Rajasthan High Court - Jaipur
State Of Rajasthan Through Chief ... vs M/S Madhav Infra Projects Limited, ... on 12 November, 2024
Bench: Pankaj Bhandari, Praveer Bhatnagar
[2024:RJ-JP:46624-DB]
HIGH COURT OF JUDICATURE FOR RAJASTHAN
BENCH AT JAIPUR
D.B. Civil Miscellaneous Appeal No.2026/2019
State Of Rajasthan Through Chief Engineer (Roads), Public
Works Department, Jacob Road, Civil Lines, Jaipur ---Appellant
Versus
M/s Madhav Infra Projects Limited, Having Its Registered Office
At 24, Laxmi Chambers, Navjivan Press Road, Near Old High
Court, Ahmadabad (Gujrat). ----Respondent
For Appellant(s) : Mr. Sandeep Taneja, AAG assisted by Mr. Kartikeya Sharma, Mr. Aditya Sharma, Ms. Kinjal Surana, Mr. Nishant Saraf For Respondent(s) : Mr. Ashok Mehta, Senior Advocate with Mr. Vivek Dangal, Mr. Hitesh Jatawat, Mr. Divakar Tehariya, Ms.Himangi Sharma, Ms. Ayushi Goyal HON'BLE MR. JUSTICE PANKAJ BHANDARI HON'BLE MR. JUSTICE PRAVEER BHATNAGAR Judgment Reserved on 24/10/2024 Pronounced on 12/11/2024 (Per Hon'ble Justice Praveer Bhatnagar):
1. The appellant has preferred the appeal against the order dated 11.03.2019 passed by the Commercial Court No.4, Jaipur, in which the Objection Application preferred by the State against the claimant was rejected and the award passed by the Tribunal dated 29.03.2013 was confirmed.
2. It is vehemently argued that the conclusion suffers from patent illegality as the Tribunal has transcended the Express Terms enumerated in the Bid Document and Contract, and no such obligation was cast upon the appellant to issue the Notifications above in any of the contractual documents. Learned counsel has (Downloaded on 23/11/2024 at 12:22:18 AM) [2024:RJ-JP:46624-DB] (2 of 12) [CMA-2026/2019] referred to the conditions elucidated in the Project Report Pre-Bid Meeting and Contract entered into. To bolster the arguments, it is furthermore contended that, on the contrary, the conditions enu- merated in the above-referred documents impose liability upon the claimant to assess its estimation of the traffic flow. The pre- bid meeting explained such aspects well before entering into the contractual liability. The Tribunal, despite the express terms, went beyond it.
3. The learned Counsel also argued that the law of limitation hopelessly bars the claim as the contract was executed in 2000, and the claim for damages was initiated by serving notice for the arbitration in 2009. The legal point can be raised at any time, and even the court can ask Suo Moto to examine whether the claim is barred by limitation.
4. The appellant also contended that despite the knowledge that the claimant has suffered losses and condition number 6 of the agreement dated 19.08.1998 pertinently stipulates that the contract may be extended for a year, the claimant did not endeav- our to seek an extension and handed possession of the project to the appellant, this amounts to a waiver of the claim.
5. Learned counsel for the appellant fervently points out that apart from the above, the computation of damages claimed is patently illegal, and the claimant has belied the project cost.
6. Learned counsel for the claimant justifies the findings arrived at by the Tribunal. It is argued that the letters issued by the appellant to the notifying authority substantiates that the said issuance of the Notifications for diverting the vehicular traffic flowing from the Khurd and Salawas to Sikar was imperative for (Downloaded on 23/11/2024 at 12:22:18 AM) [2024:RJ-JP:46624-DB] (3 of 12) [CMA-2026/2019] the claimant. The necessity clause of the project report mentions explicitly that to avoid the traffic flow towards Sikar, it is essential to build a bye-pass. The learned counsel has drawn our attention to section 9 of the Contract Act, which stipulates that insofar as the proposal or acceptance of any promise is made in words, the promise is said to be expressed. Insofar as such proposal or acceptance is made otherwise than in words, the promise is said to be implied. A similar Notification was issued for the traffic flowing to and fro towards Jaipur-Bikaner. The appellant issued the notification in the claimant's instance. Learned counsel has drawn our attention towards the estimation report annexed to the claim.
7. The claimant's learned counsel argued that the claim for damages was within the Limitation as per Section 21 and Article 55 of the Limitation Act. Before the expiry of the contractual period, the claimant couldn't assess the total damages or claim damages at regular intervals in continuity with the contract. The tribunal has dealt with the said issue elaborately, and that cannot questioned in an appeal filed appeal under section 37 of the Act.
8. The learned counsel contended that striving for an extension for a further period is also misconceived, as the claimant suffered a considerable loss and was not assured of recovering the project cost as prescribed in the extension clause. Likewise, the extension clause was not unilateral and can be expanded subject to the appellant's affirmation.
9. The methodology of computing the award amount cannot be questioned, and that cannot be grounds to unsettle the claim as settled by the Apex Court in the matter of Associate builder. The appeal lacks merit and deserves dismissal. (Downloaded on 23/11/2024 at 12:22:18 AM) [2024:RJ-JP:46624-DB] (4 of 12) [CMA-2026/2019]
10. The counsel for the claimant relies upon the Judgment passed in MSK Projects (India) (JV) Ltd. V/s State of Rajasthan & Anr. (2011) 10 SCC 573.
11. Heard and perused the record.
12. Before delving into the various issues raised through the appeal, it is appropriate to refer to the settled legal position asserted time and again by the Apex Court regarding interference with the Arbitral Award under the appellate jurisdiction vested to the High Court under Section 37 of the Arbitration Act. The law so far declared is summarised as follows:-
"a. The Court does not sit in appeal over the Arbi- tral award. It may interfere with merits on the lim- ited grounds provided under Section 34 (2)(b)(ii) of the Act, i.e., if the award is against India's Public policy.
b. The grounds for challenging an arbitral award are restricted to instances of contravention of sub- stative Indian law, violations of the Act, or breaches of contract terms, emphasizing the con- cept of "patent illegality".
c. The powers of the appellate courts under Section 37 are even more constrained.
d. A possible view by the arbitrator on facts has necessarily to pass muster as the Arbitrator is the sole judge of the quantity and quality of the evi- dence.
e. Insufficiency of evidence cannot be grounds for interference by the Court. Re-examining the facts to determine whether a different decision can be arrived at is impermissible under section 34(2) of the Act.
f. An award can be set aside only if it shocks the court's conscience.
(Downloaded on 23/11/2024 at 12:22:18 AM) [2024:RJ-JP:46624-DB] (5 of 12) [CMA-2026/2019] g. Illegality must go to the root of the matter and cannot be trivial for a Court to interfere with. The court cannot interfere with the arbitrator's reason- able construction of the contract terms. The error of construction is within the arbitrator's jurisdiction. Hence, no interference is warranted.
h. If the contract terms can be interpreted in two ways, the arbitrator's interpretation must be ac cepted, and the Court, under section 34, cannot substitute its opinion over the Arbitrator's view."
13. On the touchstone of the Law described above, this court has to analyse whether the Award passed by the Arbitral Tribunal Suf- fers from patent illegality.
14. Grounds assailed in the appeal:-
A) Exceeding with the terms of the contract: The Tribunal, while arriving to grant of damages to the claimant, observed in issue No.1 as under:-
"xii) The second contention of the respondent is with regard to the Claimant's obligation in the assessment of the project report, including traffic plying and expected to ply on the project has no relevance. Here, the issue is diversion of traffic on Sikar bypass as envisaged in the concession agreement for which necessary notification for restricting the entry of heavy vehicles in the Sikar city was required to be issued by the respondent. The Respondent issued notification regarding National Highway 11, i.e. Jaipur-Sikar -Bikaner road, but never issued such notification regarding Sikar Khurd road and Sikar-Salasar road. Thus, the Respon-
dent's contention as to the Claimant's obligation (Downloaded on 23/11/2024 at 12:22:18 AM) [2024:RJ-JP:46624-DB] (6 of 12) [CMA-2026/2019] to assess the traffic has no relevance as the Claimant has never complaint about the traffic, but the issue is the diversion of traffic on Sikar byepass to fulfil the necessity, object and purpose for which byepass was constructed and for which Respondent entered into an agreement with the Claimant. We have already recorded in detail the necessity, object and purpose as envisaged by the Respondent for the construction of byepass.
xiv) The Respondent also referred to Clause 15
(a) of the concession agreement and similar clause 10 of the agreement for authorising collection of fee (toll) by the Concessionaire. Both these clauses have been reproduced in forgoing paragraph. These clauses provides for reduction in collection of fee (toll) due to any reasons whatsoever, including strikes, rains, or any other except for a decision by the govern- ment of reduction of rates of fee (toll) and, in such eventuality, the extension in the period of concession is to be mutually negotiated. These clauses have no relevance to the issue before us. The issue is the fulfilment of necessity, object and purpose for which byepass was constructed, and for that, Respondent did not take action of diverting the traffic on Sikar bypass as envisaged in the concession agreement, consequently, vehicles continued to pass through existing route of Sikar city and avoided Sikar byepass and payment of toll, which ultimately resulted in loss of toll revenue to the Claimant and culminated into non-recovery of investment made in the project.
xv) The Indian Toll Act 1851, Rajasthan Motor Vehicle Taxation 1994 clearly provides (Downloaded on 23/11/2024 at 12:22:18 AM) [2024:RJ-JP:46624-DB] (7 of 12) [CMA-2026/2019] for the collection of toll till the total cost of con- struction, maintenance including interest there- upon and the total expenditure in the realization of toll has not been recovered in full. This has also been affirmed by the Hon'ble Supreme Court in the case of MSK Projects (India) (JV) Ltd. v/s State of Rajasthan & Anr. (2011) 10 SCC 573."
15. The contractual documents relevant to resolving the contro- versy are the Project Report, Tender Conditions, Prebid report, and agreement dated 19.08.1998.
In the Project Report, the necessity Clause reads as follows:-
"3. Necessity:
Sikar City is connected to five big cities and growth centres, viz. Jodhpur, Bikaner, Jhunjhunu, Jaipur and Delhi via Kotputli. It is crossed by N.H. 11, S.H. -8, S.H. -20, S.H. -8, S.H. -20, S.H.- 8A, and MDR-24. Sikar itself is an important landmark on National Highway 11, joining Agra (in UP) and Bikaner on the Western Border of the Country. It has a traffic of 16658 PCU's per day (including about 2767 commercial vehicles per day) causing lot of delays and accidents etc. in the town. The passing of highway and other transitory traffic through it also pollutes the City environment. Hence, a bypass to this City is not only economical but essential too."
The flow report, in which the appellant provided Traffic Projection considering the base years from 1998 to 2009, is also part of the report.
In the notice inviting bids for Road/Bridge Projects on BOT Basis, it was clarified by the appellant that entire fi- nances for the project(s) have to be arranged by the entre- (Downloaded on 23/11/2024 at 12:22:18 AM) [2024:RJ-JP:46624-DB] (8 of 12) [CMA-2026/2019] preneur who will be permitted to recover the investment with interest through levy of fees (toll) from the users of the facil- ity at the rate of fees (toll) fixed by the Government. The bid documents also stipulated that the project profiles of the project(s) and project report will be available from the offices of the Chief Engineer. Pursuant to the inviting bids for the above project, the Pre-Bid Meeting for BOT works was held on 04.09.1997.
16. The purpose of holding the pre-bid deliberations is to clarify the intricacies of the project, and in the pre-bid report, the follow- ing para is germane for dealing with the present controversy:-
"Sikar Bye Pass
1. The department placed the figures of traffic data before the entrepreneurs on the basis of O & D studies (Enclosed). The entrepreneurs fur- ther wanted the traffic data on the existing routes during the last 5 years. These are en- closed herewith."
Further, it was clarified that the entrepreneurs may incorporate in, their cost estimates, the missing items and work out the concession period accordingly before submitting the bids.
17. The key document is an agreement dated 19.08.1998, which contains the following Clauses:-
"6. The "Concessioner" is authorised to make such collection of fee (toll) only for the period of the concession as specified in Clause (4) here- above unless otherwise increased or decreased by mutual consent of Government and Conces- (Downloaded on 23/11/2024 at 12:22:18 AM) [2024:RJ-JP:46624-DB] (9 of 12) [CMA-2026/2019] sioner and use the fee (toll) so recovered for the express purpose of reimbursement of investment made on the "Project" as specified in Clause (2) hereabove. The right to collect fee (toll) would cease on expiry of the concession period unless the concession period is increased or decreased through mutual agreement and thereafter, the infrastructure created by "Concessioner" for the "Project" will stand reverted to "Government"
free of cost and all rights of the concessioner on the assets created as part of the "Project" will stand extinguished.
10. "Government" will not be responsible for any eventuality which may cause reduction in collection of fee (toll) due to any reason whatso- ever including strikes, rains or any other except for a decision by "Government" or reduction in the rates of fee (toll), in which case extension in the period of Concession will be mutually negoti- ated. In case the rate of fee (toll) is enhanced by the "Government", the reduction in the period of concession will be mutually negotiated."
18. From the conjoint reading of the documents above, the fol- lowing position emerges:-
(1) The claimant knew the project cost depended on an estimated traffic flow projection. In the pre-bid documents, the claimant was further explained that he might assess projected traffic flow before entering into a bid.
(2) There were no express conditions in any of the documents imposing the condition of notifying the traffic diversion to the flowing to and fro from Salasar Khurd to Sikar. Even in the project report, the necessity clause only justifies the construction (Downloaded on 23/11/2024 at 12:22:18 AM) [2024:RJ-JP:46624-DB] (10 of 12) [CMA-2026/2019] of a byepass to avoid congestion in the Sikar. It nowhere demonstrates that the appellant needed to notify the diversion of traffic arriving from Khurd and Salasar.
(3) The notification issued for heavy vehicles arriving from the Sikar bypass restricted them from entering Sikar city for a definite period to avoid congestion, and this was not in pursuance of the agreement entered upon between the parties.
(4) The Necessity Clause does not mention that the appellant is duty-bound to issue a notification diverting traffic entering Sikar City towards the proposed Sikar-Jaipur bypass.
Further, the notification's issuance has no relevance as it has been issued under the powers conferred to the concerned District Magistrate under the provisions of the Motor Vehicle Act. Even if it is presumed that the notification was issued at the claimant's insistence, it's an independent action and not as per any relevant documents.
(5) Further, the law envisages that every government con- tract shall be in writing, and these provisions of Article 299(1) are mandatory, not directory, and must be complied with. They are not inserted merely for formality but to protect the Government against unauthorised contracts. If a contract is unauthorised or over authority, the Government must be protected from liability to avoid wasting public funds. A government can be held liable for unjust enrichment if it has received a benefit at the expense of another party:
The tenet of unjust enrichment applies only in cases where the contract terms are either breached or either party has suffered (Downloaded on 23/11/2024 at 12:22:18 AM) [2024:RJ-JP:46624-DB] (11 of 12) [CMA-2026/2019] a loss due to the shrouding circumstance within the precinct of the Implied consent.
(6) The letters issued by the claimant to the appellant only demonstrate that the claimant wished to divert traffic to enhance his toll collection. Responding to the letters, if the appellant has requested to issue the notifications, it does not amount to implied consent. In the instant case, the appellant did not transgress any express condition. The terms of the project, from its inception to its culmination, are explicit and unambiguous, leaving no room for misconstruing them.
(7) The claimant handed possession of the toll to the appel-
lant and did not seek an extension of the contract despite the ex- tension clause in the agreement. If the claimant had suffered a loss, then seeking an extension of the contract could have realised it. The claimant's conduct is enough to conclude that no loss oc- curred to the claimant.
(8) As submitted by the claimant, the actual flow of vehicular traffic on the constructed bypass shows that the traffic coming from Salasar and Khurd to the bypass was more than the traffic estimated/projected by the appellant. Therefore, the claimant's plea that he suffered huge losses appears to be incorrect.
19. In MSK Projects India (JV) Limited Vs. State of Rajasthan & Anr. (supra), the controversy was entirely distinct, and the Apex Court reinstated the Award because the defence was not put forth before the tribunal and could not be raised in an appeal under sec- tions 34 and 37 of the Arbitration Act. In that case, the State did not raise the defence before the tribunal that the condition of is- suance of notification was not enumerated in the agreement. (Downloaded on 23/11/2024 at 12:22:18 AM)
[2024:RJ-JP:46624-DB] (12 of 12) [CMA-2026/2019] Therefore, observing the following law, the Apex Court set aside the judgment passed by the High Court.
20. We believe that the Arbitral Tribunal has transgressed the terms and conditions mentioned in the relevant documents neces- sary for the decision on the controversy between the parties. It is a settled law that exceeding with the terms of contract itself amount to patent illegality. The Tribunal has exceeded the terms of conditions as enshrined in the above documents. The court be- low did not appreciate the terms of the agreement and cursorily rejected the objection raised by the appellant after citing the law and Section 34 of the Arbitration Act.
(B) Issue of Limitation and Computation of Damages
21. As far as issues related to the computation of compensation and limitations are concerned, they have become irrelevant. As in the previous paragraphs, the Court has categorically held that the Arbitral Tribunal has exceeded the contract's expressed terms.
22. As a result of the above discussion, the appeal success, the award passed by the Arbitral Tribunal dated 29.03.2013, and the order passed by the Commercial Court No.4, Jaipur, dated 11.03.2019, rejecting the objections of the appellant is hereby set aside.
(PRAVEER BHATNAGAR),J (PANKAJ BHANDARI),J Ramesh Vaishnav/86 (Downloaded on 23/11/2024 at 12:22:18 AM) Powered by TCPDF (www.tcpdf.org)