Rajasthan High Court - Jaipur
State Of Rajasthan vs M/S R.C.C.L. Infrastructure Ltd on 25 November, 2022
Bench: Pankaj Bhandari, Chandra Kumar Songara
HIGH COURT OF JUDICATURE FOR RAJASTHAN
BENCH AT JAIPUR
D.B. Civil Miscellaneous Appeal No. 2056/2020
State Of Rajasthan, Through Chief Engineer And Additional
Secretary, Public Works Department, Through Superintending
Engineer, PWD, Circle- Jhunjhunu, Rajasthan.
----Appellant
Versus
M/s R.C.C.L. Infrastructure Ltd., Having Its Registered Office At
C-74, Ambabadi, Jaipur, Through Sh. Sunil Chaudhary.
----Respondent
For Appellant(s) : Mr. Prakhar Gupta with
Ms. Charvi Patni
For Respondent(s) : Ms. Sukriti Kasliwal with
Ms. Priyanka Tiwari
HON'BLE MR. JUSTICE PANKAJ BHANDARI
HON'BLE MR. JUSTICE CHANDRA KUMAR SONGARA
Judgment
RESERVED ON :: 11/10/2022
PRONOUNCED ON :: 25/11/2022
(Per: Pankaj Bhandari, J.)
1. The appellant - State has preferred this Civil Miscellaneous
Appeal under Section 37 of the Arbitration & Conciliation Act, 1996
(hereinafter referred to as "the Arbitration Act") aggrieved by the
order dated 23.01.2020 passed by the Judge, Commercial Court
No.1, Jaipur whereby objections filed by the appellant under
Section 34 of the Arbitration Act were rejected and against the
award dated 18.03.2018 passed by the Sole Arbitrator, Justice
Shiv Kumar Sharma (Retired).
2. Succinctly stated the facts of the case are that the appellant
issued a notice inviting tender on 08.04.2002 for widening and
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strengthening of Sikar-Jhunjhunu-Loharu Road. A corrigendum
was issued on 18.05.2002. The respondent submitted its bid on
27.06.2002 for Rs.46,19,88,000/- with an Internal Rate of Return
(IRR) of 37.98%. The total concession period specified by the
respondent was 103 months and 15 days, including 24 months
required for construction of the Project. The bid of the respondent
was lowest and was approved by the Empowered Committee on
05.12.2002 and a letter of acceptance was issued on 16.12.2002.
In pursuance thereof, a Concession Agreement was entered into
on 14.02.2003 between the appellant and the respondent.
Thereafter, a Lease Agreement dated 08.07.2003 was also entered
into between the parties.
3. Due to objections from different quarters, work could not be
completed and the period was extended by 49 days vide order
dated 12.03.2004, which was approved by the Empowered Board
on 11.05.2004. After completion of the work, the toll tax collection
started on Toll Booth Nos.1 & 2 on 21.07.2004. Out of initial 6 toll
collecting booths, due to agitation, the same were reduced to 4
vide order dated 24.02.2005. Since the toll collection booths were
reduced, the period of toll collection was extended. The
Empowered Committee extended the time till 23.12.2017,
however, a Public Interest Litigation (hereinafter referred to as
"the PIL") was filed before the Rajasthan High Court, which was
ultimately disposed of and time was extended till 19.09.2016 by
the authorities instead of 23.12.2017.
4. It is contended by the counsel appearing for the appellant -
State that the learned Arbitrator has completely overlooked the
provisions of the Contract entered into between the parties and
has erred in awarding Rs.24,38,00,000/- for major repairs and
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interest thereupon @ 11.75% from 10.03.2011 till actual
realization. It is also contended that in the PIL filed before the
Rajasthan High Court, Jaipur Bench, the Division Bench of this
Court has held that the claimant is not entitled to any extension
beyond 19.09.2016. The major repair work for which the claimant
is claiming amount was completed in November, 2012 and the
claim thereof was made in the year 2016 i.e. after the expiry of
period of limitation. It is argued that from the award itself, it is
evident that the learned Arbitrator has awarded Rs.24,38,00,000/-
for major repairs and interest @ 11.75% on major repairs w.e.f
10.03.2011 till actual realization, which goes to show that the
repairs were completed on 10.03.2011 and the claim made in the
year 2016 is barred by limitation. It is further contended by the
counsel for the appellant that as per the terms of the Contract, the
claimant was entitled to claim only 15% as interest on the sum
invested and 15% profit. The claimant has received a sum of
Rs.167 Crores including the deposit in the Bank Account pursuant
to the directions of the High Court.
5. It is contended that the authorities have rightly reduced the
period of the tender from 23.12.2017 to 19.09.2016 and there
was no justification whatsoever for the Arbitrator to award
compensation for 461 days i.e. Rs.29,88,83,720/-. It is also
contended that no directions were given to the claimant to re-
carpet the roads. The only direction was to repair the roads in
accordance with the Guidelines issued by the authorities. It is
further contended that the amount lying deposited in SBBJ Bank
Account i.e. Rs.37,38,81,340/- was deposited in pursuance to the
directions of the Court issued in the PIL and the learned Arbitrator
has erred in awarding interest on such deposits @ 8% per annum.
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It is further contended that the claimant is not entitled to any
amount over and above 15% for interest and 15% for profit. The
claimant has already received a sum of Rs.130 Crores whereas,
the total amount spent by him was Rs.24,38,00,000/-.
6. It is contended by the counsel appearing for the appellant -
State that an executive order was passed by the authorities
reducing the toll collection period from 23.12.2017 to 19.09.2016
and the learned Arbitrator had no authority under the law to set
aside the executive order passed by the State. My attention is
drawn to the award wherein the learned Arbitrator has quashed
and set aside the order dated 18.04.2015 passed by the
authorities being violative of Article 14 of the Constitution of India.
It is also contended that the learned Arbitrator had no authority
under the Contract or under the law to set aside an executive
order passed by the Government. Learned Arbitrator has thus
exceeded its jurisdiction in quashing and setting aside the order
dated 18.04.2015.
7. It is contended by the counsel for the appellant that claim
with regard to re-carpeting is hopelessly barred by limitation. As
per the pleadings, the carpeting was done in the year 2011. The
letter for keeping the roads in proper condition was issued by the
department on 29.03.2011. The application for referring the
matter to the learned Arbitrator was given on 08.03.2017. As per
Entry 18 of the Limitation Act, for price of work done, the
limitation prescribed is 3 years. Since the work was completed in
the year 2011, any claim with regard to re-carpeting, if any, could
have been made by 2014 itself, and in the year 2017. It is
contended that the question of limitation in the present case is not
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a mixed question of law and fact and it is a clear question of law
and can be raised at any stage.
8. It is next contended by the counsel for the appellant that the
learned Arbitrator has clearly disregarded the orders passed by
the Superior Court. There was a clear order in the PIL that no
claim would be given and no extra time for collection of the toll
would be given beyond September, 2016. Still, the learned
Arbitrator has given claim till December, 2017. Counsel for the
appellant in this regard has placed reliance on Associate Builders
Versus Delhi Development Authority: (2015) 3 SCC 49. It is next
contended by the counsel that as per Schedule-H, major
maintenance was also included. It is next contended that the
Clause has wrongly been applied in ignorance of Clause 4.2 of the
Contract, thus there is a breach of public policy.
9. Counsel for state has relied on Delhi Development Authority
Versus R.S. Sharma & Co.: (2008) 13 SCC 80, State of
Rajasthan & Anr. Versus Ferro Concrete Construction Pvt. Ltd.:
(2009) 12 SCC 1, Oil And Natural Gas Corporation Versus Wig
Brothers Builders & Engineers Pvt. Ltd.: (2010) 13 SCC 377,
Associated Engineering Co. Versus Government of Andhra Pradesh
& Anr.: (1991) 4 SCC 93, Chennai Container Terminal Pvt. Ltd.
Versus Union of India & Ors.: 2007 SCC OnLine Mad 253,
Chennai Container Terminal Pvt. Ltd. Versus Union of India & Ors.:
2007 (3) LW 700, Manoj Kumar Goswami Versus P.V. Sanghavi
& Ors.: 2007 SCC OnLine Bom 321, S.N. Prasad, Hitek
Industries (Bihar) Ltd. Versus Monnet Finance Ltd. & Ors.: (2011)
1 SCC 320, K.K. Modi Investment & Financial Services Ltd.
Versus Apollo International Inc. & Ors.: 2009 SCC OnLine Del
1595, K.P. Poulose Versus State of Kerala & Anr.: (1975) 2 SCC
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236, Union of India Versus V. Punarikakshudu And Sons & Anr.:
(2003) 8 Scc 168, Gannmani Anasuya & Ors. Versus Parvatini
Amarendra Choudhary & Ors.: (2007) 10 SCC 296, V.M.
Salgaocar & Bros. Versus Board of Trustees of Port of Mormugao
& Anr.: (2005) 4 SCC 613, The Management of State Bank of
Hyderabad Versus Vasudev Anant Bhide Etc.: (1969) 2 SCC 491,
Technofab Engg. Ltd. Versus Bharat Petroleum: 1998 (47) DRJ,
Prabhu Steel Industries Ltd. Versus Union of India & Anr.: 2005
SCC OnLine Del 401, R.P. Krishna Murthy Versus R.P.
Venkatachalam & Ors.: MFS No.9285/2015 (AA), Mir Ghulam
Hussain Versus State: 2005 SCC OnLine J&K 48, Amarpal Singh
Versus The Executive Engineer, Public Health (RWS) Division,
Muktsar: Civil Revision No.183 of 2010 and Harish Mansukhani
Versus Ashok Jain: RFA No.4/2008.
10. Learned counsel appearing for the respondent has
vehemently opposed the appeal. It is contended that as per
Section 37 of the Arbitration Act, the Court has a very limited
jurisdiction. It is only required to see whether the Court has erred
in rejecting the application under Section 34 of the Arbitration Act
and cannot go beyond the scope of Section 34 of the Arbitration
Act. Counsel for the respondent has also contended that the total
period of collecting the toll was 79 months and 15 days. Due to
some agitation, the number of tolls were reduced from 6 to 4,
thus, the appellant in these circumstances when the collection was
reduced because of reduction of tolls, has increased the period of
collection of toll and a repayment schedule was issued by the
appellant. It is further contended that during the period of toll
collection, a letter was issued by the appellant for re-carpeting on
24.03.2011 and a letter was also issued on 29.03.2011
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threatening the claimant of dire consequences, if the roads were
not re-carpeted.
11. It is contended that the appellant himself has permitted the
claimant to collect the toll till 23.12.2017 and the Empowered
Committee has wrongly reduced the period, thus the respondent
is entitled for compensation. It is also contended that in the PIL,
the Hon'ble High Court had granted stay on the collection of toll
for 49 days and the learned Arbitrator has justly awarded
compensation for non-collection of toll for 49 days. With regard to
the objection in regard to the limitation, it is contended that no
objection with regard to limitation was raised before the learned
Arbitrator or before the Commercial Court and such objection
cannot be raised at the belated stage.
12. It is contended that the dispute was alive and the toll was
being collected, hence, the claim of re-carpeting cannot be said to
be barred by limitation. It is also contended that the question of
limitation is a mixed question of law and fact and at this stage
cannot be raised by the appellant. It is further contended that the
learned Arbitrator has rightly awarded a sum of around Rs.24
Crores for re-carpeting. The respondent had taken a loan of Rs.30
Crores for re-carpeting the road and since the re-carpeting was
not included in the terms of the Contract and as per the IRC
Guidelines, re-carpeting has to be done every 7 years, the cost of
the re-carpeting is to be borne by the respondent and the award
of the learned Arbitrator is wholly justified on this count.
13. With regard to the re-carpeting cost being more than 10%, it
is contended that the appellant had threatened the respondent of
dire consequences and of terminating the Contract and therefore,
the respondent was under immense pressure and had to re-carpet
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the roads by taking a loan of Rs.30 Crores. It is also contended
that the learned Arbitrator has not exceeded its jurisdiction and
has not gone beyond the terms of the Contract for the very reason
that the arbitration clause empowers the learned Arbitrator to
resolve all the disputes. In the PIL though there was a direction
not to extend the period of collection of toll, but the loss that has
occurred to the respondent because of non-collection of toll could
very well be awarded by the learned Arbitrator and the same
cannot be said to be against the public policy. It is further
contended that in the order vide which the learned Arbitrator was
appointed, there is no such condition that the learned Arbitrator
cannot award compensation for the period in which the
respondent could not collect toll tax.
14. Counsel for Respondent has relied upon MMTC Versus Vedanta
Limited: AIR 2019 SC 1168, Mahanagar Telephone Nigam
Limited Versus Fujitshu India Private Limited: 2015 (2) Arb. LR
332 (Delhi) (DB), Ssangyong Engineering and Construction
Company Limited Versus National Highways Authority of India
(NHAI): (2019) 15 SCC 131, Associate Builders Versus Deli
Development Authority: (2015) 3 SCC 49, Thyssen Krupp
Werkstoffe GMBH Versus Steel Authority of India: 2011 (2) Arb.
LR 148 (Delhi) (DB), Steel Authority of India Limited Versus
Gupta Brother Steel Tubes Ltd.: (2009) 10 SCC 63, Continental
Construction Limited Versus Food Corporation of India & Ors.: AIR
2003 Delhi 32, Asiatic Shipping Co. (Private) Ltd. Versus P.N.
Djakarta Lloyd & Anr.: AIR 1969 Calcutta 374, National
Highways Authority of India Versus ITD Cementation India
Limited: (2015) 14 SCC 21, State of Goa Versus Praveen
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Enterprises: (2012) 12 SCC 581, Soma Isolux NH One Tollway
Private Limited Versus Harish Kumar Puri & Ors.: (2014) 6 SCC
75, Sion Panvel Tollways Pvt. Ltd. & Ors. Versus The State of
Maharashtra & Ors.: MANU/MH/2377/2015, M.
Venkataramana Hebbar (Dead) by LRs Versus M. Rajagopal
Hebbar & Ors.: (2007) 6 SCC 401, Purushotham Haridas & Ors.
Versus M/s. Amruth Ghee Co. Ltd.: AIR 1961 Andhra Pradesh
143 and Gujarat Electricity Board Versus S.A. Jais & Co. & Ors.:
AIR 1972 Gujarat 192
15. We have considered the contentions and perused the
Concession Agreement. The relevant Articles of the said
Agreement are reproduced herein below :-
"Article 8.4- Operation and Maintenance
The Concessionaire shall operate and maintain the
Project / Project Facility by itself, or through a Contractor and
if required, modify, repair or otherwise make improvements
to the Project / Project Facility to comply with Specification
and Standards, and other requirements set forth in this
Agreement, Good industry Practice, Applicable Laws and
Applicable guidelines / specifications and manufacturer's
guidelines and instructions with respect to Toll Plaza. More
specifically, the Concessionaire shall be responsible for:
.......................
(iv) undertaking routine maintenance including prompt repairs of potholes, cracks. Concrete joints, drains, line marking lighting and signage:
Article 10- Change of scope 10.1 Change of Scope -
GOR may, notwithstanding anything to the contrary contained in this Agreement, require provision of such addition / deletion to the works and services on or about the Project which are beyond the scope of the Project as contemplated by this Agreement ("Change of Scopa"). Provided such changes do not require expenditure exceeding / reducing by 10% of project cost and do not adversely affect the Scheduled Project Completion Date. All such changes shall be made by GOR by an order (the (Downloaded on 25/12/2022 at 02:58:41 PM) (10 of 21) [CMA-2056/2020] "Change of Scope order") Issued in accordance with the procedure set forth in Article 10.2.
10.2 Procedure for Change of Scope
(a) GOR shall whenever it desires provision of addition/deletion of works and services referred to in Article 10.1 above, issue to the Concessionaire a notice of Change of Scope (the "Change of Scope Notice") through the PWD Engineer.
(b) Upon receipt of Change of Scope Notice, the Concessionaire shall, withing a period of 15 (fifteen) days, provide to the PWD Engineer such information as is necessary and reasonable together with preliminary documentation in support of the following:
(i) the impact which the Change of Scope is likely to have on the Project Completion Schedule if the work is required to be carried out before COD.
(ii) the cost to the concessionaire of complying with such Change of Scope Notice on account of increases in quantities of items of work mentioned in the Bill of Quantities at the rate mentioned therein. In cases the Bill of Quantities does not carry certain items of work required under the Change of Scope, the Concessionaire shall provide the analysis of rates for carrying out such items of work.
(c) PWD Engineer shall review the information provided by the Concessionaire. Assess the change in Quantities of items of work, verify the analysis of rates if required, determine the additional cost to the Concessionaire as a result of such Change of Scope, and determine the extension/reduction, if any, to the Concession period provided that there will be no change in concession period provided that there will be no change in concession period if the change in the project cost is upto2%.
Provided that where the change in project cost is beyond 2%, then the proposed extension/reduction to the concession period would taken into account the total change in the project cost (including 2% above).
(d) GOR shall issue the Change of Scope Order within a period of 15 (fifteen) days from the date of recommendation made by the PWD Engineer in accordance with preceding sub-article (c) above.
(e) The Change of Scope Order shall be effective and binding upon receipt thereof by the Concessionaire. Notwithstanding a Dispute regarding cost and time for implementation of such order, the Concessionaire shall (Downloaded on 25/12/2022 at 02:58:41 PM) (11 of 21) [CMA-2056/2020] proceed with the performance of such order promptly following receipt thereof. Any Dispute regarding the extension in the Concession Period recommended by the PWD Engineer shall be resoled in accordance with the Dispute Resolution Procedure."
16. At the very outset, it is observed that as per Clause 8.4 of Concession Agreement dated 14.02.2003 executed by the Concessionaire, the Concessionaire shall, if required, modify, repair or otherwise make improvements to the project/project facility set forth in the Agreement to ensure smooth and uninterrupted traffic flow on the road. The road was designed for fifteen years life under BOT Scheme and the work was completed in the year 2004. However, it is noted that letters were issued by SE, PWD Circle, Jhunjhunu, dated 22.02.2010 & 24.03.2011, in compliance of inspection done by Secretary, PWD wherein it was found that the road was not properly maintained and it reached to such a state that renewal/major repair became necessary.
17. The claimant raised a claim of Rs.24,38,00,000/- on re- carpeting of road, however, this expenditure has not been substantiated by any document on record. We have perused the statement of profit and loss for the year ended 31 st March, 2013. Under the head of 'expenditure', for the maintenance of BOT road for the year ending 31st March, 2012, the amount shown is Rs.34,879,968/- and that of year ending 31st March, 2013, is Rs.65,907,008/-. The Substitution Agreement dated 08.09.2011 as well as the audited balance sheets of RCCL do not show expenditure of Rs.24,38,00,000/- incurred on re-carpeting of the roads, as claimed by the claimant. Merely because a loan of (Downloaded on 25/12/2022 at 02:58:41 PM) (12 of 21) [CMA-2056/2020] Rs.30 Crores was taken by the respondent, it cannot be treated as evidence of the actual expenditure incurred on re-carpeting.
18. Moreover, according to Article 10.1 of Concession Agreement, Government of Rajasthan may require provision of such addition/ deletion to the works and services on or about the project which are beyond the scope of the project, provided such changes do not require expenditure exceeding/reducing by 10% of project cost. The claim of Respondent goes to the extent of 55% of the project cost. The Sole Arbitrator has erred in awarding the said claim of the claimant - company by going beyond the four corners of the Agreement entered into between the parties. In view of Article 10.1 of Concession Agreement, changes which required expenditure of more than 10% of the project cost could not have been made. Also, the Agreement lays down a detailed procedure for addition/deletion of works and services referred to in Article 10.1 whereby the Concessionaire shall be issued a notice of change of scope through the PWD Engineer and such procedure as given in Article 10.2 of the Concession Agreement was not followed.
19. We find merit in the contention of the Counsel for non- claimant that the Sole Arbitrator was wrong in treating the range of 2% of the project cost prescribed as maintenance charges in the tender document as sacrosanct. The range so provided was only indicative in nature, having direct correlation with the quality of construction carried out. The maintenance charges of 2% of the project cost were prescribed assuming a design life of 15 years, but when the construction of the respondent was so poor that road could not withstand the wear and tear of 5 years, the respondent (Downloaded on 25/12/2022 at 02:58:41 PM) (13 of 21) [CMA-2056/2020] should not have been allowed by the Sole Arbitrator to take refuge under above-mentioned maintenance charges in order to avoid its operations and maintenance obligations. Also, we are of the opinion that in any case, expenditure beyond 10% of the project cost could not have been incurred by the claimant on its own accord, as the Agreement does not envisage the same. The claim of the claimant is not substantiated by documents, even if it was, we are of the opinion that such expenditure, if done, was done unilaterally, with the intent of saddling the State with huge costs and depriving the State of opportunity to issue fresh tender for the renewal work.
20. Further, we have perused the affidavit in evidence on behalf of claimant given before sole arbitrator. Para 39 of the said affidavit pertains to statement made by the claimant that expenditure of Rs.24,38,00,000/- was incurred on re-carpeting of the entire stretch of the Sikar-Jhunjhunu-Loharu road. The said affidavit cannot be relied upon in view of the fact that Exhibit 35 & 36 mentioned in Para 39 were not exhibited. Thus, the affidavit itself is incomplete as the documents mentioned as exhibits therein are not exhibited.
21. In the case of State of Rajasthan Versus Ferro Concrete Construction Pvt. Ltd.: 2009 (12) SCC 1, it was observed by the Apex Court in Para 55, which reads as under -
"While the quantum of evidence required to accept a claim, may be a matter within the exclusive jurisdiction of the arbitrator to decide, if there was no evidence at all and if the arbitrator makes an award of the amount claimed in the claim statement, merely on the basis of the claim statement without anything more, it has to be held that the award on that account would be invalid. Suffice it to say that the entire award under this (Downloaded on 25/12/2022 at 02:58:41 PM) (14 of 21) [CMA-2056/2020] head is wholly illegal and beyond the jurisdiction of the arbitrator, and wholly unsustainable."
22. Moreover, in the award passed by the Sole Arbitrator dated 18.03.2018 in Para 123 the arbitrator has decided issue No. 10 i.e whether claimant was liable to carry out major repairs under the Concession Agreement dated 14.02.2003? And if not, then whether claimant is entitled to get adequately compensated for the additional work of re-carpeting the entire Sikar- Jhunjhunu-Loharu road done by it, in favour of the claimant and held that "the claimant is entitled either to claim extension to equivalent period incorporating IRR 37.98% or to the actual cost incurred by it i.e Rs.24,38,00,000/- along with interest @ 11.75% w.e.f 10.03.2011 (date of sanction of loan) till actual realisation." In Para 135, the Arbitrator has allowed the claim petition and directed that the claimant is entitled to recover from the respondent as compensation and costs as under:-
"................
VI. Compensation for major repairs -
Rs.24,38,00,000/-
VII. Interest @ 11.75% on major repairs with effect from 10/03/2011 till actual realisation."
23. There is no document on record pertaining to date of sanction of loan and it is unclear on what basis the interest @ 11.75% has been awarded w.e.f. 10.03.2011 which as per Arbitrator is the date of sanction of loan. It is an admitted fact that a letter dated 29.03.2011 by Superintending Engineer, PWD Circle, Jhunjhunu was sent to the respondent as a last warning to undertake its operation and maintenance obligations under the Concession Agreement on time. It was only after this letter that the respondent availed the (Downloaded on 25/12/2022 at 02:58:41 PM) (15 of 21) [CMA-2056/2020] loan facility from Indusland Bank to carry out the renewal work and entered into a Substitution Agreement dated 08.09.2011 in pursuance thereof. In view of the above circumstances, there is a prima facie contradiction in the award with regard to date of sanction of loan. It is unclear as to how the date of sanction of loan can be 10.03.2011 when it is an admitted position that the loan was availed only after 29.03.2011.
24. The respondent had submitted a bid for Rs.4619.88 Lakhs which was later revised to Rs.4776.21 Lakhs. In addition to this, the respondent claimed to have incurred Rs.195.50 Lakhs on construction of drainage on road No.3 at Jhunjhunu and Rs.2438.00 Lakhs on renewal work. This amounts to a total of Rs.7409.71 Lakhs, including a profit element of 15%, as provisioned in the Concession Agreement for the respondent. We have perused the certificate issued by the Chartered Accountant pertaining to toll collection from 22.07.2004 to 19.09.2016 which is Rs.1,29,67,12,596/- out of which a sum of Rs.37,38,81,340/- has been deposited in separate bank account with SBBJ, Jaipur. The Sole Arbitrator has erred in not considering the total amount in lieu of toll collection till 19.09.2016, which is exceeding the total of Rs.7490.71 Lacks mentioned hereinabove, that the claimant - company could have claimed.
25. The total amount awarded by the Sole arbitrator was to the tune of approximately Rs.98 crores excluding the interest @11.75% for 49 days w.e.f 19.09.2015 till actual realisation and interest @11.75% on major repairs w.e.f 10.03.2011 till actual realisation. In view of the fact that the total toll collected upto (Downloaded on 25/12/2022 at 02:58:41 PM) (16 of 21) [CMA-2056/2020] 19.09.2016 was to the tune of 129 Crores which was in excess of the investments made by the claimant as well as the profit of 15% which the claimant could have made according to the Agreement between the parties. The Sole Arbitrator has thus committed error in awarding the amount far exceeding the scope of the Agreement entered into between the parties.
26. It is noted that BOT Agreement for construction of road was entered on 14.02.2003., with completion of construction work in two years and collection of tolls upto 2011. The Empowered Board vide its order dated 26.12.2005 extended the period of Concession Agreement upto 23.12.2017. The said order of Empowered Board was challenged in 2013 by way of PIL (D.B PIL No.1250/2013) before this Court wherein the Court directed the Empowered Board to review its earlier decision dated 26.12.2005 in light of Article 10 of the Concession Agreement and submit its report within a period of six weeks.
27. The Claimant-company challenged the said order by filing SLP before Hon'ble Apex Court bearing appeal no. 28131/2014 wherein Apex Court vide its order dated 3.11.2014 dismissed the said appeal and granted liberty to the claimant company to challenge the decision of the Empowered Board in case it is against it.
28. In meanwhile, the report of Empowered Board reviewing the extension of the concession period was submitted before this Court in D.B PIL No.1250/2013 and this Court vide its order dated 28.07.2015 held that the non-claimants had no authority to (Downloaded on 25/12/2022 at 02:58:41 PM) (17 of 21) [CMA-2056/2020] extend the period of collection of tolls for six years and now (with ad-hoc reduction) by five years causing collection from general public far beyond the scope of the Agreement.
29. The claimant company immediately challenged the above order by filing SLP bearing no. 23116/2015 in the Apex Court wherein vide Order dated 11.09.2015, interim stay on the impugned judgment and order dated 28.07.2015 was granted.
30. The Apex Court vide its order dated 18.07.2016 disposed of the appeal and interim applications and observed as under:
"This appeal and the interim applications are accordingly disposed off making our order dated 11.09.2015 absolute till Sept., 2016. We make it clear that this order shall not be taken as an expression of any final opinion in regard to the merit of the case or the prayer for release of the amount which the appellant is fee to make before the High Court limited to the release of some part of the amount to enable the appellant to take care of his contractual obligation. The High Court shall make an endeavor to decide the proceedings pending before it as expeditiously as possible."
31. In our view, grant of compensation for sum of Rs.32,80,50,382/- for loss suffered by claimant on account of reduction of concession period was erroneous. The Agreement provided for change of scope only upto 10% on certain conditions. On the completion of construction, state was not authorised for change of scope of Agreement beyond 10%, unless a fresh Agreement was executed. It is unclear as why empowered committee extended the time of dates of collection of tolls by more than six year. It is apparent that the toll amount collected was much beyond the scope of the Agreement, cost of (Downloaded on 25/12/2022 at 02:58:41 PM) (18 of 21) [CMA-2056/2020] construction of road as well as additional construction. Even otherwise in view of the order of the Empowered Committee dated 06.09.2016 which was passed in pursuance of direction given by this Court vide its order dated 09.09.2014, under no circumstance could compensation be given for period beyond September 2016. The same finds support from the order of Apex Court dated 18.07.2016 wherein the Apex Court has held categorically that its order dated 11.09.2015 is absolute till September,2016. The Sole Arbitrator has committed grave error in not only granting compensation for period beyond September, 2016 but also quashing and setting aside order of Empowered Board dated 06.09.2016.
32. In the case of The Project Director, National Highways Authority of India Versus M. Hakeem & Anr.: 2021 SCC OnLine SC 473 wherein the Apex Court has held as under:
"It can therefore be said that this question has now been settled finally by at least 3 decisions of this Court. Even otherwise, to state that the judicial trend appears to favour an interpretation that would read into Section 34 a power to modify, revise or vary the award would be to ignore the previous law contained in the 1940 Act; as also to ignore the fact that the 1996 Act was enacted based on the UNCITRAL Model Law on International Commercial Arbitration, 1985 which, as has been pointed out in Redfern and Hunter on International Arbitration, makes it clear that, given the limited judicial interference on extremely limited grounds not dealing with the merits of an award, the 'limited remedy' under Section 34 is co-terminus with the 'limited right', namely, either to set aside an award or remand the matter under the circumstances mentioned in Section 34 of the Arbitration Act, 1996."(Downloaded on 25/12/2022 at 02:58:41 PM)
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33. It was also held in Ssangyong Engineering and Construction Company Limited: (2019) 15 SCC 131 and reproduced herein under:
"41. 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 (2A)."
34. In the case of Md. Army Welfare Housing Organization Versus Sumangal Services (P) Ltd: (2004) 9 SCC 619, it was held as under:
"43. An Arbitral Tribunal is not a court of law. Its orders are not judicial orders. Its functions are not judicial functions. It cannot exercise its power ex debito justitiae. The jurisdiction of the arbitrator being confined to the four corners of the agreement, he can only pass such an order which may be the subjectmatter of reference."
35. In Associate Builders v. DDA: (2015) 3 SCC 49, it has been held as under:
"31. The third juristic principle is that a decision which is perverse or so irrational that no reasonable person would have arrived at the same is important and requires some degree of explanation. It is settled law that where:
(i) a finding is based on no evidence, or
(ii) an Arbitral Tribunal takes into account something irrelevant to the decision which it arrives at; or
(iii) ignores vital evidence in arriving at its decision, such decision would necessarily be perverse." (Downloaded on 25/12/2022 at 02:58:41 PM)
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36. Relying on the above judgments it can be concluded that arbitrators cannot rewrite the terms of parties' contract. The arbitrator's jurisdiction is confined to the four corners of the Agreement. They can only pass an order on the subject matter of reference. It can also be concluded, that an award based on no evidence, or passed in ignorance of vital evidence, will be perverse and will be liable to be set aside on the ground of patent illegality under Section 34 of the Arbitration and Conciliation Act, 1996.
Thus, the Commercial Court has erred in not setting aside the arbitral award when prima facie the award was passed by going beyond the terms of the Concession Agreement. Further, the Sole arbitrator had allowed the claim of the claimant to the tune of Rs.24 Crores for re-carpeting without there being sufficient evidence on record and saddling the government of Rajasthan with exorbitant costs. Thus, the award was liable to be set aside on the ground of patent illegality as well as being in contravention to fundamental policy of Indian law and the Commercial Court has erred in not doing the same.
37. In view of the above and taking into consideration the facts that the expenditure of Rs.24,38,00,000/- incurred on re- carpeting of road by the claimant has not been substantiated by any document on record, there was no justification of spending beyond 10 % of the Project Cost and the Sole Arbitrator even after knowing that the change of scope of work was more than 10%, has clearly overlooked Article 10 of the Agreement. The affidavit in evidence on behalf of claimant is in itself incomplete and that total amount in lieu of toll collection till (Downloaded on 25/12/2022 at 02:58:41 PM) (21 of 21) [CMA-2056/2020] 19.09.2016 far exceeds the total of Rs.7409.71 Lacks that could have been collected as per the Agreement between the Parties, we deem it proper to allow the present appeal and the same is, accordingly allowed. The order dated 23.01.2020 passed by Commercial Court is set aside as well as the award dated 18.03.2018 passed by the Sole Arbitrator is quashed and set aside.
(CHANDRA KUMAR SONGARA),J (PANKAJ BHANDARI),J SUNIL SOLANKI /PS (Downloaded on 25/12/2022 at 02:58:41 PM) Powered by TCPDF (www.tcpdf.org)