evidence to conclude
that the award suffers from patent illegality
appearing on the face of the award, as Courts
do not sit in appeal against the arbitral award.
The permissible grounds for interference with
a domestic award under Section 34(2-A) on
the ground of patent illegality is when the
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possible one, or interprets a clause in the
contract in such a manner which no fair-
minded or reasonable person would, or if the
arbitrator commits an error of jurisdiction by
wandering outside the contract and dealing
with matters not allotted to them. An arbitral
award stating no reasons for its findings
would make itself susceptible to challenge on
this account. The conclusions of the arbitrator
which are based on no evidence or have been
arrived at by ignoring vital evidence are
perverse and can be set aside on the ground of
patent illegality. Also, consideration of
documents which are not supplied to the other
party is a facet of perversity falling within the
expression "patent illegality".
30. Section 34(2)(b) refers to the other
grounds on which a court can set aside an
arbitral award. If a dispute which is not
capable of settlement by arbitration is the
subject-matter of the award or if the award is
in conflict with public policy of India, the
award is liable to be set aside. Explanation
(1), amended by the 2015 Amendment Act,
clarified the expression "public policy of
India" and its connotations for the purposes of
reviewing arbitral awards. It has been made
clear that an award would be in conflict with
public policy of India only when it is induced
or affected by fraud or corruption or is in
violation of Section 75 or Section 81 of the
1996 Act, if it is in contravention with the
fundamental policy of Indian law or if it is in
conflict with the most basic notions of morality
or justice.
(emphasis supplied)
28. Applying the above test to the facts of the present case, I shall
consider the objections of the petitioner on merit.
CLAIM NO. 1:
29. On the applicability of Clause 41.1, the learned Arbitral
Tribunal in its Impugned Award has observed as under: -
"20. Before we may deal with the controversy
on merit in the context of the relevant clauses
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to deal with the twin objections as noted
above. We have already mentioned that the
Claimant was the highest bidder. His bid was
accepted on 30.11.2009 or at the most when a
Letter of Award was issued in his favour on
4.1.2010. Highest bid given by the Claimant is
an offer, it is accepted at least when Letter of
Award was issued in its favour. In view of the
provisions contained in Section 4 of the Indian
Contract Act, 1872 the communication of an
acceptance is complete as against the
proposer, when it is put into a course of
transmission to the person to whom it is made,
so as to be out of the power of the acceptor
and as against the acceptor, when it comes to
the knowledge of the proposer. In view of the
facts as mentioned above, when the Letter of
Award was issued to the Claimants on
4.1.2010 a concluded and binding contract
would come into existence. The mining
operations stopped in the State of Haryana on
1.3.2010 i.e. after the contract had already
come into being. The ground for rejection as
contained in the letter of the Respondent
referred to as also in the counter that the
concluded contract came into being when the
Concession Agreement was signed by the
parties on 9.3.2010 by which time the
Claimants had come to know about halting of
mining operations in the State needs to be
repelled. The provisions of Section 4 of the
Contract Act are clear. However, we may
mention that Hon'ble Supreme Court in
Haridwar Singh v. Begum. Sumbruiu AIR 1972
SC 1942 has held that the communication of
acceptance of the highest bid is necessary for
completed contract. Surely, when Letter of
Award was issued by none other than the
Respondent, it certainly would be an
acceptance of the highest bid given by the
Claimant.
That apart, the RFP clearly states that
no bid shall be modified, substituted or
withdrawn by the bidder after the bid date and
further the selected bidder shall not be able to
make any deviation in the Concession
Agreement after acknowledgement of the LOA.
Clauses 2.15.1 and 3.3.6 read as follows:
"2.15.1 The Bidder may modify,
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substitute or withdraw its Bid after
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submission, provided that written notice
of the modification, substitution or
withdrawal is received by the Authority
prior to Bid Due Date. No Bid shall be
modified, substituted or withdrawn by
the Bidder on or after the Bid Due
Date."
"3.3.6. After acknowledgement of the
LOA as aforesaid by the Selected
Bidder, it shall execute the Concession
Agreement within the period prescribed
in Clause 1.3. The Selected Bidder shall
not be entitled to seek any deviation in
the Concession Agreement."
The very fact that the Claimants could
not modify, substitute or withdraw their
bid after the Bid Due Date i.e.
30.11.2009 and further that
Concessionaire was not entitled to seek
any deviation in the Concession
Agreement after acknowledgement of
LOA would conclusively manifest that
the contract had come into being at
least when LOA was issued by the
Respondent."
30. The above finding of the learned Arbitral Tribunal is based on
the interpretation of various terms of the RFP. I find no infirmity in
the above view taken by the learned Arbitral Tribunal. In terms of
Clause 3.3.6 of the Concession Agreement, the respondent was not
entitled to seek any deviation in the Concession Agreement after the
acknowledgement of the LOA. Admittedly, the mining activity in the
State of Haryana was banned vide order dated 21.04.2012 with effect
from 01.03.2010, that is, after the issuance of the LOA on 04.01.2010.
The same would, therefore, fall within the scope of „change in law‟.
31. On the question of the claim no.1 being barred by limitation, I
again find no merit in the objection raised by the petitioner. Clause
41.1 of the Concession Agreement is reproduced hereinunder:-
"41.1 Increase in costs
If as a result of Change in Law, the
Signature Not Verified Concessionaire suffers an increase in
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costs or reduction in net after tax return
or financial burden, the aggregate
financial effect of which exceeds the
higher of Rs. 1 crore (Rupees one crore)
and 0.5% (zero point five percent) of the
Realisable Fee in any Accounting Year,
the Concessionaire may so notify the
Authority and propose amendments to
this Agreement so as place the
Concessionaire in the same financial
position as it would have enjoyed had
there been no such Change in Law
resulting in the cost increase, reduction
in return or other financial burden as
aforesaid upon notice by the
Concessionaire, the Parties shall meet,
as soon as reasonably practicable but
no later than 30 (thirty) days from the
date of notice, and either agree on
amendments to this Agreement or on
any other mutually agreed arrangement:
Provided that if no agreement is
reached within 90 (ninety) days of the
aforesaid notice, the Concessionaire
may by notice require the Authority to
pay an amount that would place the
Concessionaire in the same financial
position that it would have enjoyed had
there been no such Change in Law, and
within 15 (fifteen) days of receipt of
such notice, along with particulars
thereof, the Authority shall pay the
amount specified therein; provided that
if the Authority shall dispute such claim
of the Concessionaire, the same shall be
settled, in accordance with the Dispute
Resolution Procedure. For the
avoidance of doubt, it is agreed that this
Clause 41.1 shall be restricted to
changes in law directly affecting the
Concessionaire's costs of performing its
obligations under this Agreement."
32. In the present case, the work commenced on 18.04.2011. The
claim was raised by the respondent with the petitioner on 13.05.2014.
Even in terms of the Clause 41.1, the claim for seeking amendment in
theVerified
Signature Not Concession Agreement due to increase in cost resulting from
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change of law would arise in favour of the respondent only on the end
of the Accounting Year. Therefore, the claim was raised within the
period of limitation by the respondent. The same was rejected by the
petitioner only on 25.05.2015, whereafter, the respondent invoked the
Arbitration Agreement on 11.02.2016. From the date of rejection of
the claim, the invocation was also within the period of limitation.
33. In the present case, as is noted hereinabove, the „dispute‟
between the parties can be said to arise only with the rejection of the
claim of the respondent by the petitioner vide its letter dated
25.05.2015. Delay in raising the claim by the respondent cannot be a
ground to hold the same to be not maintainable.
34. In Geo Miller (supra), the Supreme Court has held that the
period of limitation for commencement of arbitration runs from the
date on which, had there been no arbitration clause, the cause of action
would have accrued. The cause of action would also arise when
„dispute arises between the parties.‟ It has been held that the period
during which the parties were bona fide negotiating towards an
amicable settlement may be excluded for the purpose of computing
the period of limitation for reference to arbitration under the Act.
While mere failure to pay may not give rise to a cause of action, once
the applicant has asserted its claim and the respondent fails to respond
to such claim, such failure will be treated as a denial of applicant‟s
claim giving rise to a dispute and, therefore, the cause of action for
reference to arbitration.
35. In Bharat Sanchar Nigam Limited (supra), the Supreme Court
held that the period of limitation for issuing notice of arbitration
would not get extended by mere exchange of letters, or mere
settlement discussion, „where a final bill is rejected by making
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deduction or otherwise.‟ It was held that the notice invoking
arbitration must be received by the other party within a period of three
years from the rejection of the final bill, failing which the time bar
would prevail.
36. The above judgments, therefore, do not support the plea of the
petitioner that the claim of the respondent was barred by limitation.
37. The learned Arbitral Tribunal has also discussed the above issue
and has held as under:-
"21. In so far as second plea pertaining to the
claim being barred by time is concerned, the
same has no merit either. It may be recalled
that the bid was accepted on 4.1.2010 by
which the Claimants were informed that the
concession period is 25 years including
construction period of 910 days from the
Appointed Date. The construction of the
project would only start after the Concession
Agreement is signed by parties. The actual
work was to start even as per the case set up
by the Respondent in the written synopsis of
arguments on 18.4.2011. It is further the case
of the Respondent in synopsis that the
Claimant applied for Completion Certificate
for full length on 13.11.2013. Provisional
Certificate was issued by the Respondent on,
6.1.2014 which would only show that
substantial work had already been done. The
Claimants, however, state that the Provisional
Certificate should have been granted 3/4
months earlier. Complete computation of the
extra cost incurred by the Claimants could be
done only after the construction was complete.
The claim was raised on 13.4.2014 and the
same can by no stretch of imagination be
termed as barred by time or belated.
Further, for the claim to be barred by
time, the Respondent places reliance on
Article 41.1 which has already been
reproduced hereinabove. A bare reading of the
Article would show that there is no time limit
to notify the Authority of the proposed
amendments of the Agreement if as a result of
Signature Not Verified
Change of Law, Concessionaire has suffered
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an increase in costs and put to financial loss
etc. If no time may be prescribed to file
suit/application or claim, it could be said at
best that the claim is belated but if the present
case even this plea appears to be
impermissible."
38. I find no infirmity with the view expressed by the learned
Arbitral Tribunal and, consequentially, find no merit in the above
objection of the petitioner.
39. On the question of quantification of the claim, I would first
quote from the Impugned Award:-
"(i) Rates for carriage of material: The
carriage charges have been taken from
Haryana Schedule of Rates, Public Works
Department, Haryana 1988 with premium
applicable with effect from 31.10.2011 as per
22.11.2011. The relevant pages of the same
are annexed at page nos.705, 706 and 707 of
the SOC. CD -5. The Independent Engineer
has computed the rates based on the same for
the year 2011 and has adopted the same rates
for 2012-2013. The relevant page of the same
is at page no.104 of the SOC. CD-1.
The Claimant has also computed the rates as
per the said Schedule of Rates & Premium
applicable for the year 2011 and has adopted
the same rates for subsequent years without
any escalation thereon. The computation of
carriage charges by the Claimant is at Page
704 of the SOC and the said rates of 2011
have been used to compute the amount for
Claim No.1 which is at Page 686 of the SOC.
CD-5.
Even the Independent Engineer in its letter
dated 15.04.2013, Annexure C-18 annexed at
page no.101 of SOC. CD-1 has observed that
"the carriage charges by mechanical means
and loading & unloading of materials have
only been taken from Haryana Schedule of
Rate, Public Works Department, Haryana
1988 with premium applicable with effect from
31.10.2011 as per Haryana Public Works
Signature Not Verified
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Department (B&R) Memo No.7739-56 dated
31.10.2011",
Thus, the Claimant has used the minimum rate
for the entire period in the computation of the
Claim No.1.
(ii) Lead distance for transportation of raw
material:
For GSB: So as to rationalize the claim
amount, the Lead distance for transportation
of raw material, can be taken as 113 Km,
which is the average of 60 km, 90 Km and 190
Km, as mentioned in Table 8.5 at page 8-11 of
the Final Feasibility Report got prepared by
the Authority, which is also attached as page
61 of the Statement of Claims (CD-1):
For Aggregate: The Lead distance for
transportation of raw material should be taken
as 75 Km, which is the average of 60 km and
90 Km mentioned in Table 8.8 at page 8-13 of
the Final Feasibility Report got prepared by
Authority and attached with the Statement of
Claims (CD-1) at page 63.
For Sand: So as to rationalize the claim
amount, the compensation for Sand need not
be granted and thus, we are not inclined to
include the same in the awarded amount."
40. A reading of the above would show that the learned Arbitral
Tribunal has taken the rates from the Haryana Schedule of Rates,
Public Works Department. The Arbitral Tribunal has also placed
reliance on the report of the IE dated 15.04.2013 to conclude that the
respondent had transported stone/GSB from Rajasthan. The Arbitral
Tribunal has awarded the claim taking the lead distance as an average
of what was provided in the final Feasibility Report. The approach
adopted by the learned Arbitral Tribunal can in no manner be said to
be perverse so as to warrant interference from this Court.
Signature Not Verified
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41. As far as the submission of the learned senior counsel for the
petitioner that in terms of the Government Order dated 21.04.2012,
two small stone mines in District Mahendergarh were in operation and
that the respondent should have sourced the stone and aggregate from
the said mine rather than from Rajasthan, the same also cannot be
accepted as falling within the scope of the limited grounds available
with a party to challenge the Arbitral Award. As noted hereinabove,
the learned Arbitral Tribunal has placed reliance on the report of the
IE, which though was for the purpose of change in scope of work,
admitted to the respondent procuring the stone/GSB from Rajasthan.
42. In view of the above, challenge of the petitioner to the grant of
Claim No. 1 in favour of the respondent by the learned Arbitral
Tribunal, is rejected.
CLAIM NO. 2
43. As far as Claim no.2 is concerned, Article 14.3 of the
Concession Agreement is relevant to the same, and is reproduced
hereinbelow:-
"14.3 Provisional Certificate
14.3.1 The Independent Engineer may, at the
request of the Concessionaire, issue a
provisional certificate of completion
substantially in the form set forth in Schedule-
J (the, "Provisional Certificate") if the Tests
are successful and the Project Highway can be
safely and reliably placed in commercial
operation though certain works or things
forming part thereof are outstanding and not
yet complete. In such an event, the Provisional
Certificate shall have appended thereto a list
of outstanding items signed jointly by the
Independent Engineer and the Concessionaire
(the, "Punch List"); provided that the
Independent Engineer shall not withhold the
Provisional Certificate for reason of any work
Signature Not Verified remaining incomplete if the delay in
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completion thereof is attributable to the
Authority.
14.3.2 The parties hereto expressly agree that
a Provisional Certificate under this Clause
14.3 may, upon request of the Concessionaire
to this effect, be issued for operating part of
the Project Highway, if atleast 75% (seventy
five percent) of the total length of the Project
Highway has been completed. Upon issue of
such Provisional Certificate, the provisions of
Article 15 shall apply to such completed part."
(Emphasis supplied)
44. A reading of the above would show that though the PCC is to
be issued if atleast 75% of the total length of project highway has been
completed, it is also the condition of contract that the same would be
issued only where the project highway can be „safely and reliably
placed in commercial operation though certain works or things
forming part thereof are outstanding and not yet complete.‟
45. The learned Arbitral Tribunal has placed reliance on the letter
dated 18.09.2013 from the IE on the grant of PCC, and has held as
under:-
"...Then there is a mention of some
outstanding work but the same was not
towards the' safety of the road but was such
that, may be required to be done as per the
punch list.
xxxxx
37. What further emerges from the
observations and findings of the Independent
Engineer is that all tests had been successfully
carried out. The request of the Concessionaire
was examined for grant of Provisional
Certificate and 93.70% of the total work of the
project had been completed. It is specifically
mentioned by the Independent Engineer that
93.70% is more than 75% of the total project
length which is required to grant Provisional
Certificate.
38. We are not at all impressed with the
Signature Not Verified objections raised by the Respondent that some
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items were still left to be worked out by the
Claimants and therefore, the Provisional
Certificate was not issued when the
Independent Engineer made recommendations
for the same. None of the items said to be not
complete were such which may pertain to
reliability and safety. Further, it is specifically
provided that Provisional Certificate shall be
issued when 75% of the work has been done
even when some items may have been left out
and may be completed later. We are also of the
view that as per provisions contained in
Article 14.3.1 the Independent Engineer was
himself competent to issue Provisional
Certificate and it was the Independent
Engineer (and not NHAI) who was required to
finally satisfy itself with regard to the project
highway being capable of being safely and
reliably being opened to traffic for commercial
operations. Our observations made above get
support from the observations made in Soma
Isolux Kishangarh Beawar Tollway Pvt. Ltd.
{Supra} and NHAI's letter dated 05.05.2015
recognizing the effect of the aforesaid
judgment."
(Emphasis Supplied)
46. A reading of the above observations/findings of the learned
Arbitral Tribunal would show that the learned Arbitral Tribunal has
concluded that the said letter dated 18.09.2013 does not indicate any
work outstanding towards the safety of the road.
47. For appreciating the above findings, the letter dated 18.09.2013,
so far as it is relevant to the present petition, is reproduced
hereinbelow:-
"We have examined the request of the
Concessionaire for grant of Provisional
Completion Certificate from km. 0+000 to km.
75+765. Our recommendations are as under:-
As per clause no. 14.3.2 (Article 14), of
Concession Agreement "The Parties hereto
expressly agree that a Provisional Certificate
under this clause 14.3 may, upon request of
Signature Not Verified
the Concessionaire to this affect be issued for
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operating part of the Project Highway, if at
least 75% (seventy five per cent) of the total
length of the Project Highway has been
completed. Upon issue of such Provisional
Certificate, the provisions of Article
15(ENTRY INTO COMMERCIAL SERVICE)
shall apply to such completed part."
The Concessionaire has completed the project
highway in a length of 75.765 (km 04000 to
75+765) out of total project length of 80.858
which is 93.70% of total project length. The
completed 93.70% of the project highway is
more than 75% of the total project length.
xxxxx
All the tests as required under Article 14 of the
Concession Agreement to check the
compliance of the project highway to the
provisions of Schedule have been conducted in
the presence of the I.E.'s representatives and
Concessionaire's representative's. A list
showing the status of various tests is enclosed
as Annexure-I.
3 lists of outstanding works of the Project
Highway have been prepared after Joint
Inspection by the Independent Engineer and
Concessionaire on 16.08.2013, 17.08.2013
and 04.09.2013 which are as under:-
(i) Appendix-A1 & A2 cover the
Items of work which the
Concessionaire will complete
before issue of Provisional
Completion Certificate.
(ii) Appendix B- The Punch list
covers items which do not affect
the safe Operation of the Project
Highway and will be completed
by the Concessionaire within 90
days of the issuance of the
Provisional Completion
Certificate as per clause no.
14.4.1 (Article 14) Vol-I of
Concession Agreement.
(iii) Appendix-C covers Items of
works, which could not be
Signature Not Verified
undertaken due to Land
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Acquisition Issues and for
reasons attributed to NHAI.
The Concessionaire has confirmed vide their
letter no. SEL/RP/SITE/IC/1424 dt. 05.09.2013
that
(i) Items of Appendix-A1 & A2 will
be completed before issue of
Provisional Completion
Certificate.
(ii) Items of Punch List Appendix-B
will be completed within 90 days
of the issue of Provisional
Completion Certificate.
(iii) Items of Appendix-C will be
completed as and when land is
made available by NHAI.
xxxxx
The provision of the Article 14.3 permit the
Independent Engineer to Issue Provisional
Certificate at the request of Concessionaire if
the tests are successful as per Schedule „I‟ of
CA and the Project Highway can be safely and
reliably placed to commercial operation.
However, the Clause 12 of TOR of the
Independent Engineer Consultancy Agreement
with NHAI requires IE to take prior approval
of NHAI before the issuance of the Provisional
Certificate. The prior approval for issuance of
Provisional Certificate is being sought vide
this letter to enable the Concessionaire to
commence Commercial Operation at the
earliest.
The draft Provisional Certificate as per
Schedule „J‟ of Concession Agreement for the
completed part of the Project Highway is
attached herewith for your kind perusal
(Annexure-II).
Based on the above facts we are of the opinion
that Project Highway can be safely and
reliably placed in Commercial Operation."
(Emphasis supplied)
48. Appendix A-1 to the said letter is titled as under:-
Signature Not Verified
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"ITEMS REQUIRED TO BE COMPLETED
BEFORE ISSUE OF PROVISIONS
COMPLETION CERTIFICATE"
49. Similarly Appendix A-2 is titled as under:-
"Items required to be completed before issue
of Provisional Completion Certificate - As
per Safety Consultant."
50. Clearly, therefore, by the above letter the IE had opined that the
respondent shall have to complete the items of work mentioned in
Appendix A-1 and A-2 to the said letter. The work mentioned in
Appendix A-1 was to be completed by the respondent before issuance
of PCC. It was based on the undertaking given by the respondent that
these items will be completed before the issuance of the PCC, that the
IE submitted the draft Provisional Certificate for the approval of the
petitioner. The reliance of the learned Arbitral Tribunal on the said
letter to conclude that no issue of safety was raised by the IE or that
the said letter amounts to an unconditional opinion of the IE to the
grant of Provisional Certificate to the respondent is, therefore,
completely perverse and unfounded and against the bare reading of the
letter itself. The opinion of the IE that the "Project Highway can be
safely and reliably placed in Commercial Operation" was based on the
undertaking of the respondent that it shall complete the work
mentioned in Appendix A-1 to the letter before grant of PCC. It was
therefore, conditional in nature and could not operate unless the
respondent completes the work mentioned in Appendix A-1 to the
letter to the satisfaction of the IE. The learned Arbitral Tribunal has,
however, taken the said letter as an unconditional opinion of the IE
that the PCC can be granted to the respondent. This finding, therefore,
cannot be sustained.
Signature Not Verified
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51. In fact, the learned senior counsel for the petitioner has also
drawn my reference to the subsequent letter dated 25.10.2013 of the
„Team Leader‟, which in turn records the Compliance Report of Pre-
COD Safety Audit Report, and which in turn lists out certain items for
which the IE has reported the work to be still in progress. The learned
Arbitral Tribunal has ignored the said letter altogether. The said letter
shows that even as on 25.10.2013 certain work to make the Project
Highway safely and reliably to be put in Commercial Operation were
pending at the end of the respondent.
52. The learned Arbitral Tribunal while awarding Claim no.2 has
taken 15 days from the date of the above letter as the start point for the
loss of revenue awarded to the respondent. In view of my observation
hereinabove, the start point for award of the claim to the respondent is
therefore, contrary to the evidence on record and cannot be upheld.
53. The learned counsel for the respondent, faced with the above,
submitted that as Clause 14.3.2 provides that the PCC can be granted
on completion of 75% of the Project Highway, whereas the
respondent had sought the same on completion of 93.7% of the Project
Highway, the work that was still remaining could not come in the way
of grant of PCC to the respondent.
54. In my opinion, however, as the learned Arbitral Tribunal has
not considered the above submission nor has rendered its findings
based thereon; the same being a factual issue, it is not for this Court to
adjudicate thereon and to hazard a guess thereon while exercising its
jurisdiction under Section 34 of the Act. This plea was to be
considered by the learned Arbitral Tribunal at the first instance and
cannot be considered by this Court in absence thereof.
Signature Not Verified
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55. In view of the above, the Impugned Award on Claim no.2, even
applying even the limited jurisdiction that this Court possesses under
Section 34 of the Act, cannot be sustained.
RELIEF:
56. In view of the above, the challenge of the petitioner to the
impugned Arbitral Award on Claim no.1 is rejected. The Impugned
Award, so far as it grants Claim no.2 in favour of the respondent, is,
however, set aside.
57. The petition is disposed of in the above terms.
58. There shall be no order as to costs.
NAVIN CHAWLA, J.
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