Delhi High Court
Gmr Ambala Chandigarh Pvt. Ltd. vs National Highways Authority Of Indiia & ... on 26 September, 2022
Author: C. Hari Shankar
Bench: C. Hari Shankar
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 17th December, 2021
Pronounced on: 26th September, 2022
+ O.M.P. (COMM) 480/2020 & I.A.12083/2020, I.A.3233/2021
GMR AMBALA CHANDIGARH PVT. LTD. ..... Petitioner
Through: Mr. Atul Sharma, Mr. Milanka
Chaudhury, Mr. Sarojanand Jha,
Mr.Siddarth Mehra, Ms. Abhilasha Sharma
and Mr. Dipan Sethi, Advs.
versus
NATIONAL HIGHWAYS AUTHORITY OF INDIA & ANR.
..... Respondents
Through: Ms. Maninder Acharya Sr.
Adv, Mr. Suman Jyoti Khaitan, Mr. Nubair
Alvi, Mr. Viplav Acharya, Advs. for R-1
Mr.Ashwani Kumar Bansal, Ms.Shweta
Soni and Mr.Pankaj Mehta, Advs. for R-2
+ O.M.P. (COMM) 481/2020 & I.A.12082/2020, I.A.3232/2021
GMR AMBALA CHANDIGARH PVT. LTD. ..... Petitioner
Through: Mr. Atul Sharma, Mr. Milanka
Chaudhury, Mr. Sarojanand Jha, Mr.
Siddarth Mehra, Ms. Abhilasha Sharma and
Mr. Dipan Sethi, Advs.
versus
NATIONAL HIGHWAYS AUTHORITY OF INDIIA & ANR.
..... Respondents
Signature Not Verified
Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 1 of 133
By:SUNIL SINGH NEGI
Signing Date:28.09.2022
13:07:07
Through: Ms. Maninder Acharya Sr.
Adv, Mr. Suman Jyoti Khaitan, Mr. Nubair
Alvi, Mr. Viplav Acharya, Advs. for R-1
Mr.Ashwani Kumar Bansal, Ms.Shweta
Soni and Mr.Pankaj Mehta, Advs. for R-2
CORAM:
HON'BLE MR. JUSTICE C. HARI SHANKAR
JUDGMENT
% 26.09.2022
1. GMR Ambala Chandigarh Expressways Pvt Ltd (―GMR‖, hereinafter) seeks, by means of the present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (―the 1996 Act‖), to challenge award dated 26th August 2020, passed by a learned three- member Arbitral Tribunal by a majority of two learned Members to one, whereby the claims of GMR (as the claimant before the learned Arbitral Tribunal) have been dismissed.
Facts and the impugned Award
2. Bids were invited by the National Highways Authority of India (NHAI) for carrying out work on the NH-21 and NH-22 National Highways. Along with the Bid Documents, a draft Concession Agreement (CA) was provided to the prospective bidders. The draft CA stated that NHAI had carried out feasibility studies for the project. Prospective bidders were also provided with a Detailed Project Report (DPR) prepared by NHAI, which assured the economic and financial viability of the project. The Bid Documents represented, additionally, thus:
Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 2 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07―The minimum post-tax Project IRR that is commensurate with the risks associated with the project and returns acceptable to investors, is around 12 percent. The target Equity IRR is taken as 20 percent.‖ It was specified, in the present petition that the DPR represented the ―Annual Toll Revenue‖ to be realized by the Consortium every year, which made the Project financially viable and enabled the Consortium to earn ―reasonable return‖ on its investment. Annexure 7.1 of the DPR set out the projected Annual Toll Revenue that the Project Highway would earn from 2009 to 2024. Significantly, for bidders who opted for the contract on ―Negative Grant‖ basis, and who would, therefore, be required to pay, to NHAI, Rs 174.752 crores during the course of the project, a steady increase in Actual Toll Revenue, from Rs 18.62 crores in 2010 to Rs 41.55 crores in 2017, was projected.
3. Despite the considerable cash outflow that opting for the project on Negative Grant basis entailed, GMR contends that the Consortium opted for the Negative Grant arrangement only because of the considerable increase in Annual Toll Revenue, year by year, as projected in the DPR.
4. A consortium of GMR Energy Ltd and GMR Infrastructure Ltd (―the consortium‖) emerged as the successful bidder. As already noted, the consortium bid for the Project on a Negative Grant basis, and offered a total Negative Grant of ₹ 174.752 crores to NHAI, of which ₹ 55.921 crores was payable during construction and the remaining amount during the period of concession after construction Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 3 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 was complete. Letter of Acceptance (LOA) dated 29th June 2005 was issued by NHAI in favour of the Consortium.
5. The Consortium incorporated GMR as a Special Purpose Vehicle (SPV) to carry out the Project. GMR entered into a Concession Agreement (CA) dated 16th November 2005 with NHAI, for improvement, operation and maintenance, including strengthening and widening of the existing two lane road to four lane dual carriageway from (i) km 5.735 to km 39.960 of NH-22 and (ii) km 0.00 to km 0.871 of NH-21 (Ambala-Chandigarh section) in the States of Haryana and Punjab (―the Project Highway‖). The Concession was granted by NHAI to GMR, as the Concessionaire, for a period of twenty years commencing from the Appointed Date.
6. Support, for the aforesaid Project, was extended by the States of Haryana and Punjab, vide tripartite State Support Agreements (SSAs) executed among NHAI, GMR and the State of Haryana in one SSA and the State of Punjab in the other. The SSAs with the State of Haryana and the State of Punjab were executed on 8th March 2006 and 21st February 2006 respectively.
7. Relevant Clauses of CA and SSAs: The clauses of the CA and the SSAs, around which the present dispute revolves, may be set out thus:
Relevant Clauses of the CA ―VIII. ADDITIONAL TOLLWAY
8.1 Notwithstanding anything to the contrary contained in this Agreement, any of NHAI, GOI, GOHR or GOPb may Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 4 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 construct and operate either himself or have the same, inter alia, built and operated on BOT basis or otherwise any Expressway or other toll road, not being a bypass, between, inter alia, Ambala-Chandigarh Section from i) Km 5 + 735 - Km 39 + 960 of NH-22 and ii) Km 0 + 000 - Km 0 + 871 of NH-21 (the ―Additional Tollway‖) provided that such Additional Tollway shall not be open to traffic before expiry of 8 years from the Appointed Date.‖ 1.1 Definitions ―Material Adverse Effect‖ means a material adverse effect of any act or event on the ability of either Party to perform any of its obligations under and in accordance with the provisions of this Agreement.‖ ―Material Breach‖ means a breach by either Party of any of its obligations in this Agreement which shall be deemed to have a Material Adverse Effect on the Project in which it shall have failed to cure within the Cure Period.
***** XII. DISCLAIMER 12.1 The Concessionaire acknowledges that prior to the execution of this Agreement, the Concessionaire has after a complete and careful examination made an independent evaluation of the traffic volumes, Specifications and Standards, site and all the information provided by NHAI and has determined to the Concessionaire's satisfaction the nature and extent of such difficulties, risks and hazards as are likely to arise or may be faced by the Concessionaire in the course of performance of its obligations hereunder.
12.2 the Concessionaire acknowledges and hereby accepts the risk of inadequacy, mistake or error in law relating to any of the matters set forth in Clause 12.1 above and hereby confirms that NHAI shall not be liable for the same in any manner whatsoever to the Concessionaire, the Consortium Members or their Associates.
*****
Signature Not Verified
Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 5 of 133
By:SUNIL SINGH NEGI
Signing Date:28.09.2022
13:07:07
XXXI. COMPENSATION FOR BREACH OF
AGREEMENT.
*****
31.2 In the event of NHAI being in material default of this Agreement and such default is cured before Termination, NHAI shall pay to the Concessionaire as compensation, all direct additional costs suffered or incurred by the Concessionaire arising out of such material default by NHAI, in one lump sum within 30 days of receiving the demand or at NHAI's option in 3 equal semi-annual instalments with interest @ SBI PLR plus 2%.
***** 32.4 Termination for NHAI Event of Default.
32.4.1 The Concessionaire may after giving 90 days notice in writing to NHAI terminate this Agreement upon the occurrence and continuation of any of the following events (each a ―NHAI Event of Default‖), unless any such NHAI Event of Default has occurred as a result of Concessionaire Event of Default or due to a Force Majeure Event.
***** (3) GOI or GOH or any Governmental Agency have by an act of commission or omission created circumstances that have Material Adverse Effect on the performance of its obligations by the Concessionaire and have failed to cure the same within 90 days of receipt of notice by NHAI in this behalf from the Concessionaire;
***** 37.1 General Indemnity *****
(ii) NHAI will indemnify, defend and hold harmless the Concessionaire and against any and all proceedings, actions, third-party claims for loss, damage and expense of whatever kind and nature arising out of effect in title and/or the rights of NHAI in the land comprised in the Site adversely affecting Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 6 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 the performance of the Concessionaire's obligations under this Agreement and/or arising out of acts done in discharge of their lawful functions by NHAI, Officers, servants, agents, subsidiaries and contractors (―NHAI Indemnified Persons‖) including NHAI Events of Default except to the extent that any such claim has arisen due to negligent act or omission, breach of contract or breach of statutory duty on the part of the Concessionaire, its Subsidiaries, affiliates, contractors, servants or agents including due to Concessionaire Event of Default.‖ Relevant Clauses of the SSA with the State of Haryana ―3. SUPPORT OF GOHR 3.1 Upon and with effect from the date hereof, GOHR agrees:
*****
(xi) not to do or omit to do any act, deed opting which may in any manner be violative of or cause the Concessionaire to violate any of the provisions of the Concession Agreement.
3.2 Notwithstanding anything to the contrary contained in the Agreement, GOHR may construct and operate either itself or have the same, inter alia, built and operated on BOT basis or otherwise any Expressway or other toll road, not being a bye-pass, between inter alia, Ambala-Chandigarh Section from i) Km 5+735 - Km 39+960 of NH-22 and ii) Km 0+000
- Km 0+871 of NH-21 (the ―Additional Tollway‖), provided that such Additional Tollway shall not be opened to traffic before expiry of 8 (eight) years from the Appointed Date.
7. BREACH AND COMPENSATION 7.1 In case GOHR is in breach of any of its obligations under this Agreement, which breach is not cured within 30 days of receipt of notice in writing from the Concessionaire to GOHR and NHAI and which has not occurred as a result of Concessionaire's breach of its obligations under this Agreement or the Concession Agreement, GOHR shall pay to the Concessionaire, all direct additional costs suffered or incurred by the Concessionaire, determined by NHAI as arising out of such material default by GOHR.‖ Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 7 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 Relevant Clauses of the SSA with the State of Punjab (The relevant Clauses of the SSA which the State of Punjab are identical to the relevant Clauses in the SSA with the State of Haryana.)
8. To facilitate the understanding of the nature of the Project, a map, which identifies the various stretches of highway in question, is annexed as Annexure A to this judgement.
The impugned Award, in précis
9. GMR's contention, before the learned Arbitral Tribunal, was that the states of Punjab and Haryana, by constructing bypasses resulting in diversion of traffic from the Project Highway, violated the provisions of the CA as well as the SSAs executed among the concerned States, NHAI and GMR.
10. Both these OMPs are directed against a common award. OMP (Comm) 480/2020 assails the impugned arbitral award to the extent it disallows the claim directed against the alleged bypass constructed by the State of Haryana, whereas OMP (Comm) 481/2020 assails the award to the extent it disallows the claim to the extent it is directed against the bypass constructed by the State of Punjab. Inasmuch as the nature of the claims, and the issues involved, are similar, it would be appropriate to limit the discussion, first, to OMP (Comm) 480/2020 and, thereafter, to apply the findings to OMP (Comm) 481/2020.
Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 8 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07OMP (Comm) 480/2020 - Re: Claim against NHAI/State of Haryana
11. With respect to the State of Haryana, GMR contended that, between 2006 and 2010, the State of Haryana had, in violation of the CA and the SSA dated 8th March 2006 to which it was a party, developed, improved and strengthened the peripheral road from Shahabad to Panchkula, which ran as SH-31 from Shahabad to Saha and as NH-73 from Saha to Panchkula. Kesri fell midway between Shahabad and Saha. Admittedly, after the CA and SSA had been executed, a ROB had been erected at Kesri and the stretch of NH-73 from Saha to Panchkula had been widened and strengthened. On this factual position, all parties are ad idem. It is the consequence of these improvements, on the inter se rights and liabilities of GMR and NHAI under the CA and SSA, which forms, as it were, the crux of the controversy.
12. GMR contended, in its Statement of Claim (SOC) before the learned Arbitral Tribunal as well as before this Court, that the above improvements on the Shahabad-Panchkula stretch of highway rendered the stretch (comprising SH-31 and NH-73) capable of carrying commercial traffic which, prior to the said improvements, they were not capable of carrying. Resultantly, commercial traffic, which was earlier using the Project Highway, started opting for the alternate route via Shahabad-Panchkula, inter alia to avoid payment of toll. As a result, the volume of traffic on the Project Highway, as well as toll collection, reduced. This, according to GMR, amounted Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 9 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 to construction, by the State of Haryana, of a ―bypass‖ within the meaning of Clause 8.1 of the CA and Clause 3.2 of the SSA, which stood breached thereby. Inasmuch as the consequent diversion of traffic to the said bypass had resulted in reduction in the toll collected by GMR, a ―material adverse effect‖, to GMR, and an ―NHAI Event of Default‖ had resulted, by application of Clause 32.4.1(3) of the CA read with Clause 32.4.1 thereof. NHAI was, therefore, bound, under Clause 37.1(ii), to indemnify GMR for the loss suffered thereby. This, in substance, constituted the claim of GMR in the SOC.
13. GMR contended that the commercial decision taken by the Consortium to bid for the Project, was based on the representations made by NHAI in the bid documents, which included the projected traffic volume and expected increase in traffic volume year to year, on the Project Highway, as projected in the DPR. Based on these representations, GMR contended that it had agreed to adopt the ‗Negative Grant' model, estimating a toll collection, in the year of commissioning of the Project Highway, i.e. 2008, of ₹ 13.3 lakhs per day, with commensurate expectation of yearly increase, as commercial traffic on the constructed Project Highway was expected to increase on a day-to-day basis. As against this expectation, GMR pointed out that, consequent on the diversion of commercial traffic as a result of the rendering, by the State of Haryana, of the Shahabad- Saha-Panchkula highway stretch as a viable Alternate Competing Route (ACR) bypass, the average toll collection per day on the Project Highway fell to ₹ 5 lakhs, which was less than 50% of the projected revenue. This, submitted GMR, substantially altered the basic Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 10 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 commercial understanding, premised on which the Consortium had bid for the project and had entered into the CA.
14. In support of its submissions, GMR relied on expert studies. It was contended that an expert agency, M/s ICRA Management Consultancy Service Ltd (IMACS) had been engaged by GMR to undertake a Traffic Validation Study in and around the Ambala- Chandigarh section of the Project Highway and that IMACS had, in its detailed report dated 29th September 2009 indicated, as the key reason for diversion of traffic from the Project Highway to Alternate Competing Roads, (i) the improvement of NH-73 which, at the time of execution of the CA, was a single lane road with poor surface quality, into a 2-lane road with shoulders and good surface quality, which resulted in diversion of traffic as NH-73 was connected to NH- 1 at Shahabad and (ii) substantial improvement of SH-31 which, earlier, was a single lane road, with development of an ROB at Kesri and widening and improvement of the carriageway. Another traffic study conducted by IMACS on the Project Highway in October 2012, found that (i) the DPR of July 2004, by M/s CES, the Consultant of NHAI, characterised the Project Highway as a commercial and industrial corridor with very high growth potential, with the further observation that, between 2000 and 2004, traffic of cars and commercial vehicles had grown between 7% and 9% respectively, (ii) vis-à-vis the forecasts regarding the Project Highway in the bid documents, total vehicular traffic had shown about 40% decline and commercial/goods traffic using the Project Highway had shown around 80% decline, (iii) as against this, commercial traffic in the Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 11 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 neighbouring corridors had shown strong and aggressive growth of above 25% between 2005 and 2009, post-completion of the Project Highway, (iv) traffic plying through Delhi/Haryana/Rajasthan/South India and Mohali/Kalka/Panchkula, which was earlier using the Project Highway, was now found travelling along alternate routes, i.e. Tepla-Banur-Kharar in the State of Punjab and Shahabad-Saha- Panchkula in the State of Haryana and (v) this indicated that the traffic which, during the pre-bid period i.e. 2004-2005, was using the Project Highway had, since the Commercial Operation Date (COD), i.e. since 2008-2009, been diverted to alternate roads which had undergone substantial improvement in terms of capacity and riding quality, in the interregnum, and were toll free. The development of alternate routes, through which the traffic could divert and avoid the Project Highway, it was contended, constituted a breach of the CA as well as the SSA. On this basis, GMR claimed, from NHAI and the State of Haryana jointly & severally, an amount of ₹ 86,69,37,141/-, comprising a principal of ₹ 64,42,16,715/- and interest of ₹ 22,27,20.426/-.
The Award
15. The learned Arbitral Tribunal framed the following issues as arising for consideration:
―1. Whether the State of Haryana/Respondent No. 2 in improving, developing and strengthening the:
i) Road Over Bridge (ROB) on Saha and
Shahabad of SH31 at Kesri,
ii) NH-73 between Saha to Panchkula,
Signature Not Verified
Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 12 of 133
By:SUNIL SINGH NEGI
Signing Date:28.09.2022
13:07:07
And the acts of Respondents in allowing the operation of the aforesaid rules to vehicular traffic has:
a. Caused the leakage/deviation of vehicular traffic (commercial & private) from the Project Highway to the aforesaid roads?
b. Any Material Adverse Effect on the performance of its obligations by the Claimant under the Concession Agreement?
c. The effect of causing the Claimant to violate any provisions of the Concession Agreement?
d. The effect of frustrating the fundamental economics on which the Concession Agreement was executed?
2. Whether Respondent No, 1/NHAI is liable to determine all additional costs suffered or incurred by the Claimant due to improvement, development, strengthening and operation of the aforesaid roads on account of statutory guarantee (of interest on capital invested and reasonable return) to the Claimant under the National Highways Act, 1956?
3. Whether the Respondent No. 1/NHAI vide its letter dated 05.08.2011, wrongfully rejected the request of the Claimant to determine all direct additional costs suffered or incurred by the Claimant due to the improvement, development, strengthening and operation of the aforesaid roads?
4. What is the percentage traffic deviation from the Project Highway (vis-à-vis the projections of NHAI in Bid Document) and consequently direct additional costs suffered or incurred by the Claimant on account of leakage/deviation of traffic from Project Highway?
5. Whether the Claimant is entitled to award of a direction to the Respondents to jointly and severally continue to compensate till the time the financial viability as statutorily Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 13 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 guaranteed to the Claimant is restored by taking all appropriate steps?
6. Whether the Claimant is entitled to the award of interests both pendente lite and future on all amounts as may be awarded at the rate of SBI PLR + 2%?
7. Whether the Claimant is entitled to an Award of costs of all proceedings including the present proceedings?
8. Whether the Claimant can claim any waiver of Negative Grant under Clause 7.1 of the State Support Agreement?
9. Whether Respondent No. 1 can be made to suffer any financial and/or other liability for the alleged breach if made by Respondent No. 1 in any of its obligations as defined in the Concession Agreement?‖
16. Having thus framed the issues which arose for consideration, the learned Arbitral Tribunal proceeded to adjudicate on the claims of GMR, qua the State of Haryana (jointly/severally with NHAI) issue wise thus.
17. Re. Issue 1 17.1 Issue 1, as framed by the learned Arbitral Tribunal, read thus:
―Whether the acts of State of Haryana/Respondent No, 2 in improving, developing and strengthening the:
i. Road Over Bridge (ROB) on Saha and
Shahabad of SH 31 at Kesri;
ii. NH-73 between Saha to Panchkula;
And the acts of Respondents in allowing the operation of the aforesaid roads to vehicular traffic has:Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 14 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07
a. Caused the leakage/deviation of vehicular traffic (commercial and private) from the Project Highway to the aforesaid roads?
b. Any Material Adverse Effect on the performance of its obligations by the Claimant under the Concession Agreement?
c. The effect of causing the Claimant to violate any provisions of the Concession Agreement?
d. The effect of frustrating the fundamental economics on which the Concession Agreement was executed?‖ 17.2 Having extracted the relevant clauses of the CA and SSA, the learned Arbitral Tribunal held, unexceptionably, that ―the agreement makes an enabling provision and clearly permits NHAI, Government of India, Government of Haryana and Government of Punjab to construct and operate any Expressway or other Tollway subject to two important conditions viz. (i) the same is not a ―bypass‖ between Ambala-Chandigarh section referred to in Clause 8.1 of the Concession Agreement and (ii) any such Expressway or Tollway is not open to traffic for a period of 8 years from the appointed date.‖ Following this, the impugned Award records that, while GMR conceded that the respondents had not constructed any Expressway or Additional Tollway within the meaning of Clause 8 of the CA or Clause 3.2 of the SSA, it contended, nonetheless, that the activities of the State of Haryana amounted to construction of a ―bypass‖ to the Project Highway which breached the said Clauses. The learned Arbitral Tribunal, therefore, delineated the issue arising before it for consideration as ―whether the State Highway 31 between Shahabad and Saha and National Highway 73 between Saha-Shahzadpur and Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 15 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 Panchkula got converted into a bypass because of what the Claimant alleges was extensive widening and strengthening of the said stretches‖.
17.3 Observing that the expression ―bypass‖ was not defined in the CA or in the SSA, the learned Arbitral Tribunal relied on the following dictionary definitions of ―bypass‖:
Oxford English Dictionary ―A road passing around the town or its centre to provide an alternative route for through traffic‖.
Webster's Dictionary ―A passage to one side; especially a deflected route usually around the town.‖ The Random House Dictionary ―A road enabling motorists to avoid a city or other heavy traffic points or to drive around an obstruction.‖ The Macmillan Dictionary ―... To avoid the centre of a town or city by using a road that goes around it‖.
Applying these definitions to the present case, the learned Arbitral Tribunal held that a ‗bypass' ―would actually and contextually imply a road that is meant to provide to truckers, motorists and other users of the road, the means to avoid the Project road between Ambala and Zirakpur‖.
17.4 The learned Arbitral Tribunal, thereafter, proceeded to reject the contention, of GMR, that the improvements and activities carried Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 16 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 out by the State of Haryana on NH-73 and SH-31 resulted in the coming into being of a ‗Bypass' in each case, on the following grounds:
(i) Apropos Clauses 8 of the CA and 3.2 of the SSA, the learned Arbitral Tribunal held thus:
(a) Inasmuch as Clause 8 of the CA and Clause 3.2 of the SSA forbade the Government of India, NHAI, State of Haryana and State of Punjab from constructing a road that is a bypass to the Project Road, the prohibition, of necessity, applied in future.
(b) The contractual prohibition contained in the said clauses did not, therefore, conceive of an existing State Highway or National Highway becoming a ‗bypass' only because of its upkeep, maintenance, strengthening or widening, which is what had been alleged in the present case by GMR.
(c) On a true and correct interpretation of Clause 8 of the CA and Clause 3.1 of the SSA, the parties never contemplated that an existing highway could also become a bypass. Nor could the parties ever intend to consider the improvement, or maintenance of an existing highway, a major part of which was a National Highway even on the date of invitation of bids, being treated as a bypass within the meaning of Clauses 8.1 and 3.2 of the CA and SSA respectively.Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 17 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07
Had the parties so intended, the CA and SSA would specifically have so provided.
(d) All that Clauses 8 of the CA and 3.2 of the SSA intended to say was, therefore, ―that no new road shall be constructed so as to provide an alternate route or a parallel road to the Project Road‖.
(ii) De hors the interpretation to be placed on Clauses 8 of the CA and 3.2 of the SSA, the learned Arbitral Tribunal observed that, as NH-73 (which, from Shahazadpur to Panchkula, was NH-7) and SH-31 were both existing Highways on the date when bids were invited and the CA was executed, they were never intended to serve as a bypass to the Project Highway, as GMR sought to allege.
(iii) SH-31, NH-73 and NH-7 took off from Shahabad which was 23 km short of the starting point of the Project Highway. By its very nature, a bypass had necessarily to start from a point proximate to the Project Highway, and join the other end of the same road at a similar proximate point. The alleged bypass, which was a pre-existing road, branched off from as far away as 23 km from the starting point of the Project Highway and did not join the Project Highway at Chandigarh, but ended at Panchkula.
(iv) A bypass could not predate the town or city which it intended to bypass. By its very nature, a bypass was a Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 18 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 subsequent development, and would come into existence only after, and not before, the coming into existence of the city, town or Highway which it bypassed. The very purpose of a bypass was decongestion of the city, town or obstruction to traffic on the road. A road or stretch could not be bypassed even before it came into existence.
(v) The road connecting Shahabad and Panchkula was not narrow, kucha, muddy or unsteady. It was a State Highway for 17 km and a National Highway for the remaining 57 km. It could not, therefore, be suggested that the State Highway or National Highway was in such a condition that no commercial traffic could use it. Rather, there was contrary evidence to show that these two stretches were good for commercial traffic even before the construction of the ROB at Kesri or the undertaking of the repair, maintenance, widening and strengthening work.
17.5 Having thus found that no ‗bypass', within the meaning of Clause 8.1 of the CA or Clause 3.2 of the SSA, had been constructed by the State Governments, the learned Arbitral Tribunal held that it was not necessary to examine the nature of the improvement carried out on SH-31 and NH-73. Nonetheless, detailed submissions having been advanced by GMR in that regard, the learned Arbitral Tribunal proceeded to examine the issue.
Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 19 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:0717.6 The learned Arbitral Tribunal held, at the outset, that ―the maintenance and/or strengthening of an existing State Highway or National Highway has no relevance for determining whether a State Highway/National Highway does or does not constitute a Bye Pass on the Project Road‖. That apart, the learned Arbitral Tribunal held the contention of GMR, that construction of the ROB on SH-31 changed the economics of the Project Highway as apparently ―not well- founded‖, as the ROB at Kesri, along with other ROBs, was planned as early as in 2002. In this context, the learned Arbitral Tribunal relied on Item 14 of the table 8.3 under the chapter titled ―Risk Analysis and Management‖ in the tender documents, which read thus:
―S. Risk Risk Mitigation Instrument/Allo-
No. Category/Description cation
*****
14.0 Operation Revenue: - 1. This risk is Instrument:-
Non-realisation of expected to be
traffic as projected. mitigated by Concession
This may be on carrying out Agreement
account of detailed traffic
Lower growth studies and demand Allocation:-
rates projections as part
Less diverted of Feasibility SPV
traffic from Studies. Various (Concessionaire)
the other possible growth
routes rates scenarios have
development been developed and
of other finally traffic has
competitive been projected
schemes by considering the
NHAI/GOH/G most likely
OP scenario. In
addition, different
future plans of
NHAI/GOH - GOP
have been assessed
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and considered
while carrying out
the traffic
assignment.
2. CA to provide that
in order to maintain
the project viability,
NHAI/GOH/GOP
agrees not to
implement any new
project which will
affect the traffic
flow or revenue
streams of the
project.‖
17.7 The learned Arbitral Tribunal also relied on the following disclaimer contained in the tender documents/ Request for Proposal (RFP), Clause 1.2 of the RFP, Clauses 12.1 and 12.2 of the CA and Para 1.2 of Section - I (General) in the Manual of Indian Roads Congress (IRC) 2007:
―Disclaimer Disclaimer in Tender Documents ―Whilst the information in this RFP Document has been prepared in good faith, it is not and does not purport to be comprehensive or to have been independently verified. Neither NHAI, or any of its officers or employees, nor any of their advisers nor consultants accept any liability or responsibility for the accuracy, reasonableness or completeness of, or for any errors, emissions or misstatements, negligent or otherwise, relating to the proposed road project, or makes any representation or warranty, express or implied, with respect to the information contained in this RFP document or on which this RFP Document is based or with respect to any written or oral information made or to be made available to any of the Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 21 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 recipients or their professional advisers and, so far as permitted by law and except in the case of fraudulent misrepresentation by the party concerned, and liability therefore is here disclaimed.
The information contained in this RFP Document is selective and is subject to updating expansion, revision and amendment. It does not, and does not purport to contain all the information that a recipient may require. Neither NHAI or any of its officers, employees nor any of its advisors nor consultants undertakes to provide any recipient with access to any additional information or to update the information in this RFP Document or to correct any inaccuracies therein which may become apparent. Each recipient must conduct its own analysis of the information contained in this RFP Document or to correct any inaccuracies therein that may become apparent. Each recipient must conduct its own analysis of the information contained in this RFP Document and is advised to carry out its own investigation into the proposed road project, the legislative and regulatory regime which applies thereto and by and all matters pertinent to the proposed project and to seek its own professional advice on the legal, financial, regulatory and taxation consequences of entering into any agreement or arrangement relating to the proposed project.
This RFP Document includes certain statements, estimates, projections, targets and forecasts with respect to the road project. Such statements, estimates, projections, targets and forecasts reflect various assumptions made by the management, officers, and employees of NHAI, which assumptions (and the base information n which they are made) may or may not prove to be correct. No representation or warranty is given as to the reasonableness of forecasts or the assumptions on which they may be based and nothing this RFP Documents is, or should be relied on as a promise,, representation or warranty.
***** Clause 1.2 of the RFP 1.2 The data presented in this schedule is for an initial understanding and guidance of the Concessionaire. NHAI Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 22 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 will not be responsible for any inaccuracy in the information provided and shall not be liable for or be bound by the data used by the Concessionaire in evaluating the project viability. The Concessionaire will carry out his own independent surveys for assessing actual position of the project corridor.
The Concessionaire acknowledges that prior to the execution of this Agreement, the Concessionaire has satisfied himself (based on his own Independent assessment) of the survey data, specifications and standards site and all information provided by the NHAI. The Concessionaire acknowledges and accepts the difficulties, risks and hazards likely to arise during the course of performance of his obligations hereunder.
***** Clauses 12.1 and 12.2 of the CA (also reproduced above) 12.1 The Concessionaire acknowledges that prior to the execution of this Agreement the Concessionaire has after a complete and careful examination made an independent evaluation of the traffic volumes, specifications and Standards, Site and all the information provided by NHAI and has determined to the Concessionaire's satisfaction the nature and extent of such difficulties, risks and hazards as are likely to arise or may be faced by the Concessionaire in the course of performance of its obligations hereunder.
12.2 The Concessionaire acknowledged and hereby accepts the risk of inadequacy, mistake or error in or relating to any of the matters set forth in Clause 12.1 above and hereby confirms that NHAI shall not be liable for the same in any manner whatsoever to the Concessionaire, the Consortium Members or their Associates.
***** Para 1.2 of Section - I (General) in the Manual of Indian Roads Congress (IRC) 2007 1.2 The Project Highway and the project facilities shall confirm to the design requirements set out in this manual which are minimum prescribed. The project report and other Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 23 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 information provided by the Government shall be used by the Concessionaire only for its own reference and for carrying out further investigations. The Concessionaire shall be solely responsible for undertaking all the necessary surveys, investigations and detailed designs in accordance with the good industry practice and due diligence, and shall have no claim against Government for any loss, damage, risk, costs, liabilities or obligations arising out of or in relation to the project report and other information provided by the Government.‖ 17.8 Relying on the aforesaid extracted Clauses and the risk analysis and management tabular statement contained in the bid documents, the learned Arbitral Tribunal held that the tenderer - in this case, GMR - was required to undertake its own due diligence exercise and to study and investigate all relevant features of the project as well as familiarize itself with all factors which would be likely to impact the project. Had this exercise been done, the learned Arbitral Tribunal found that GMR would have been aware of the plan to construct the ROB at Kesri on SH-31, which had already been sanctioned in 2004, prior to invitation of bids and award of contract. It could not, therefore, be treated as a post contract development.
17.9 The learned Arbitral Tribunal also noted that the tender documents specifically underscored the development of other competitive schemes as a hazard for which the tenderer would have to make allowance. Having been thus forewarned, the learned Arbitral Tribunal held that GMR ought to have asked for all information in the pre-bid meeting which took place on 15th May 2005 and 7th June 2005. That no such clarification was sought by GMR indicated that GMR was aware of the actions proposed to be taken on the alternate Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 24 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 routes such as SH-31, NH-73 etc. The tender documents, especially the recital contained in Serial No. 14.0 of table 8.3 under the head ―Risk Analysis and Management‖ in Chapter 8 of the tender documents clearly suggested that NHAI/Government of Haryana/ Government of Punjab had plans which had been assessed by NHAI while inviting bids.
17.10 Adverting, next, to the widening and strengthening activity which had been carried out in NH-73, the learned Arbitral Tribunal that NH-73 spanned the distance from Saharanpur to Panchkula, of which the last stretch from Shahazadpur to Panchkula was regarded as NH-7. Being a National Highway, the learned Arbitral Tribunal held that it could reasonably be assumed that it was capable of carrying heavy vehicles even prior to the execution of the CA. In that view of the matter, the expenditure incurred in widening and strengthening of NH-73 could not be regarded as a breach of the CA or the SSA. In this context, the learned Arbitral Tribunal noted that the CA and SSA did not forbid maintenance, by the State Government, of the pre- existing National Highways or State Highways or of improving their condition. The CA and SSA did not, therefore, hold out any assurance to GMR that the existing highways would not be maintained.
17.11 GMR sought to contend that, based on the Detailed Project Report (DPR) of July 2004, of NHAI, pursuant to traffic volume studies undertaken by it through its own agency CES, the bid documents made future projections of traffic volume on the Ambala-
Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 25 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07Dera Bassi and the Dera Bassi-Zirakpur for 2004-2013. The projections contained in the said DPR of NHAI compared favourably with the traffic value projections which emerged from the independent studies conducted by GMR through IMACS. As such, GMR proceeded on the premise that the traffic volumes on the Project Highway, as indicated in the DPR of NHAI in 2004 as well as after completion of the highway in 2008, were reliable. A comparison of the traffic volume projections reflected in the bid documents issued by NHAI with the actual traffic volume recorded on the toll plaza set up by GMR, it was submitted, clearly indicated diversion of traffic from the highway to the Alternate Competing Routes (ACRs). In this context, GMR also placed reliance on the deposition of CW-1 Venkat Subba Rao and CW-2 Amit Kumar. It was pointed out that CW-1 had specifically deposed that there was substantial reduction in the traffic volume on the project highway because of diversion of traffic to the Saha-Panchkula Highway, and that CW-2 had deposed that the actual receipts at the toll plaza were less than the revenue projected in the bid documents. Clearly, therefore, submitted GMR, the widening and strengthening of the ACRs had resulted in diversion of traffic from the project highway to the ACRs.
17.12 This argument, noted the learned Arbitral Tribunal, threw up two aspects for consideration; the first, as to whether there was credible evidence to indicate that a significant percentage of traffic had been diverted from the project highway to the Shahabad- Panchkula stretch of SH-31 and NH-73 and second, in the event the Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 26 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 answer was in the affirmative, whether this diversion amounted to a breach of the CA or of the SSA so as to entitle GMR to redress.
17.13 The learned Arbitral Tribunal answered these issues in the negative for the following reasons:
(i) The projected traffic volume figures in the bid documents were merely provisional and subject to verification by interested bidders. Specific disclaimers, to this effect, were contained in the bid documents as well as in the CA.
(ii) GMR's own study conducted in 2005 indicated that the projected figures in the bid documents relating to traffic of commercial vehicles on the Project Highway were exaggerated. In this context, the learned Arbitral Tribunal relied on a letter dated 1st June 2009 from GMR to the Project Director, NHAI which contained the following tabular statement of the traffic volume on the Project Highway:
Details Bid- Bid Bid- Post
Docume Assessment Document COD
nt Base By GMR Projected (2008)
Traffic (2005) (2008)
(2004)
Car/Jeep/Van 11,056 12,311 15,735 13,248
LCV/Minibus 2,256 1,628 3,044 814
Bus/Truck 7,100 6,354 9,490 2,949
Traffic(VEH) 20,412 21,168 28,269 17,010
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(iii) Ignoring the clear indicator, in the afore-extracted
tabular statement of the study conducted by GMR itself, regarding traffic volumes on the Project Highway, GMR, at its own risk, offered to bid for the project on Negative Grant Basis.
(iv) That apart, the learned Arbitral Tribunal held that GMR could not seek to contend, on the basis of the traffic volume projection as contained in the bid documents, that there was a reduction in traffic volume consequent on augmentation and strengthening of ACRs.
(v) Even otherwise, observed the learned Arbitral Tribunal, GMR, despite having had the traffic volume on the Project Highway assessed in 2005, had not chosen to place the assessment study report on record. Nor was the person who assessed the traffic volume brought into the witness box or examined. Despite relying on the said assessment, purportedly conducted by IMACS, GMR had failed to lead evidence to prove the correctness of the assessment. The methodology by which the assessment was conducted also remained undisclosed. In the absence, therefore, of credible evidence regarding the projected traffic volume in 2005, the learned Arbitral Tribunal held that GMR could not seek to plead, even on facts, that there was a reduction in traffic volume on the Project Highway.Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 28 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07
(vi) It was further noted by the learned Arbitral Tribunal that the base figures of the traffic volume on NH-73 and SH-31, prior to execution of the CA, were not available. In the absence of such base figures, it was not possible to examine the plea of GMR that, consequent to widening and strengthening of the ACRs and other activities conducted by the State Government/NHAI, traffic volume on the ACRs had increased.
(vii) Adverting, next, to the IMACS report of 2009, the learned Arbitral Tribunal held that it suffered from the same deficiencies which plagued the IMACS report of 2005. The original report had not been placed on record, and all that was provided was an executive summary. Nor had GMR chosen to examine the author of the report. Inasmuch as the correctness of the report had been denied by NHAI, the learned Arbitral Tribunal held that the onus to prove the report and establish its credibility was on GMR. Having not produced the original report and having failed to call the author of the report to the witness box, the learned Arbitral Tribunal held that GMR had failed to establish the reliability of the IMACS report of 2009.
(viii) Even otherwise, held the learned Arbitral Tribunal, diversion of vehicles which would have used the Project Highway to the ACRs was a pure question of fact. The learned Arbitral Tribunal expressed the view that such Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 29 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 diversion could not be established by reference to the traffic volume on the ACRs such as on the Saha-Panchkula route, the entire traffic proceedings on the Saha-Panchkula route or on any other ACR, was not necessarily traffic which otherwise would have used the Project Highway and had diverted to the ACR. The learned Arbitral Tribunal was of the view that GMR ought to have proved, by credible evidence, that the vehicles would ordinarily have adopted the Project Highway had they not had the option of diverting via the ACR. In the context of the Shahabad-
Panchkula route, GMR ought to have established that diversion took place at Shahabad. No such attempt was made. The learned Tribunal also noted, in this context, that the distances which were required to be covered using the Shahabad-Panchkula route was greater than the distance which would have to be covered using the Project Highway. It was unlikely, according to the learned Arbitral Tribunal, that commercial vehicles would opt for a longer route merely to avoid toll of ₹140/- per vehicle.
(ix) As in the case of the IMACS report of 2009, even in respect of the report purportedly of December, 2012, GMR had placed on record only an executive summary, without the original report, unproved by the author of the report. The report of 2012 could also, therefore, not be treated as reliable or taken cognizance of.
Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 30 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07(x) GMR further sought to contend that the Government of Haryana had also upgraded and improved SH-31 from Shahabad to Shahzadpur. Reliance was placed, in this context, on (a) an internal letter dated 7 th January, 2010 of NHAI, which recorded the fact that the Government of Haryana had widened the carriageway of the aforesaid stretch of SH-31 from 5.5 - 7.5 to 10 m., and (b) depositions of CW-1, Subba Rao and Vishal Sharma, the Executive Engineer, PWD. Apropos NH-73, GMR relied on the technical notes dated 24th/27th November 2007, 31st March 2007, 12th March 2007 and 7th August 2008 of the Ministry of Road Transport and Highways, indicating sanction of funds for widening and strengthening NH-73, resulting in improvement in its riding quality and considerable improvement in its capacity to handle commercial traffic. Regarding these submissions, the learned Arbitral Tribunal observed that the technical notes and administrative approvals merely indicated that SH-31 and NH-73 had been strengthened. Widening and strengthening of highways, it was observed, was not forbidden either by the CA or by the SSA and was, in fact, necessary in public interest. Widening of SH-31 or NH-73 by 1.5m could not, therefore, constitute a breach of any contractual stipulation.
17.13.1 Issue 1 was, therefore, answered by the learned Arbitral Tribunal against GMR, by holding that:
Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 31 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07(i) construction of the Kesri ROB on SH-31 and improvement and strengthening of NH-73 could not be regarded as amounting to creation of a bypass within the meaning of Clause 8 of the CA, so as to constitute a breach of Clause 3.1 (xi) and 3.2 of the SSA,
(ii) GMR had failed to prove diversion of traffic from the Project Highway or any activity, by the respondents, which had a material effect on the performance of the GMR's obligations under the CA, and
(iii) GMR had also failed to prove that strengthening and widening of the road between Saha and Panchkula resulted in violation of the CA which affected the fundamental economics on the basis of which the CA was executed.
18. Re. Issue 2 18.1 Issue 2, as framed by the learned Arbitral Tribunal, dealt with whether NHAI was liable to determine all additional costs suffered or incurred by GMR due to improvement, development, strengthening and operation of SH-31 and NH-73 on account of the statutory guarantee (of interest on capital invested and reasonable return) to GMR under the National Highways Act, 1956 (―the NH Act‖).
Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 32 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:0718.2 GMR contended that the execution of the CA was subject to a statutory guarantee of reasonable returns to the concessionaire, i.e. to GMR, under Section 8A (2) of the NH Act. Section 8A of the NH Act read thus:
"8A. Power of Central Government to enter into agreements for development and maintenance of national highway. -
(1) Notwithstanding anything contained in this Act, the Central Government may enter into an agreement with any person in relation to the development and maintenance of the whole or any part of the national highway.
(2) Notwithstanding anything contained in Sec. 7, the person referred to in sub-section (1) is entitled to collect and retain fees at such rate, for services or benefits rendered by him as the Central Government may, by notification in the Official Gazette. specify having regard to the expenditure involved in building, maintenance, management and operation of the whole or part of such national highway, interest on the capital invested, reasonable return, the volume of traffic and the period of such agreement.
(3) A person referred to in sub-section (1) shall have powers to regulate and control the traffic in accordance with the provisions contained in Chapter VIII of the Motor Vehicles Act, 1988 (59 of 1988) on the national highway forming subject-matter of such agreement, for proper management thereof"
The ―reasonable return‖ which GMR estimated that it would earn, consequent on the execution of the CA, was 20%.
18.3 Dealing with the aforesaid argument, the learned Arbitral Tribunal noted that the CA had been awarded on an Open Signature Not Verified Competitive Bidding Basis and the projections in the CA in the bid Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 33 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 documents and the CA did not carry any warranty, much less guarantee, of reasonable return on profit investment. In this context, the learned Arbitral Tribunal once again relied on the disclaimers contained in the bid documents and in the CA. The issue of whether to bid for the contract on positive or negative grant basis, it was noted, was in the bidder's discretion.
18.4 Specifically adverting to Section 8A of the NH Act, the learned Arbitral Tribunal held that the provision merely indicated reasonable return as one of the considerations to be borne in mind while fixing the fee which the person was entitled to collect. Fixation of fee, it was observed, was an annual and a gazetted exercise. GMR had never sought to make out a case that the factors envisaged by Section 8A(2) had not been taken into consideration by NHAI while fixing the fee payable to GMR. Nor were the proceedings before the learned Arbitral Tribunal dealing with the correctness of appropriateness of the fixation of fee under the CA. Inasmuch as the fixation of fee was not questioned by GMR, the learned Arbitral Tribunal held that the alleged reduction of traffic volume on the project highway could not be regarded as entitling GMR to contend that it would not make a reasonable profit.
19. Issues 3 to 9 In view of its answers regarding Issues 1 and 2, the learned Arbitral Tribunal held that Issues 3 to 9 did not survive for consideration.
Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 34 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07Submission and Analysis
20. Mr Atul Sharma, learned Counsel, argued for GMR and Ms Maninder Acharya, learned Senior Counsel, advanced submissions on behalf of NHAI. They were heard at length. Copious written submissions were also filed.
21. Submissions of GMR 21.1 Compartmentalising the submissions advanced by GMR by way of challenge to the impugned award, one may first advert to the submission of GMR that several vital pieces of evidence, which crucially impacted the decision on the various issues that arose for consideration, were overlooked by the learned Arbitral Tribunal.
21.2 GMR contended, before the learned Arbitral Tribunal, that
(i) the Shahabad-Saha-Panchkula highway was earlier incapable of carrying commercial traffic owing to its poor condition,
(ii) the highway was widened and strengthened and a ROB was constructed at Kesri between Shahabad and Saha,
(iii) this resulted in the Shahabad-Saha-Panchkula stretch becoming usable by commercial traffic and, consequently, became a viable bypass, which was utilised by traffic which was earlier using the project highway,
(iv) this, in turn, resulted to consequent loss to GMR and Signature Not Verified
(v) GMR became aware of these facts only in 2008.
Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 35 of 133By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 21.3 Re. earlier condition of the Shahabad-Saha-Panchkula highway:
The following evidence which indicated that the Shahabad-Saha- Panchkula highway was, prior to re-development, incapable of carrying commercial traffic, submitted GMR, was over- looked/ignored by the learned Arbitral Tribunal.
(i) the affidavit in evidence of CW-1 (Venkata Subba Rao), in which it was stated thus:
―24. Due to the said improvement, development and strengthening of the aforesaid sections of the State Highway namely Railway Over Bridge on Saha and Shahabad of SH-31 at Kesri and strengthening and widening of NH-73 between Saha to Panchkula in the State of Haryana ("Alternate Routes/Competing Roads") which hitherto were not capable of catering to heavy and other commercial vehicles, which were otherwise using the Project Highway started opting to ply on these roads by avoiding and bypassing the toll plaza of the Claimant situated at "Dappar" thereby substantially reducing the commercial traffic on the Project Highway passing through the toll plaza of the Claimant. Such reduction of tollable traffic on the Project Highway due to diversion of the same on the Additional Routes/Competing Roads is causing substantial loss of toll which would have otherwise have been collected by the Claimants from such vehicles, This has substantially altered the basic understanding between the Claimant and the Respondents as to the commercial and financial viability of the Project Highway thus disturbing the financial equilibrium agreed to be maintained by the parties during the concession period‖,
(ii) the following questions put to CW-1 in cross-
examination, and his response thereto:
Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 36 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07(By NHAI) ―Q. 70. I put it to you that the stretch from Saha- Panchkula along NH-73 was already created and was in continuous use since long before the bidding process was initiated for the project highway. What have you to say ?
Ans. Though the stretch Saha-Panchkula was in existence but has not been an alternative road due to its poor conditions and restricted carriageway. The developments undertaken by the State of Haryana post signing of Concession Agreement and State Support Agreement has resulted in enhancement of the road worthiness to a large extent resulting in creation of alternate road to the project highway.‖ (By State of Haryana) ―Q.45 Is it correct that average speed of commercial vehicles on GMR Project Road is more than average speed of commercial vehicle plying on the alleged bye-pass road?
Ans. The speed of vehicles on the highway is a direct function of density of traffic on that particular highway. Since in the current context the most of the commercial traffic from the Project Highway has diverted to the bye-pass the speed of commercial traffic on bye-pass is obviously going to be lesser than that of the Project Highway.‖ Q.46 On which point of Project Highway commercial traffic has been diverted as per your above answer to question No. 45 ?
Ans. The commercial traffic which was earlier using the Project Highway has diverted to the bye-pass which is starting at the junction of SH-31 and NH-1.‖ Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 37 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07
(iii) para 5 of the preliminary submissions in the amended written statement dated 28th May 2015, filed by the State of Haryana, in which was stated thus:
―That the stretch of road from Shahabad-Saha was having very bad condition and was got repaired for convenience of the traffic.‖
(iv) letter dated 23rd July 2010 from GMR to the Government of Haryana in which it was specifically alleged that, prior to the construction of the ROB at Kesri and strengthening and widening of NH-73, SH-31 and NH-73 were ―not worthy of catering to heavy commercial traffic‖, which was not rebutted in the reply dated 17th August 2010 of the State of Haryana,
(v) letter dated 31st August 2010 from GMR to the Government of Haryana, in which, too, it was alleged that ―when the bidding process for the project was initiated by NHAI in the year 2002, these two roads were not strong enough to cater to the commercial traffic‖, which was not denied by the State of Haryana in its reply dated 17th September 2010 thereto, and
(vi) para 4.19 of the SOC, in which it was alleged that SH-31 and NH-73 were ―hereto ....not capable to cater to heavy commercial vehicles‖, which was not specifically rebutted in the corresponding para of the amended written statement filed by the State of Haryana.Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 38 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07
21.4 Re. construction of ROB and widening and strengthening of Shahabad-Panchkula highway: To support the factual assertions that, in fact, the Shahabad-Saha-Panchkula stretch had been widened and strengthened, GMR relied on the following evidence, which, too, it submitted, had been ignored by the learned Arbitral Tribunal:
(i) the affidavit in evidence of CW-1, in which it was thus stated in para 27:
―After a detailed traffic study, IMaCS submitted a detailed report dated 29.09.2009 to the Claimant wherein the key reasons for the diversion of traffic from the Project Highway to Alternate Routes/Competing Roads were ascertained as follows:
a) NH-73 was a single lane road without good surface quality during bidding process of the Project Highway.
(i) Presently it is a two lane road with Shoulders with good surface quality.
(ii) NH- 73 is connected to NH-j at Shahabad and traffic is diverted.
b) SH-3l which was a single lane road during the bid stage has undergone substantial improvement with development of RoB at Kesri and widening and improvement of that carriageway.‖
(ii) letter dated 7th January 2010 from the Project Director, NHAI, to the Regional Officer, NHAI, which acknowledged that (a) SH-31 had ―been upgraded with construction of ROB on the railway line crossing on Ambala-Yamuna Nagar section and widening of 5.5/7.5 meters carriageway to a width of 10 meters carriageway in Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 39 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 the year 2007-08‖ and (b) ―the widening of NH-73 has also been carried to a width of 7.5 metres-10 meters during this period‖,
(iii) Question No. 65 put to CW-1 by the State of Haryana and the response of CW-1 thereto, which read thus:
―Q.65 I draw your attention to document C-16 at Page 212 of Vol III of the Claimant s document. Is it correct that State of Haryana had improved and widened State Highway No.31 and National Highway No. 73 in the year 2006-07?
Ans. Yes.‖
(iv) the following recital, contained in the impugned award itself:
―It was argued on behalf of the Claimant that apart from the construction of RoB at Kesri, the Respondent, the State of Haryana had also improved and upgraded SH-31 from Shahabad to Shahzadpur. Reliance in support of that submission was placed upon a letter dated 7th January 2010 from the Project Director of NHAI to the Regional Officer NHAI of the said authority, which inter alia states that the State Govt. has widened SH-31 from 5.5 to 7.5 meters carriageway to II width of 10 meters. The letter also refers to the widening of NH-73 with the help of funds provided by MORTH and the State PWD. Reliance was also placed upon the deposition of Mr. Vishal Sharma, Executive Engineer PWD, Haryana, to contend that apart from construction of the RoB at Kesri, SH-31 has also been upgraded, Deposition of Mr. D. Subba Rao CW-l was also relied upon in support of that contention.‖ 21.5 Re. diversion of traffic consequent to activities on Shahabad-
Panchkula highway: The following evidence, which indicated that, Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 40 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 consequent to the construction of ROB at Kesri and widening/strengthening of NH-73, traffic which was earlier using the project highway had been diverted to SH-31 and NH-73, was also ignored by the learned Arbitral Tribunal:
(i) para 28 of the affidavit in evidence of CW-1, which relied on toll data of an existing toll on the project highway, operated by M/s RS Builders and Engineers Ltd., indicating a sharp drop in commercial traffic immediately consequent on opening of the ROB constructed at Kesri, which went un-rebutted in cross-examination,
(ii) letter dated 30th June 2010 from the Regional Officer, NHAI to the General Manager (Technical), P&H, NHAI, in which it was specifically recorded thus:
―On the contrary, there was reduction of traffic along the project corridor post commissioning of the competing facilities in the neighborhood such us the ROB on SH-31 between Shahabad and Saha, improvement of the Saha - Panchkula section on NH- 73 which is substantiated by RSIL 's toll revenue data.
From the above analysis of the Concessionaire, it is noted that the improvement of allied infrastructure in terms of upgradation of SH, MDR and construction of ROB has resulted in leakage of revenue for the Concessionaire of Ambala Chandigarh Expressway. The traffic getting diverted from NH1 to NH73 for onwards journey to Panchkula or Himachal Pradesh, actually travels 11 km more but saves the user fee of Ambala Chandigarh Expressway and excise, entry tax on the border of Hr and Pb States. Similarly, the traffic coming from Ambala leading to Zirakpur covers the same distance but follows the NH1 up to Sabhu border (at km 212.165) deviates to Banur to reach Zirakpur by avoiding the user fee of Ambala Chandigarh Expressway.
Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 41 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07Comments of RO Chandigarh The issue has been examined with respect to the provisions related to Additional Tollway in Section 8.1 of the Concession Agreement. Prima facie, the development of ROB on SH-31 (by Haryana State PWD) in conjunction with the upgradation of Saha·Panchkula section of NH-73 from 2-lane to 2- land paved shoulder (by NH-Division, PWD, Government of Haryana) has convened the corridor from Sahabad on NH-I to Zirakpur on NH-22 via Saha and Panchkula into a bypass for the Project Highway as defined in Clause 8.1. However, this highway was already in existence prior to bidding for Ambala- Chandigarh highway only, there was improvement with a ROB.
As per Clause 8, any such development before eighth anniversary of project by the authorities is not in compliance with the provisions of the Concession Agreement. Also, as per Clause 8.4, the above developments also call for implementation of clause 8,4 i.e., to toll the corridor from Sahabad on NH-1 to Zirakpur on NH-22 via Saha and Panchkulo, whereby per Krn toll fee to be collected on NH-73 shall be 133% of the per Km. fee levied and collected from similar vehicle or class of vehicles using the Amhala- Chandigarh Highway (Project Highway).
Sub-clause 8.1 and 8.4 both are in favour of the concessionaire in the event of considering the above developments as additional toll way/bypass to project highway. In case the provision sub-clause 8.4 are to be operated the issue is required to be deliberated now itself as work of upgradation of NH-73from 2 land to 4 lane carriageway width is in bidding stage and the same should be made clear to the bidders now itself.
In view of the forgoing paras it has been observed that the parallel development by Stare Govt, like NH-73 Lehli-Banur road were improvement of existing facilities which seems to have affected the viability of Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 42 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 the subject project corridor, which needs due attention of NHAI.‖ (Emphasis supplied)
(iii) the minutes of the Mediation Meeting dated 15th July 2010 between NHAI and GMR held in terms of Clause 39.1(b) of the CA, in which it was recorded thus:
―It was noticed that there had been some effect of opening of ROB on SH-3 in the revenue/toll collection of M/s RS Infrastructure in the year 2007-2008 as compared to 2006-2007 as presented by M/s GMR. The state roads, namely Bannur-Lehli and Tepla- Banur-Kharar Sections were also found to be having some effect on the toll collections on account of location of toll plaza in Duppar. Accordingly, various portions available under the concession were deliberated. On deliberation, it was observed that the cause for diversion of traffic has not arisen out of the acts of NHAI, but the same has happened on account of development of various facilities by the State Govt. Of Haryana & Punjab."
(Emphasis supplied)
(iv) letter dated 26th August 2010 from the CGM-cum-
Regional Officer, NHAI, Chandigarh to the Member (Project), NHAI, consequent to the aforesaid second mediation meeting, in which a detailed recital of the claims of GMR was set out, followed by the following acknowledgement:
―The total loss projected by Concessionaire on account of diversion of traffic to competing roads from the date of commissioning of toll operations i.e., Dec'08 till June'10 comes to Rs. 34.76 Crores.
The Concessionaire has been given all the supporting documents in support of the traffic counts carried out Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 43 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 by different agencies including GMR itself. By going through the details provided by Concessionaire the loss projected by the concessionaire seems, to be broadly justified. Accordingly, respective State Governments needs to be notified in accordance with the provisions of the Clause 7 of the State Support Agreement. Therefore further necessary action may please be taken at NHAI HQ in notifying to the State Govt. of Punjab and Haryana.‖ (Emphasis supplied)
(v) the specific assertion of GMR, in its letter dated 23 rd July 2010 to Government of Haryana, to the effect that commercial traffic had been diverted from the project highway to the ACR from Shahbad to Panchkula, consequent to the development of the ROB at Kesri and the widening and strengthening of the stretch between Saha and Panchkula, which was not denied in the reply dated 17th August 2010, of Government of Haryana thereto,
(vi) the similar assertion by GMR, in its letter dated 31 st August 2010 to Government of Haryana which, too, was not denied by Government of Haryana in its reply dated 17 th September 2010,
(vii) para 24 of the affidavit in evidence of CW-1, in which it was specifically deposed as under:
―24. Due to the said improvement, development and strengthening of the aforesaid sections of the State Highway namely Railway Over Bridge on Saha and Shahabad of SH-31 at Kesri and strengthening and widening of NH- 73 between Saha to Panchkula in the Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 44 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 State of Haryana ("Alternate Routes/Competing Roads") which hitherto were not capable of catering to heavy and other commercial vehicles, which were otherwise using the Project Highway started opting to ply on these roads by avoiding and bypassing the toll plaza of the Claimant situated at "Dappar" thereby substantially reducing the commercial traffic on the Project Highway passing through the toll plaza of the Claimant. Such reduction of tollable traffic on the Project Highway due to diversion of the same on the Additional Routes/Competing Roads is causing substantial loss of toll which would have otherwise have been collected by the Claimants from such vehicles.‖
(viii) Question 70 posed by NHAI and Question 46 posed by the State of Haryana to CW-1 in cross-examination and his response thereto, both of which stand already reproduced hereinabove,
(ix) the IMACS reports dated 29th September 2009 and December 2012 which clearly established that there had been reduction in the traffic volume on the project highway and diversion of traffic to the ACRs, consequent on their widening, strengthening and redevelopment, on which no question whatsoever was posed to CW-1 and no doubts were expressed regarding the correctness or authenticity of the said reports or the data reflected therein and the findings arrived at on the basis thereof, and
(x) para 26 of the affidavit in evidence of CW-1 in which he specifically deposed that he was part of the 2009 study Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 45 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 conducted by the IMACS, on which CW-1 relied, apart from the 2012 IMACS report.
21.6 Re. consequent loss having ensued to GMR: Apropos the fact that, as a result of diversion of traffic to the ACR consequent to the construction of the ROB at Kesri and the widening and strengthening of the stretch between Saha and Panchkula, loss had ensued to GMR, once again the following evidence had been ignored by the learned Arbitral Tribunal:
(i) para 28 of the affidavit in evidence of CW-1, which remain unrebutted in cross-examination, and
(ii) letter dated 26th August 2010 from the CGM cum Regional Officer of the NHAI to the Project Member of NHAI which confirmed the loss occasioned to GMR as a consequence of diversion of traffic as assessed by the Project Director of the NHAI.
21.7 Overlooking of the above evidence and material by the learned Arbitral Tribunal, submits GMR, has vitiated the impugned Award in its entirety.
21.8 Violation of principles of natural justice and due process of law GMR has also raised a serious issue regarding violation of the principles of natural justice and due process. The attention of the Court has been invited to the fact that, vide letter dated 24th July 2013, GMR had, after inspecting documents at the head office of NHAI, Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 46 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 requested for as many as 21 documents. Subsequently, applications were also filed by GMR, before the learned Arbitral Tribunal for a direction to NHAI to produce the aforesaid 21 documents. The said application was allowed by the learned Arbitral Tribunal vide communication/order dated 7th October 2013, addressed by the learned Presiding Member of the learned Arbitral Tribunal to the parties and their respective Counsel, which read thus:
―Sirs, This has reference to the applications made by the advocates for the Claimant on 29th August, 2013 seeking directions to the first Respondent to provide copies of the documents therein mentioned, which have already been inspected by the Claimant, and to the e-mail from the Presiding Arbitrator pointing out that no responses had been filed to those application and directing that such responses should be filed on or before 4th October, 2013.
No responses have thus far been received.
The Tribunal, therefore, allows the applications of the Claimant of 29th August, 2013 and directs the first Respondent to provide copies/photocopies of the documents that have been inspected by the Claimant and are referred to in the said applications. This shall be done within 4 weeks from today and it shall be done at the cost of the Claimant.
Yours faithfully S.P.Bharucha ‖ (Emphasis supplied) The aforesaid direction was reiterated by the learned Arbitral Tribunal in its minutes/order dated 29th March 2014 (which appears erroneously to have recorded the earlier order as 5 th October 2013 Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 47 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 instead of 7th October 2013) and order dated 13th September 2014, which again reiterated the direction to NHAI to produce the documents mentioned in the order dated 7th October 2013, of which inspection had already been allowed to GMR. The said 21 documents were not made available by NHAI, despite four orders having been passed by the learned Arbitral Tribunal. GMR sought to contend that the defiance, by NHAI, to comply with the directions issued by the learned Arbitral Tribunal was not only violative of the principles of natural justice but ought also to have necessarily invited an adverse inference against NHAI. Despite this fact having been brought to the notice of the learned Arbitral Tribunal, it is pointed out that the impugned Award does not reflect any application of mind thereto. It is submitted that Sections 181and 282 of the 1996 Act stand infracted thereby.
21.9 In sum: Essentially, therefore, insofar as the claim relating to the diversion of traffic from the project highway to the Shahabad-
Panchkula stretch was concerned, GMR advanced the following principal grounds of challenge:
18. Equal treatment of parties.--The parties shall be treated with equality and each party shall be given a full opportunity to present his case.2
28. Rules applicable to substance of dispute.--
(1) Where the place of arbitration is situate in India,--
(a) in an arbitration other than an international commercial arbitration, the arbitral tribunal shall decide the dispute submitted to arbitration in accordance with the substantive law for the time being in force in India;
(b) in international commercial arbitration,--
(i) the arbitral tribunal shall decide the dispute in accordance with the rules of law designated by the parties as applicable to the substance of the dispute;
(ii) any designation by the parties of the law or legal system of a given country shall be construed, unless otherwise expressed, as directly referring to the substantive law of that country and not to its conflict of laws rules;
(iii) failing any designation of the law under clause (a) by the parties, the arbitral tribunal shall apply the rules of law it considers to be appropriate given all the circumstances surrounding the dispute.Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 48 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07
(i) The learned Arbitral Tribunal ignored vital evidence, oral as well as documentary.
(ii) The principles of natural justice, as also Sections 18 and 28 of the 1996 Act, were violated, as 21 documents, of which GMR had been allowed inspection and which were vital to GMR establishing its case, had been directed, by the learned Arbitral Tribunal, to be produced by NHAI on as many as three occasions but the direction was never complied with. This ought to have invited an adverse inference against NHAI and in favour of GMR. The learned Arbitral Tribunal, however, completely ignored this fact.
(iii) Both the reports of the IMACS dated 29th September 2009 and December 2012, were ignored by the learned Arbitral Tribunal, despite categorically confirming the case that GMR sought to set up, i.e. that, consequent to strengthening and development of the Shahabad-Panchkula stretch, it had emerged as an ACR and a bye-pass to the project highway, through which traffic had been diverted resulting in loss to GMR.
21.10 Apart from the above, GMR also sought to urge that there had been lack of proper deliberations amongst the members of the learned Arbitral Tribunal and that, for want of mutual consultation and deliberation, the Award was vitiated. Mr. Sharma had invited attention, in this context, to various correspondences between the Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 49 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 members of the learned Arbitral Tribunal. However, I do not deem it necessary to enter into that aspect of the matter.
22. Submissions of NHAI and State of Haryana 22.1 Both the NHAI and the State of Haryana have essentially relied on the findings in the impugned majority award, reproducing them in extenso in their written submissions. The submissions advanced, on the basis thereof, may be enumerated as under:
(i) The claims of the petitioner were based on the representations, forecasts and figures provided by NHAI in the RFP, which could not have been relied upon, in view of the disclaimer clauses contained therein.
(ii) No bypass had been constructed, either by the NHAI or by the State of Haryana, within the meaning of Clause 8.1 of the CA or Clauses 3.2 of the SSA.
(iii) Section 8A of the NH Act was of no application. It merely prescribed the method for fixing the toll fee by the Central Government. NHAI had no concern with the said provision.
(iv) Internal communications between officers of the NHAI, it was rightly held, could not have been relied upon by GMR, as they did not constitute admissions and were of no probative value.
Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 50 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07(v) It was absurd to contend that the CA or the SSA prohibited the NHAI from maintaining or improving pre- existing roads or highways. No such prohibition, for that matter, existed either in the CA or in the SSA.
(vi) The IMACS report, cited by GMR, was of no evidentiary value as it was merely an executive summary, and the original report, from which the summary was prepared, had never been produced by GMR. Equally, the author of the report had also not been cited as a witness.
(vii) The learned Arbitral Tribunal had correctly held that GMR had failed to prove that the construction of the ROB at Kesri and widening and strengthening of the highway between Saha and Panchkula had resulted in diversion of commercial traffic which was otherwise plying on the Project Highway.
(viii) Equally, the GMR had failed to prove that the said changes, effected on the Shahabad-Panchkula highway, had affected the fundamental economics of the CA. Under Section 34 of the 1996 Act, a Court could not sit in appeal over the reasoning of the learned Arbitral Tribunal. All that the Court was required to examine was whether the reasoning was plausible. If it was, no case for interference could be said to exist.
(ix) Despite having carried out its own studies and, therefore, ascertained that the traffic volume projections in Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 51 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 the bid documents was exaggerated, GMR, nonetheless, opted to bid on negative grant basis. Though GMR contended that it had itself conducted a traffic volume assessment as in 2008, at the time of bidding for the project, and had found the figures arrived at in the said assessment to corroborate the figures in the DPR, GMR had failed to place on record the report obtained by it at that point of time.
(x) Thus, GMR was guilty of withholding best evidence, justifying an adverse inference against it. Reliance was placed, for this purpose, on Gopal Krishnaji Ketkar v. Mohamed Haji Latif3.
(xi) Clause 8 of the CA and Clauses 3.1 and 3.2 of the SSA prohibited construction of Expressway and Additional Tollway for eight years. Neither was any Expressway, nor was any Additional Tollway, constructed. The State of Haryana had merely maintained, improved, widened and strengthened the alternative roads around the project highway, without violating provisions of the SSA. Neither CA nor the SSA contained any proscription against improvement, widening or maintenance of the existing roads. Interestingly, in this context, the State of Haryana contends thus, in its written submission:
―The contractual prohibition contained in the clauses of the agreement did not prohibit an existing state highway or any existing national highway to become 3 AIR 1968 SC 1413 Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 52 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 any road a "bypass" only because of its upkeep, maintenance, strengthening or widening. The provisions of the Clause 8 of the Concession agreement and Clause 3.2 of the SSA prohibited the GOI, NHAI and the State of Haryana & Punjab from constructing a bypass between Ambala & Zirakpur and all they intended to say was that no new road shall be constructed to provide an alternate route or a parallel road to the project highway. If the Applicant wanted to restrict the Respondent from any such improvement or development they should have provided for the same and specifically forbidden it.‖ The State of Haryana, thereby, impliedly acknowledged that, by the strengthening and widening of the existing parallel highways, they had become viable bypasses to the Project Highway. That, however, according to the State of Haryana, was not prohibited by the CA or SSA, which merely prohibited construction of a new road.
Analysis
23. Scope of interference under Section 34 23.1 There is no gainsaying that interference with arbitral awards is not an exercise to be likely undertaken. Ordinarily, the Arbitral Tribunal is the final arbiter on all aspects factual and legal. Interpretation of contractual covenants is ordinarily the province of the Arbitral Tribunal. The scope of interference, with the manner in which an Arbitral Tribunal interprets contractual covenants, is heavily circumscribed. A Section 34 Court cannot interfere with an Arbitral Tribunal on the ground that the Arbitral Tribunal has not interpreted the contractual covenants correctly, as, in its view the covenants were Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 53 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 required to be differently interpreted. The Court cannot, therefore, substitute the interpretation of the contractual covenants which, according to it, is most appropriate, in place of the interpretation that the learned Arbitral Tribunal has chosen to place thereon. It is only where the interpretation of the contractual covenants is plainly unacceptable, or contradictory to well settled principles governing interpretation of contractual covenants, or the interpretation accorded by the Arbitral Tribunal to a contractual covenant would be contrary to other covenants of the same contract, that the Section 34 Court can interfere. In N.H.A.I. v. Progressive MVR JV4, the Supreme Court has, however, also endorsed interference under Section 34 where different Arbitral Tribunals, dealing with the same contract or with identical contractual covenants, have arrived at different conclusions. Absent these limited grounds, an Arbitral Award cannot be interfered with, under Section 34 of the 1996 Act, on the ground that the interpretation of the contractual covenants, by the Arbitral Tribunal is not palatable, or even acceptable, to the Court.
23.2 The trajectory in the development of the law, with respect to Section 34 of the 1996 Act may, for the present, be charted starting from the decision in Associate Builders v. DDA5, rendered on 25th November 2014. Section 34 of the 1996 Act read, at that point of time, thus:
―34. Application for setting aside arbitral award. -
(1) Recourse to a court against an arbitral award may be made only by an application for setting aside 4 (2018) 14 SCC 688 5 (2015) 3 SCC 49 Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 54 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 such award in accordance with sub-section (2) and sub-section (3).
(2) An arbitral award may be set aside by the court only if -
(a) the party making the application furnishes proof that -
(i) a party was under some incapacity; or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the Arbitral Tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 55 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 failing such agreement, was not in accordance with this Part; or
(b) the court finds that -
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation. - Without prejudice to the generality of sub-clause (ii), it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81.
(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under Section 33, from the date on which that request had been disposed of by the Arbitral Tribunal:
Provided that if the court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.
(4) On receipt of an application under sub-section (1), the court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the Arbitral Tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of Arbitral Tribunal will eliminate the grounds for setting aside the arbitral award.‖ Section 34 of the 1996 Act as it stood when Associate Builders5 was Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 56 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 rendered, therefore, did not contain any specific provision permitting interference with an Arbitral Award, predicated on the merits of the Award. It did, however, contain a general provision, in Section 34(2)(b)(ii) of the 1996 Act, permitting such interference where the Arbitral Award is in conflict with the public policy of India.
23.3 Thankfully, the expression ―public policy of India‖ which, otherwise, could lend itself to a veritable multitude of interpretations, was cabined and confined, by the decisions in ONGC Ltd v. Saw Pipes Ltd.6 and Associate Builders5, into certain well-delineated and recognizable parameters. The Supreme Court, in Associate Builders5, endorsed the earlier view, expressed in ONGC5, that the expression ―public policy of India‖ was required to be widely interpreted.
23.4 ONGC6 In ONGC6, the Supreme Court, even while observing that the concept of public policy connoted a matter which concerned public good and public interest, which concept itself had varied from time to time, nonetheless opined that any Award which was likely to adversely affect the administration of justice was against public policy. As a result, an Arbitral Award was held to be contrary to the public policy of India if it was (i) contrary to fundamental policy of Indian Law or
(ii) contrary to the interest of India or (iii) contrary to justice or morality or (iv) patently illegal. Explaining the concept of ―patent illegality‖, ONGC6 held that the illegality had to be such as went to the root of the matter and that trivial illegalities would not be 6 (2003) 5 SC 705 Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 57 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 encompassed in the said expression. An Arbitral Award which was so unreasonable or unfair as to shock the judicial conscience was also held to be contrary to public policy of India.
23.5 McDermott International Inc. v. Burn Standard Co. Ltd.7 In Mcdermott7, the Supreme Court held that ―patent illegality‖, in order to constitute violation of public policy, would include an instance in which the arbitrator ―has gone contrary to or beyond the express law of the contract or granted relief in the matter not in dispute‖. In ascertaining whether the Award was contrary to public good or public interest and, therefore, whether it was contrary to the ―public policy of India‖, the Supreme Court held that the pleadings of the parties and the materials brought on record were relevant. This view was reiterated in Centrotrade Minerals & Metals Inc. v. Hindustan Copper Ltd.8.
23.6 DDA v. R.S. Sharma & Co.9 This view was somewhat broadened in R.S. Sharma9, which held that an Award which was
(i) contrary to substantive provisions of law, or
(ii) contrary to the provisions of the Arbitration and Conciliation Act, 1996, or
(iii) against the terms of the respective contract, or
(iv) patently illegal, or 7 (2006) 11 SCC 181 8 (2006) 11 SCC 245 9 (2008) 13 SCC 80 Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 58 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07
(v) prejudicial to the rights of the parties, was also open to interference under Section 34(2) of the 1996 Act. In this context, the Supreme Court held that it was open to the Section 34 Court to consider whether the Award was against the specific terms of contract and, if the answer was in the affirmative, to interfere with the award as being patently illegal and opposed to the public policy of India.
23.7 Associate Builders5 23.7.1 In Associate Builders5, the Supreme Court went on to expound, in detail, on the four criteria envisaged in ONGC5 as vitiating an Arbitral Award under Section 34(2) of the 1996 Act, i.e. that the Award was contrary to the fundamental policy of Indian law, contrary to the interests of India, contrary to justice or morality, or patently illegal.
23.7.2 Adverting, first, to the concept of the ―fundamental policy of Indian law‖ the Supreme Court held that if the Award was violative of any statutory provision or of any order passed by a hierarchically superior court, it would be violative of the ―fundamental policy of the Indian law‖.
23.7.3 Additionally, any arbitral Award which did not reflect a ―judicial approach‖, it was held, would be contrary to the fundamental policy of Indian law. On the concept of a ―judicial approach‖, para 29 of the report in Associate Builders5 observed thus:
Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 59 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07―29. It is clear that the juristic principle of a ―judicial approach‖ demands that a decision be fair, reasonable and objective. On the obverse side, anything arbitrary and whimsical would obviously not be a determination which would either be fair, reasonable or objective.
23.7.4 Fundamental, to the policy of Indian law, it was also held, was the audi alteram partem principle which found statutory expression in Sections 18 and 34(2)(a)(iii) of the 1996 Act.
23.7.5 A third category of Awards which could be treated as opposed to the fundamental policy of Indian law, it was held, was awards which were perverse, in that (i) they contained findings based on no evidence or (ii) they took into account something irrelevant to the decision arrived at or (iii) they ignored vital evidence in arriving at the decision. In this context, the Supreme Court cautioned that the approach, while dealing with arbitral awards, had to be qualitatively different. The Court had to bear in mind the fact that the arbitrator was the ―ultimate master of the quantity and quality of evidence to be relied on‖ when he delivered the award. Thus, held the Supreme Court, ―an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score‖. The Court could not sit in appeal over the arbitral award.
23.7.6 On the concept of ―patent illegality‖, which was also one of the grounds on which Associate Builders5 held that an Arbitral Award could be set aside as contrary to the public policy of India, the Supreme Court held thus:Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 60 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07
―42. In the 1996 Act, this principle is substituted by the ―patent illegality‖ principle which, in turn, contains three subheads:
42.1. (a) A contravention of the substantive law of India would result in the death knell of an arbitral award. This must be understood in the sense that such illegality must go to the root of the matter and cannot be of a trivial nature. This again is really a contravention of Section 28(1)(a) of the Act, which reads as under:
―28. Rules applicable to substance of dispute.--(1) Where the place of arbitration is situated in India--
(a) in an arbitration other than an international commercial arbitration, the Arbitral Tribunal shall decide the dispute submitted to arbitration in accordance with the substantive law for the time being in force in India;‖ 42.2. (b) A contravention of the Arbitration Act itself would be regarded as a patent illegality -- for example if an arbitrator gives no reasons for an award in contravention of Section 31(3) of the Act, such award will be liable to be set aside.
42.3. (c) Equally, the third subhead of patent illegality is really a contravention of Section 28(3) of the Arbitration Act, which reads as under:
―28. Rules applicable to substance of dispute.--(1)-
(2)*** (3) In all cases, the Arbitral Tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction.‖ This last contravention must be understood with a caveat.
An Arbitral Tribunal must decide in accordance with the terms of the contract, but if an arbitrator construes a term of the contract in a reasonable manner, it will not mean that the award can be set aside on this ground. Construction of the terms of a contract is primarily for an arbitrator to decide unless the Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 61 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 arbitrator construes the contract in such a way that it could be said to be something that no fair-minded or reasonable person could do.
43. In Mcdermott7, this Court held as under: (SCC pp. 225- 26, paras 112-13) ―112. It is trite that the terms of the contract can be express or implied. The conduct of the parties would also be a relevant factor in the matter of construction of a contract. The construction of the contract agreement is within the jurisdiction of the arbitrators having regard to the wide nature, scope and ambit of the arbitration agreement and they cannot be said to have misdirected themselves in passing the award by taking into consideration the conduct of the parties. It is also trite that correspondences exchanged by the parties are required to be taken into consideration for the purpose of construction of a contract.
Interpretation of a contract is a matter for the arbitrator to determine, even if it gives rise to determination of a question of law. [See Pure Helium India (P) Ltd. v. Oil and Natural Gas Commission10 and D.D. Sharma v. Union of India11 ]
113. Once, thus, it is held that the arbitrator had the jurisdiction, no further question shall be raised and the court will not exercise its jurisdiction unless it is found that there exists any bar on the face of the award.‖
44. In MSK Projects (I) (JV) Ltd. v. State of Rajasthan12, the Court held: (SCC pp. 581-82, para 17) ―17. If the arbitrator commits an error in the construction of the contract, that is an error within his jurisdiction. But if he wanders outside the contract and deals with matters not allotted to him, he commits a jurisdictional error. Extrinsic evidence is admissible in such cases because the dispute is not something which arises under or in relation to the contract or dependent 10 (2003) 8 SCC 593 11 (2004) 5 SCC 325 12 (2011) 10 SCC 573 Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 62 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 on the construction of the contract or to be determined within the award. The ambiguity of the award can, in such cases, be resolved by admitting extrinsic evidence. The rationale of this rule is that the nature of the dispute is something which has to be determined outside and independent of what appears in the award. Such a jurisdictional error needs to be proved by evidence extrinsic to the award. (See Gobardhan Das v. Lachhmi Ram13 , Thawardas Pherumal v. Union of India14 , Union of India v. Kishorilal Gupta & Bros.15 , Alopi Parshad & Sons Ltd. v. Union of India16 , Jivarajbhai Ujamshi Sheth v. Chintamanrao Balaji17 and Renusagar Power Co. Ltd. v. General Electric Co.18 )‖
45. In Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram Saran19 , the Court held: (SCC pp. 320-21, paras 43-45) ―43. In any case, assuming that Clause 9.3 was capable of two interpretations, the view taken by the arbitrator was clearly a possible if not a plausible one. It is not possible to say that the arbitrator had travelled outside his jurisdiction, or that the view taken by him was against the terms of contract. That being the position, the High Court had no reason to interfere with the award and substitute its view in place of the interpretation accepted by the arbitrator.
44. The legal position in this behalf has been summarised in para 18 of the judgment of this Court in SAIL v. Gupta Brother Steel Tubes Ltd.20 and which has been referred to above. Similar view has been taken later in Sumitomo Heavy Industries Ltd. v. ONGC Ltd.21 : to which one of us (Gokhale, J.) was a party. The observations in para 43 thereof are instructive in this behalf.
13AIR 1954 SC 689 14 AIR 1955 SC 468 15 AIR 1959 SC 1362 16 AIR 1960 SC 588 17 AIR 1965 SC 214 18 (1984) 4 SCC 679 19 (2012) 5 SCC 306 20 (2009) 10 SCC 63 21 (2010) 11 SCC 296 Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 63 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07
45. This para 43 reads as follows: (Sumitomo 21 case , SCC p. 313) ‗43. ... The umpire has considered the fact situation and placed a construction on the clauses of the agreement which according to him was the correct one. One may at the highest say that one would have preferred another construction of Clause 17.3 but that cannot make the award in any way perverse. Nor can one substitute one's own view in such a situation, in place of the one taken by the umpire, which would amount to sitting in appeal. As held by this Court in Kwality Mfg.
Corpn. v. Central Warehousing Corpn.22, the Court while considering challenge to arbitral award does not sit in appeal over the findings and decision of the arbitrator, which is what the High Court has practically done in this matter. The umpire is legitimately entitled to take the view which he holds to be the correct one after considering the material before him and after interpreting the provisions of the agreement. If he does so, the decision of the umpire has to be accepted as final and binding.'‖ 23.7.7 Following Associate Builders5, the 1996 Act was amended, with effect from 23rd October 2015, vide Section 18 of the Arbitration and Conciliation (Amendment) Act, 2016. For the pre-existing explanation to Section 34(2), Explanation 123 and Explanation 224 22 (2009) 5 SCC 142 23 Explanation 1.-- For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,--
(i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or
(ii) it is in contravention with the fundamental policy of Indian law; or
(iii) it is in conflict with the most basic notions of morality or justice.
24Explanation 2.-- For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.
Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 64 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07were substituted. Additionally, sub-section (2A)25 added in Section 34. 23.7.8 Ordinarily, a Section 34 Court would not interfere with the interpretation adopted by an Arbitral Tribunal with respect to a contractual covenant. This proscription is, however, not absolute. Where it appears to the Court that the interpretation placed by the Arbitral Tribunal on the contractual clauses is not one which can be adopted by any reasonable person, the Court can interfere. In deciding whether the interpretation, placed by the learned Arbitral Tribunal on the contractual covenants is, or is not, reasonable, the Court would be required to examine all relevant covenants in the contract. An interpretation of a particular clause, which stands alone and is unconditioned by any other clause in the contract, would be less vulnerable to interference by a Court, apropos the interpretation that an Arbitral Tribunal may choose to place on it. Where, however, a contractual covenant is interlinked to other covenants in the contract, or where there are more than one covenants in a contract dealing with a particular contingency, then, if the Arbitral Tribunal interprets one of the covenants in such a manner as would frustrate the intent of the other covenants, or in a manner which is not in sync with the other covenants, a Court would be bound to interfere.
23.7.9 Equally, if an Arbitral Tribunal does not consider a particular relevant covenant, despite its attention having been invited thereto, 25 (2A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award: Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 65 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 the Court would be justified in interfering. In this context one may refer to para 61 of the report in Ssangyong Engg. & Construction Co. Ltd. v. NHAI26 in which the Supreme Court addressed the question of the amenability to interference of an arbitral award, on the ground that a contention raised by a party was not considered. The Supreme Court approved principle enunciated in the decision of the Singapore Court of Appeal in CRW Joint Operation v. PT Perusahaan Gas Negara (Persero) TBK27 which, in turn, relied on the following enunciation of the law in ―Redfern and Hunter on International Arbitration‖ (Oxford University Press, 5th Edn., 2009):
―The significance of the issues that were not dealt with has to be considered in relation to the award as a whole. For example, it is not difficult to envisage a situation in which the issues that were overlooked were of such importance that, if they had been dealt with, the whole balance of the award would have been altered and its effect would have been different.‖ The Court faced with a submission by an aggrieved litigant that the Arbitral Tribunal had failed to consider a contention advanced before it is, therefore, required to examine whether, if the Arbitral Tribunal would have considered the contention, the outcome may have been different. If the answer to this query is in the negative, no cause for interference exists, merely because the Arbitral Tribunal has not considered the contention. If, however, the Court comes to the conclusion that, were the contention to be considered, the outcome of the proceedings might have been different, the failure, on the part of 26 (2019) 15 SCC 131 27 2011 SGCA 33 Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 66 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 the Arbitral Tribunal, in considering the contention, would imperil the award.
23.8 South East Asia Marine Engineering & Constructions Ltd. v. Oil India Ltd.28 23.8.1 An important decision, in this context, is the pronouncement of the Supreme Court, through Ramana J (as he then was) in South East Asia Marine Engineering & Constructions28. The issue before the Supreme Court was with respect to the interpretation, by the Arbitral Tribunal, with a ―change in law‖ clause in the contract, in which event Oil India Ltd (OIL), the respondent before the Supreme Court, became liable to re-imburse South East Maritime Constructions Ltd. (SEAMEC), the appellant before the Supreme Court. SEAMEC claimed that the increase in price of High Speed Diesel (HSD), an item essential to carry out the contract, constituted ―change in law‖ and, thereby, entitled SEAMEC to re-imbursement. The learned Arbitral Tribunal, per majority, allowed the claim, albeit by holding that the increase in price of HSD was not a ―change in law‖ stricto sensu. Nonetheless, the learned Arbitral Tribunal held that it had the ―force of law‖ and was also, therefore, covered by the ―change in law‖ clause.
23.8.2 The High Court, however, reversed the decision of the learned Arbitral Tribunal, holding that the manner in which the learned Arbitral Tribunal had interpreted the clauses of the contract was contrary to public policy and amounted to patent illegality.
28(2020) 5 SCC 164 Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 67 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 23.8.3 The Supreme Court, in appeal, first noted the position, in law, as enunciated in Dyna Technologies Pvt. Ltd v. Crompton Greaves Ltd.29, that the mere possibility of an alternative interpretation of the contractual covenants would not justify interference with arbitral award under Section 34 of the 1996 Act. The need for deference and caution, by Courts seized with Section 34 challenges, was also underscored in the said decision.
23.8.4 Having so noticed, the Supreme Court in South East Asia Marine Engineering & Constructions28, in para 14 of the report, framed the issue arising before it for consideration as ―whether the interpretation provided to the contract in the award of the tribunal was reasonable and fair, so that the same passes the muster under Section 34 of the Arbitration Act‖.
23.8.5 Having thus framed the issue that arose for consideration, the Supreme Court disapproved the interpretation of the contract, both by the learned Arbitral Tribunal as well as by the High Court. In so far as the reasoning of the learned Arbitral Tribunal was concerned, the Supreme Court held, significantly, that ―although the Arbitral Tribunal correctly held that a contract needs to be interpreted taking into consideration all the clauses of the contract, it failed to apply the same standard while interpreting Clause 23 of the contract".
23.8.6 Having thus set out the legal position, the Supreme Court held that, while interpreting the ―change in law‖ clause in the contract, the Arbitral Tribunal was required to take into account other contractual 29 (2019) 20 SCC 1 Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 68 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 terms such as Item 1 of List II which indicated that fuel would be supplied by the contractor at his expense. If other contractual terms were taken into account, the Supreme Court held that the interpretation, accorded to the ―change in law‖ clause in the contract by the Arbitral Tribunal, could not sustain.
23.8.7 While examining the vulnerability of the decision of the learned Arbitral Tribunal, on the claims of GMR, to interference under Section 34 of the 1996 Act, this Court would, applying the law enunciated in South East Asia Marine Engineering & Constructions28, have to examine whether the interpretation of the covenants of the CA, by the learned Arbitral Tribunal, is reasonable and fair. In doing so, no doubt, the Court is required to bear in mind the constraints that operate on it, as a Court exercising jurisdiction under Section 34 of the 1996 Act, in the matter of interference with the manner in which the Arbitral Tribunal has chosen to interpret the contract. If, however, the Court finds that the learned Arbitral Tribunal has not taken into account all relevant clauses, or that the manner in which the learned Arbitral Tribunal has interpreted the contract is disharmonious with other clauses, the Court would have necessarily to interfere.
23.9 Project Director, NHAI v. M. Hakeem30 The Supreme Court was, here, essentially concerned with the issue of whether Section 34 of the 1996 Act permitted the Court to modify an arbitral award. While answering the issue in the negative, the 30 (2021) 9 SCC 1 Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 69 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 Supreme Court also reiterated the limitations on the scope of judicial review of an arbitral award under Section 34.
23.10 After the above decisions, the Supreme Court has, in 2022, rendered two more decisions which are of considerable significance in understanding Section 34 of the 1996 Act and its scope and ambit. They are State of Chhatisgarh v. Sal Udyog Pvt.Ltd.31 and NHAI v. P. Nagaraju alias Cheluvaia32.
23.11 Sal Udyog31 23.11.1 In Sal Udyog31, the issue in controversy was whether the State of Chhatisgarh was entitled to recover, from the respondent Sal Udyog Pvt. Ltd. (―Sal Udyog‖ hereinafter), supervision charges, against sal seeds supplied by the State to Sal Udyog. The State had, in fact, recovered supervision charges of ₹ 1.49 crores from Sal Udyog. Sal Udyog challenged the said recovery in arbitral proceedings and sought refund of the recovered amount along with interest. The Arbitral Tribunal allowed the claim of Sal Udyog and directed payment, by the State of Chhattisgarh to Sal Udyog, of an amount of ₹ 7,43,46,772/-. The State of Chhattisgarh assailed the award before the High Court and, having failed, carried the matter further to the Supreme Court.
23.11.2 Paras 18 and 19 of the Award under challenge in Sal Udyog31, which dealt with recoverability of supervision expenses, read thus:
31(2022) 2 SCC 275 32 2022 SCC OnLine SC 864 Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 70 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 ―18. The further submission of the defendant is that in Clause 6(b) of the agreement in respect of supervision expense it is mentioned and the provision also enjoins that the supervision expenses along with other expenses which are spent by the defendant would be recoverable. Insofar as the supervision expense is concerned that concerned that concerns will all those expenses with respect to collection of the Sal seeds under the banner of the Government. And in these expenses there are certain expenses like godown rent, the salary of the officers and the staffs, the appointment of the different persons of the work in the department and their travelling allowance, vehicle, telephone, furniture, transport and all other expenses of the vehicle. They are all such proportionate expenses which cannot be shown under the head of the bill or the voucher under the head of Sal seeds and therefore 10% supervision expenses are acceptable and recoverable.
19. On the analysis of this issue there is a clear provision in the agreement that the purchase of the Sal seeds shall be divided into two parts, the first would be of royalty and the second part would be of the purchaser of Sal seed and all those expenses until its delivery in which the collection expenses, purchasing price, handling and supervision expenses, the agents commission, transports would all be assembled. After the examination of the price on both the ends the first end would be of royalty according to the industrial policy of the State Government of Madhya Pradesh the meaning of royalty implies the meaning the price at the production site. For the calculation the bazaar rate or the auction or the price received on tender, the transport (in wood matter the cutting) expenses may be reduced. In this was in the matter of royalty from the point of production and protection and until the arrangement for the sake of trading all indirect expenses are assembled so far as the second part is concerned from the point of collection of Sal seeds until its delivery all expenses are assembled. In order to make it more clear the first part has been shown which relates to the expenses relating to ―storing and the purchase price to the producers and other handling and supervision expenses‖. Insofar as the guidelines which have been issued by virtue of the Notification of the State Government dated 25-4-1981 insofar as Para 17 is concerned and particularly the guidelines which have been issued by Madhya Pradesh Rajya Vanopaj Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 71 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 Sangh it is apparent that the work of the supervisor has to be done by the agent/committee and particularly the expenses to the clerk checker, etc. and all those other expenses which go to the handling expenses and the commission. And thus insofar as in the form of supervision expenses there is no basis to admit any indirect expense. In this situation the amount which is shown in the account by the account experts are liable to be admitted for adjustments.‖ 23.11.3 The Supreme Court, having noted the law laid down in Associate Builders5, Ssangyong26 and Delhi Airport Metro Express Pvt. Ltd. v. Delhi Metro Rail Corporation Ltd.33 with respect to the scope of interference with arbitral awards under Section 34 of the 1996 Act, went on to hold, with respect to the facts before it, that Clause 6(b) of the agreement between the State of Chhattisgarh and Sal Udyog clearly included, in the expenses incurred by the State Government towards supply of sal seeds, supervision charges. The agreement also envisaged that supply of sal seeds would be against advanced payment. The Supreme Court held that, in turning down the plea of the State of Chhattisgarh regarding recoverability of supervision expenses, predicated on clause 6(b) of the Agreement, the learned Arbitral Tribunal had given a complete go by to the terms and conditions of the agreement between the parties. This, held the Supreme Court, amounted to ―patent illegality‖ manifest on the face of the Arbitral Award. Para 26 of the report concluded thus:
―26. To sum up, existence of Clause 6(b) in the agreement governing the parties, has not been disputed, nor has the application of the Circular dated 27-7-1987 issued by the Government of Madhya Pradesh regarding imposition of 10% supervision charges and adding the same to cost of the Sal seeds, after deducting the actual expenditure been questioned 33 (2022) 1 SCC 131 Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 72 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 by the respondent Company. We are, therefore, of the view that failure on the part of the learned sole arbitrator to decide in accordance with the terms of the contract governing the parties, would certainly attract the ―patent illegality ground‖, as the said oversight amounts to gross contravention of Section 28(3) of the 1996 Act, that enjoins the Arbitral Tribunal to take into account the terms of the contract while making an award. The said ―patent illegality‖ is not only apparent on the face of the award, it goes to the very root of the matter and deserves interference. Accordingly, the present appeal is partly allowed and the impugned award, insofar as it has permitted deduction of ―supervision charges‖ recovered from the respondent Company by the appellant State as a part of the expenditure incurred by it while calculating the price of the Sal seeds, is quashed and set aside, being in direct conflict with the terms of the contract governing the parties and the relevant circular. The impugned judgment dated 21-10-2009 is modified to the aforesaid extent.‖ 23.12 P. Nagaraju32 23.12.1 Compensation, against land of the respondents before the Supreme Court in P. Nagaraju32, had been granted to them @ ₹ 2026 per sq. mtr and ₹ 17,200/- per sq.mtr by the Special Land Acquisition Officer (SLAO). The decision was assailed, by the land owners, and referred to arbitration. The learned Arbitrator enhanced the awarded compensation to ₹ 15,400/- per sq.mtr and ₹ 25,800/- per sq.mtr respectively. NHAI challenged the award before the High Court under Section 34 of the 1996 Act. The High Court upheld the award.
NHAI, consequently, appealed to the Supreme Court. The Supreme Court noticed its earlier decisions in Associate Builders5, Ssangyong26, Delhi Airport Metro Express33, Sal Udyog31 and NHAI v. M. Hakeem30.
Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 73 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:0723.12.2 In para 27 of the report in P. Nagaraju32, the Supreme Court held that ―while examining the award in the limited scope under Section 34 of Act of 1996, the Court is required to take note as to whether the evidence available on record has been adverted to and has been taken note by the Arbitrator in determining the just compensation failing which it will fall foul of Section 31(3) 34 and amount to patent illegality‖. The Supreme Court nonetheless noted that the issue of whether the learned Arbitrator had appropriately considered the aspect of applying the market value notifying as a guided value, who had afforded due opportunity to NHAI in that regard, still remained to be examined. The Supreme Court went on to hold thus (in para 27 of the report):
―27. ..... In such event an error if found, though it would not be possible for the Court entertaining the petition under Section 34 or for the appellate court under Section 37 of Act 1996 to modify the award and alter the compensation as it was open to the court in the reference proceedings under Section 18 of the old Land Acquisition Act or an appeal under Section 54 of that act, it should certainly be open to the court exercising power under Section 34 of Act, 1996 to set aside the award by indicating reasons and remitting the matter to the Arbitrator to reconsider the same in accordance with law. The said exercise can be undertaken to the limited extent without entering into merits where it is seen that the Arbitrator has on the face of the award not appropriately considered the material on record or has not recorded reasons for placing reliance on materials available on record in the background of requirement under RFCTLARR Act, 2013.‖ 34
31. Form and contents of arbitral award.--
(3) The arbitral award shall state the reasons upon which it is based, unless--
(a) the parties have agreed that no reasons are to be given, or
(b) the award is an arbitral award on agreed terms under section 30.
Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 74 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:0723.12.3 The Supreme Court noted that in view of the law enunciated in P. Nagaraju30, it was not permissible for a Section 34 Court to modify the Award passed by the learned Arbitrator, and the Court, even it found the challenge to the substantial, would have to set aside the Award and remit the matter to the learned Arbitrator for de novo consideration. The Supreme Court addressed the first contention advanced by the NHAI, before it, thus (in paras 35 to 37 of the report):
―35. In that view, the question that would arise for consideration in the case on hand is as to whether the award passed by the learned Arbitrator would stand vitiated merely because the guideline dated 28.03.2016 which is marginally subsequent in point of time is reckoned, when the acquisition notification under Section 3A of NH Act was prior to the same i.e. on 01.02.2016. As already noted, Section 3G(7)(a) of NH Act provides for determination of the market value on the date of publication of the acquisition notification under Section 3A. In a normal circumstance, for the determination of the market value, the rate prevailing prior to the date of the notification shall be the basis more particularly when the determination is made based on sale exemplars, as otherwise there is a likelihood of manipulation with escalated price being dishonestly indicated in the subsequent transactions. While taking note of the documents relied on for the purpose of determination of the market value, the existence of appropriate documents in the facts of each case would also become relevant. In circumstances where a document which is proximal to the date of acquisition is not available, it would be open to rely on a document which is much prior in point of time and if the time gap is more, determination could be made by providing for reasonable escalation depending on the area wherein the acquired property is situate and nature of property. Similarly, in a circumstance where no document which is prior to the date of the acquisition notification is available and the exemplars are subsequent to the date of acquisition notification, the value therein could be noted and reasonable de-escalation be considered to determine the appropriate value. Needless to mention that no strait-jacket Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 75 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 formula can be applicable to all cases with arithmetical precision in the matter of determination of compensation.
36. In that backdrop, in the instant case it is no doubt true that the notification issued by the Department of Stamps and Registration on 07.11.2014 is prior to the acquisition notification dated 01.02.2016. It is also to be noted that there was a time gap of more than one year between the two. In a normal circumstance, even if the notification dated 07.11.2014 was taken into consideration it would be open for the learned Arbitrator to consider certain amount of escalation to determine the market value. The said process could have been adopted if there was no other document. At this juncture, it is necessary to note that the SLAO in fact had relied on the said notification dated 07.11.2014 and determined the market value but had ignored the fact that the lands regarding which the market value was to be determined had been converted for purposes other than agriculture. The SLAO had therefore taken into consideration the registration value which had been fixed in respect of the agricultural property. In that light, firstly it would have been open for the learned Arbitrator to take note of the value fixed for the commercial/industrial lands under that notification itself and provide certain amount of escalation.
37. Notwithstanding such option of providing escalation to the already existing guideline value being available to the learned Arbitrator, what cannot be lost sight in the instant case is that, as evident from the notification dated 28.03.2016 the process for redetermining the guideline value had commenced through the notification bearing No. CBC-
25/2014-15 dated 14.09.2015 and proceedings of the committee were also held during 2015-2016 which ultimately led to the notification dated 28.03.2016. Further, though the preliminary notification for acquisition was issued on 01.02.2016, the final notification under Section 3D of NH Act was issued on 23.09.2016. During the intervening period the guideline value notification dated 28.03.2016, the process for which had commenced through the notification dated 14.09.2015, was already published. Furthermore, when all these proceedings were in close proximity to the date of the preliminary notification for acquisition and the revision of the market value by the Department of Stamps and Registration itself was within a period of one year and 4 months from the Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 76 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 earlier guideline value published on 07.11.2014, it would indicate that the escalation which was otherwise open for being worked out and applied by the learned Arbitrator on taking note of the notification dated 07.11.2014 was undertaken by the Department of Stamps and Registration and the benefit of considering such escalation was available to the learned Arbitrator by taking note of the guideline dated 28.03.2016, though technically published on a date subsequent to the preliminary notification dated 01.02.2016. In that view of the matter, in the present facts and circumstances, the reliance placed on the guideline value notification dated 28.03.2016 for reckoning the market value of the property acquired under the preliminary notification dated 01.02.2016, by itself cannot be accepted to be a patent illegality committed by the learned Arbitrator.‖ 23.12.4 Having so held that in relying on the guideline value notification dated 28th March 2016, for reckoning the market value of the acquired property, the learned Arbitrator could not be said to have committed any patent illegality, the Supreme Court, nonetheless noted that the issue of whether the learned Arbitrator had appropriately considered the aspect of applying the market value notified as a guiding value, and had afforded due opportunity to NHAI in that regard, still remained to be examined. The Supreme Court held that the guideline value notification dated 28th March 2016 fixed the value of the land acquired in the ―City Greens‖ and ―Zunadu‖ layouts and not to the layout in which the land acquired by the respondents before the Supreme Court was situate. In that regard, the Supreme Court held thus (in para 42 of the report):
―42. .... If the value as fixed under the guideline for ‗City Greens' and ‗Zunadu' was to be adopted as comparable land to the acquired land, necessary reasons ought to have been indicated in the award with reference to the evidence brought on record, with opportunity to NHAI to have their say on that Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 77 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 aspect and reasons justifying such comparison should have been recorded. Further the manner in which the notification dated 28.03.2016 has been relied upon and the value fixed under the said notification in respect of two distinct layouts has been automatically made applicable to the lands in question despite noting the guideline value notified for the same survey number would indicate that the said exercise has been undertaken without sufficient opportunity to NHAI. Further, appropriate reasons have not been indicated by the learned Arbitrator to arrive at the conclusion to uniformly adopt the value of Rs. 15,400/-per sq.mtr fixed in respect of lands in a layout which was separately indicated in the notification. As stated above, if there is evidence brought on record in the manner known to law with opportunity to the opposite side, it certainly would be open for the learned Arbitrator to adopt the said value. However, from the pleading in the claim petition and from the portion extracted from the award which is the only basis for the ultimate order made by the learned Arbitrator, it would indicate that the NHAI did not have sufficient opportunity before the learned Arbitrator to controvert the material sought to be relied upon by the learned Arbitrator nor has the learned Arbitrator indicated sufficient reasons which to that extent would indicate patent illegality in the award passed by the learned Arbitrator being contrary to Section28(2) and 31(3) of Act, 1996.‖ 23.12.5 In these circumstances, the Supreme Court, observing that it could not modify the award of the learned Arbitrator, set aside the Award and remanded the matter to the learned Arbitrator for de novo consideration after affording adequate opportunity to both parties.
23.12.6 The aforesaid decisions fairly demarcate the boundaries of Section 34 jurisdiction.
Applying the law to the facts Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 78 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07
24. ―Bypass‖ 24.1 As already noted, the entire controversy revolves around Clauses 8.1 of the CA and 3.2 of the SSA, specifically around the expression ―not being a bypass‖, as contained in the two clauses. Both clauses proscribe the construction and operation of a ―bypass‖. The petitioner contends that the State of Haryana had constructed a ―bypass‖ between Shahabad and Panchkula. This, asserts the petitioner, contravened Clause 8.1 of the CA and Clause 3.2 of the SSA. As a consequence, by conjoint operation of Clauses 32.4.1(3), 32.4.1 and 37.1(ii) of the SSA, GMR was entitled to be indemnified for the loss suffered by it, by way of reduced toll collections, consequent on the diversion of traffic to the ACR.
24.2 The expression ―bypass‖ is not defined either in the CA or in the SSA. On this, the learned Arbitral Tribunal holds as under:
―The expression "Bye pass" used in clause 8 of the Concession Agreement has not been defined. The same shall therefore have to be given its ordinary dictionary meaning. Oxford English Dictionary defines the term Bye Pass as under:
"A road passing round a town or its centre to provide an alternative route for through traffic".
Webster, similarly defines the term Bye pass as under:
"a passage to one side; especially: a deflected route usually around a town."
In similar vein, The Random House dictionary defines bypass as below:
Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 79 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07―A road enabling motorists to avoid a city or other heavy traffic points or to drive around an obstruction.‖ The Macmillan Dictionary also defines bypass as "to avoid the center of a town or city by using a road that goes round it."
24.3 Insofar as the understanding of the meaning of the expression ―bypass‖ is concerned, the expression not having been defined in CA or in the SSA and the learned Arbitral Tribunal having taken recourse to well-known dictionaries to understand the meaning, no justification would exist to interfere with the said understanding of the meaning of the expression ―bypass‖, as contained in the afore-extracted passages from the impugned award, under Section 34 of the 1996 Act. The expression ―bypass‖ not being a term of art or of law, but being an expression of common usage, a Section 34 Court would not be justified in attributing, to the said expression, a meaning different from that which the learned Arbitral Tribunal has chosen to attribute to it, on the basis of the meaning of the word as contained in authoritative dictionaries.
24.4 As such, this Court does not find any reason to question the recourse, by the learned Arbitral Tribunal, to the Oxford English dictionary, Webster or Random House or Macmillan dictionaries for understanding the meaning of the word ―bypass‖. The Court, therefore, upholds and affirms the observations, in the impugned award, that ―a bypass is a stretch of road that circumvents a town or city with a view to avoiding traffic congestion which generally slows down the vehicular movement‖.Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 80 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07
25. Application of understanding of ―bypass‖ by the learned Arbitral Tribunal to the facts of the present case - the raison d'etre of the impugned Award Having thus extracted the meaning of ―bypass‖ as contained in authoritative dictionaries, the learned Arbitral Tribunal goes on, in the following passages, to set out, in sum and substance as it were, the raison d' etre for the impugned Award:
―It is therefore reasonable to say that a Bye Pass is a stretch of road that circumvents a town or city with a view to avoiding traffic congestion which generally slows down the vehicular movement. That being so, a 'Bye Pass' in the case at hand would textually and contextually imply a road that is meant to provide to the truckers motorists and other users of tile road, the means to avoid the Project road between Ambala and Zirakpur. It would also mean that the bypass is constructed with the intention of bye-passing the "Project Road'. In as much as Clause 8 of the Concession Agreement and Clause 3.2 of the State Support Agreement both forbid the GOI, NHAI, State of Haryana and State of Punjab from constructing a road that is a Bye pass to the Project Road, the prohibition must of necessity apply in future. The contractual prohibition contained in the clauses extracted above does not in our opinion conceive of an existing State Highway or any existing National Highway becoming a 'Bye Pass' only because of its upkeep, maintenance, strengthening or widening, as is the position here. We therefore have no hesitation in holding that on a true und correct interpretation of the two clauses, in the literal and contextual setting in which the expression 'Bye Pass' is used therein, the parties never contemplated that an existing Highway like the one from Shahabad to Panchkula, could also become a Bye Pass. Nor could the parties ever intend to consider the improvement or maintenance of an existing highway, major part whereof was a National Highway even on the date the Bids were invited being treated as a Bye Pass so as to fall foul of Clauses 8.1 and 3.2 of the Concession and State Support Agreements. Indeed, if parties ever intended to mean that an existing highway could also become a Bye Pass, by reason of Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 81 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 its improvement or strengthening, they would have provided for such a contingency and specifically forbidden it. In as much as the provisions of clauses 8 of the Concession Agreement and Clause 3.2 of the Stale Support Agreements prohibited the GoI, NHAI, the State of Haryana and State of Punjab, from constructing a Bye Pass, between Ambala and Zirakpur, all that they intended to say was that no new road shall be constructed so as to provide an alternate route or parallel road to the Project Road.
Interpretation of Clauses 8 and 3.2 apart, it is important to remember that NH-73 starts from Sahazadpur and goes up to Shahzadpur in the State of Haryana. From Shahzadpur upto Panchkula it is NH-7. Both these Highways were pre-existing as on the date of the Bids and the execution of the Concession and State Support Agreements. It was not as though Saharanpur to Shahzadpur via Yamunanagar and Saha was ever constructed to be used as a bypass for the Project Road. So also, the Highway from Shahzadpur to Panchkula was also a pre-existing National Highway which was very much in existence as on the date of the bids and the execution of the agreements. Both NH-73 and NH-7 were serving the states of U.P., Haryana, Himachal and other neighbouring States, as full-fledged Highways and not as alleged Bye Passes for the Project Road. That is true even about State Highway No.31 from Shahabad to Saba in the State of Haryana, which too was an existing Highway and was never meant to be or constructed to serve as a Bye Pass to the Project Road of the Claimant as alleged.
Also significant is the fact that the so called - Bye PMS, (SH-31, NH-73 & NH-7) takes off from Shahabad which is 23 kms short of the starting point of the Project road. A bypass, in the ordinary course and in the very nature of the things must start from a proximate point and join the other end of the same road - at a proximate point. While it is not (possible to stipulate a precise distance in this regard, it appears to us to be little unusual for a (road to be called a 'Bye Pass' even when it is a pre-existing road and even when it takes off from a point that is as far away as 23 kms from the beginning/starting point of the Project Road. So also, the alleged Bye Pass does not join the Project Road at Chandigarh end. Instead it ends at Panchkula in Haryana.Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 82 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07
There is another dimension to the question which may also be examined at this stage. A Bye Pass, it is obvious cannot come into existence or predate the Town or City or even a (stretch of road intended to be bypassed. A bypass is by its very nature and purpose a subsequent development. It cannot precede the city, town or the road to be bypassed. Since the very purpose of the Bye Pass is to Bye Pass the city or town or a stretch of the Highway, it will come into existence only after and not before the city, town or the Highway comes into existence. That is especially so when the very purpose of the Bye pass is to decongest the city, town or obstruction to traffic on the road. It would be anomalous to say that a Bye pass can be constructed even before the city or town comes into existence nor can a road or stretch thereof be bypassed before any such road or stretch comes into existence. The argument, that the pre-existing Highways in the present case were a Bye Pass, must therefore be noticed only to be rejected.
So also, the argument that if the road is narrow, the same cannot be a Bye Pass has not impressed us. In the first place the road connecting Shahabad and Panchkula was not a narrow, kucha, muddy or an unsteady road which could not he treated to be even a road or a viable alternative. The road between Shahabad and Panchkula was a State Highway for 17 kms and a National Highway for the remaining 57 kms.
No one could suggest that the State Highway was unfit for commercial traffic much less could it be said that a National Highway was so poor in its carrying capacity, strength, width or riding comfort that no commercial traffic was possible over it. There is on the contrary, evidence to show that the two stretches were good for commercial traffic even before the construction of ROB at Kesri or the repair, maintenance, widening and strengthening that was undertaken. The alleged breach of clauses 8 and 3.2 of the Concession Agreement and the State Support Agreement respectively therefore remains un-substantiated and is accordingly rejected.‖
26. Learned Counsel for the petitioner has serious reservation regarding the afore-extracted observations and findings of the learned Arbitral Tribunal, from the impugned award and, I confess, I am, with Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 83 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 the greatest respect to the learned Members who constituted the majority of the learned Arbitral Tribunal, inclined to agree with the petitioner in that regard.
27. Infirmities in the reasoning of the learned Arbitral Tribunal:
The infirmities in the above findings which, in my view, serve to vitiate the impugned Award, may be demonstrated thus.
27.1 The question of ―intention‖:
27.1.1 The learned Arbitral Tribunal has held that, in order for a road to be a ―bypass‖, it must have been ―constructed with the intention of bypassing the project road‖. Learned Counsel for the petitioner contends and, in my view, rightly, that there is no justification for the learned Arbitral Tribunal to have incorporated, into the understanding of the expression ―bypass‖, any element of intention. What Clause 8.1 of the CA and Clause 3.2 of the SSA prohibits, is construction of a ―bypass‖. So long as a road is a ―bypass‖, and it has been constructed by the NHAI or the Government of India or the Government of Haryana or the Government of Punjab, the proscription contained in Clause 8.1 of the CA and Clause 3.2 of the SSA stands infracted. Whether the road was constructed with the intention of operating it as a ―bypass‖ or without any such intention appears to me to be immaterial and, in fact, a consideration extraneous to Clause 8.1 of the CA and Clause 3.2 of the SSA.
Inasmuch as this interpretation incorporates, into the said Clauses of the contract, a consideration of ―intention‖, which is extraneous to Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 84 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 what is to be found therein, the finding travels beyond the contractual provision and is, to that extent, contrary thereto.
27.1.2 It is well settled that, in interpreting contracts, especially commercial contracts, the Court cannot add to or subtract from covenants of or considerations in the contracts on its own accord. Specifications and stipulations, which are not to be found in commercial contracts, cannot be read into such contracts by a Court - or, for that matter, by an Arbitral Tribunal. The principle governing interpretation of the terms of commercial contracts is that the contractual terms are to be treated as manifesting, in their entirety, the intent of the parties to the contract. There is a presumption, in law, that commercial contracts, especially contracts involving large projects, are executed after minutest and most precise circumspection. Every term of such a contract is expected to reflect the intent of the parties. A consideration which does not find place in such a contract, therefore, it is expected, was a consideration which the parties did not intend to be part thereof. A Court or an Arbitral Tribunal cannot presume the existence of such a consideration. Casus omissus cannot be provided by a Court or by an Arbitral Tribunal, into the covenants in a commercial contract.
27.1.3 Viewed thus, there being no reference, either in Clause 8.1 of the CA and Clause 3.2 of the SSA to the intent of the parties, the parties' intention cannot be a relevant consideration. All that the Court or the Arbitral Tribunal has to see is whether the road that is constructed and alleged to be a ―bypass‖ is, in fact, a ―bypass‖, in the Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 85 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 manner in which the learned Arbitral Tribunal itself understood the expression. If it is, the contractual covenants of clauses stand violated. Whether it was intended to be a ―bypass‖ or not intended to be a ―bypass‖, in my view, is an immaterial and altogether irrelevant consideration.
27.2 Section 8A of the NH Act and its implications:
27.2.1 At this juncture, one may address the findings of the learned Arbitral tribunal with respect to Section 8A of the NH Act, which reads thus:
―8A. Power of Central Government to enter into agreements for development and maintenance of national highways. -
(1) Notwithstanding anything contained in this Act, the Central Government may enter into an agreement with any person in relation to the development and maintenance of the whole or any part of a national highway.
(2) Notwithstanding anything contained in Section 7, the person referred to in sub-section (1) is entitled to collect and retain fees at such rate, for services or benefits rendered by him as the Central Government may, by notification in the Official Gazette, specify having regard to the expenditure involved in building, maintenance, management and operation of the whole or part of such national highway, interest on the capital invested, reasonable return, the volume of traffic and the period of such agreement.
(3) A person referred to in sub-section (1) shall have powers to regulate and control the traffic in accordance with the provisions contained in Chapter VIII of the Motor Vehicles Act, 1988 (59 of 1988) on the national highway forming subject-matter of such agreement, for proper management thereof.‖ Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 86 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 27.2.2 GMR sought to contend, before the learned Arbitral Tribunal, that, in interpreting the covenants of the CA and the SSA, Section 8A of the NH Act was required to be borne in mind. Sub-
section (2) of Section 8A, it was pointed out, ensured, to the person with whom the Central Government entered into an agreement for development and maintenance of the whole, or any part of the National Highway, inter alia, ―interest on the capital invested‖ and ―reasonable return‖. It further contemplated the volume of traffic being a valid consideration in the fixation of the fee to be charged by such person for use of the Highway.
27.2.3 The impugned Arbitral Award did regard the submission of GMR, predicated on Section 8A of the NH Act, as being irrelevant. The observations and findings of the learned Arbitral Tribunal, on the said submission, to the extent relevant, read as under:
―This simply means that the question of reasonable return is one of the inputs to be taken into consideration while determining the Fee that the person concerned may be allowed to collect. The process of determination of a Fee that may be collected by the person developing and maintaining the Highway is an annual exercise, which the competent authority undertakes and notifies in the official Gazette. There can be no quarrel with the proposition that, while determining the amount of Fee chargeable by the person entrusted with developing and maintaining the Highway, the Competent Authority must take into consideration all the factors enumerated in Section 8A(2). It is not the case of the Claimant that the Competent Authority who has specified the Fee has not, while doing so, taken into consideration all the factors are relevant in Section 8A (2), including reasonable return to the person making the investment. At any rate, the present proceedings are not aimed at examining whether or Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 87 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 not the Fee specified by the competent authority as may chargeable by the Claimant in the instant case is reasonable having regard to the relevant factors including the reasonable return referred to in the said provision. If the Claimant has any grievance in that regard it shall obviously habits remedy in appropriate forum and in appropriate proceedings. But so long as, the determination of fee remains unquestioned, the alleged reduction in the volume of traffic on account of the alleged diversion or otherwise, will not entitle the Claimant to content that it will not make a reasonable profit within the contemplation of Section 8A.‖ 27.2.4 The afore-extracted findings of the learned Arbitral Tribunal acknowledges the fact that, while fixing the Fee which the claimant, i.e. GMR, could charge and realise for use of the Project Highway, Section 8A is required to be borne in mind. Indeed, this position stands recognised in Clauses 6.1 and 6.2 of the CA, which read thus:
―6.1 The Concessionaire shall be entitled during the Operations Period to levy and collect their Fees from the users of the Project Highway pursuant to and in accordance with the Schedule of User Fee set forth in Schedule ‗G' and this Agreement. Provided, however, that such Fee shall be rounded of to the nearest one rupee for ensuring ease of payment and collection. Within 90 days prior to the COD of the Project Highway, as certified by the Independent Consultant, the Schedule of User Fees as per Schedule ‗G', shall be notified by MoSRT&H as Fees Notification.
6.2 The Concessionaire acknowledges that the Fee Notification, infer alia, provides for annual revision in the Fees linked to the extent of variation in WPl as per the Fee Notification, and hereby confirms that save and except as provided in the Fee Notification, the Concessionaire is not entitled to and shall not seek any any relief whatsoever from NHAI, GOI, GOHR (or GOPb on account of increase or otherwise in WPI or any other account except in accordance with express provisions of this Agreement.‖ Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 88 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 27.2.5 It may be true that there is no direct challenge, in the present case, to the fixation of the fees to be charged by GMR from the Project Highway users. That, however, is only one side of the coin.
That GMR is entitled to the benefit of Section 8A (2) of the NH Act stands acknowledged even by the learned Arbitral Tribunal, inter alia by its finding that, if GMR had any grievance with the manner in which the Fee chargeable by it, from the Highway users, had been fixed, it would have its remedy in an appropriate forum and in appropriate proceedings. This amounts to an acknowledgement, by the learned Arbitral Tribunal, of the legal position that GMR was entitled, while charging fees from the Highway users, in accordance with the terms of the CA, to interest on the capital invested by it and reasonable return, in which the volume of traffic using the Highway was a relevant consideration.
27.2.6 It is not possible to dichotomise the Fee chargeable by GMR and the volume of traffic using the Project Highway. The total Fee realized by GMR would obviously be a multiple of the Fees chargeable by it and the number of vehicles plying on the Project Highway. It is obviously for this reason that "volume of traffic" has also been stipulated as a relevant consideration in Section 8A (2). Where, therefore, the volume of traffic using the Project Highway dwindles, so that the total Fee realised by GMR reduces to a point where it does not ensure, to GMR, interest on capital invested and a reasonable return, Section 8A(2) of the NH Act would, ipso facto, stand violated.
Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 89 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:0727.2.7 With greatest respect to the learned Members of the Arbitral Tribunal who constituted the Majority in the present case, the manner in which the learned Arbitral Tribunal has addressed the plea of GMR, predicated on Section 8A of the NH Act cannot, in my considered opinion, sustain. Had the learned Arbitral Tribunal examined the provision and come to a finding that there was no violation of the provision, despite the plea of GMR that there had, consequent to the upgradation, widening and strengthening of the Shahabad-Panchkula stretch of highway, no reduction of the overall returns earned by GMR from toll users, the position may have been different. The learned Arbitral Tribunal, however, has completely discounted the submission of GMR, predicated on Section 8A of the NH Act, merely on the ground that there was no challenge to the manner in which the Fee chargeable by GMR from toll users had been fixed in the CA. For the aforesaid reasons, I am not able to subscribe to the said finding.
27.3 Must the bypass be a ―new road‖?
27.3.1 The afore-extracted passages from the impugned award further observed that the prohibition against the construction of a ―bypass‖ in Clause 8.1 of the CA and Clause 3.2 of the SSA ―must of necessity apply in future‖. This has been further explained, by the learned Arbitral Tribunal, by holding that the contractual prohibition in Clause 8.1 of the CA and Clause 3.2 of the SSA did not ―conceive of an existing State Highway or any existing National Highway becoming a ‗bypass' only because of its upkeep, maintenance, strengthening or widening, as is the position here‖.
Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 90 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:0727.3.2 Again, there does not appear to be any justification for the assumption, by the learned Arbitral Tribunal, that an existing highway cannot become a ―bypass‖, or that the proscription in Clause 8.1 of the CA and Clause 3.2 of the SSA against the construction of a ―bypass‖ necessarily implied construction of a ―bypass‖ from the ground up. What the afore-extracted interpretation, placed by the learned Arbitral Tribunal on the contractual covenants, would seem to indicate, is that a ―bypass‖ for the purposes of the said Clauses, cannot be referring to a road which was in existence on the date when the CA or the SSA was executed. This, again, appears to me to be presumptive in nature and travelling beyond the contractual covenants. The definition of ―bypass‖ as contained in the Random House dictionary, on which the learned Arbitral Tribunal has itself relied, envisages a ―bypass‖ as being a road enabling motorists to avoid a city or other heavy traffic points. If, therefore, a road did exist even on the date when the CA or the SSA was executed, connecting points which the project road connected, but not capable of carrying commercial traffic, and the road was modified in such a manner as to make it capable of carrying commercial traffic, then, given the definition of ―bypass‖ in the Random House dictionary, such a road cannot but be regarded as a ―bypass‖.
27.3.3 This would also follow from the manner in which the learned Arbitral Tribunal has itself understood the expression ―bypass‖, in the afore-extracted passages from the impugned award. Having reproduced the dictionary definitions, the learned Arbitral Signature Not Verified Tribunal holds that ―bypass‖ is a stretch of a road which avoids traffic Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 91 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 congestion which generally slows down the vehicular movement. Further, apropos the project road, the learned Arbitral Tribunal holds that a ―bypass‖ is a means to avoid the project road.
27.3.4 Clearly, therefore, even as the learned Arbitral Tribunal understands, the expression ―bypass‖ as referring to an alternative road, which can be used by traffic as an option to avoid the project road. A ―bypass‖, therefore, by its very nature, has two features. The first is that it must be a road, other than the project road, connecting the points which the project road connects. The second is that it must be motorable by the traffic to which project road is expected to cater. A second road, which may exist between the terminus a quo and the terminus ad quem of the project road, but which is not motorable to commercial traffic, would not be a bypass, as it would not provide an alternative for commercial traffic to avoid the project road. If, however, the road is so modified - if, for example, a two lane road is converted into a four or eight lane road - as would make it usable by commercial traffic, such modification would convert the road into a bypass. If such modification is carried out by the State of Haryana, the State of Punjab or the NHAI during the currency of the CA or the SSA, it cannot be said that no bypass has been constructed, merely because the road existed even at the time of execution of the CA or the SSA. If the upgradation/improvement of the road, by the State of Haryana or the State of Punjab, renders the road motorable to commercial traffic and, therefore, a viable alternative to the project road, such upgradation/improvement has to be regarded as having Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 92 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 resulted in construction of a bypass and, therefore, having violated Clause 8.1 of the CA and Clause 3.2 of the SSA.
27.3.5 The finding of the learned Arbitral Tribunal that the prohibition against the construction of a bypass, as contained in Clause 8.1 of the CA and Clause 3.2 of the SSA must apply in future and that no existing State highway or National highway could ever become a bypass only because of its upkeep, maintenance, strengthening or widening, is, in my respectful opinion, misconceived.
27.3.6 The afore-extracted passages from the impugned award go on to observe that the parties never contemplated that the existing highway between Shahabad and Panchkula, or its improvement or maintenance, could be regarded as treating of the highway as a bypass, so as to fall foul of Clause 8.1 of the CA and Clause 3.2 of the SSA. They go on to hold that, if the parties ever intended that an existing highway could also become a bypass, by reason of its improvement or strengthening, such a contingency would specifically have found place in the CA or SSA. These observations proceed on the presumption that an existing highway could never become a bypass, irrespective of modification, widening or strengthening thereof. I have already opined that such an interpretation might do violence to the contractual covenants, as the proscription against construction of a bypass, as contained in Clause 8.1 of the CA and Clause 3.2 of the SSA, would also cover a situation in which an existing highway which, at the time of execution of the CA or the Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 93 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 SSA, was incapable of catering to commercial traffic, is so modified as to enable it to do so.
27.3.7 The learned Arbitral Tribunal has gone on to observe that ―it would be anomalous to say that a bypass can be constructed even before the city or town comes into existence nor can a road or stretch thereof be bypassed before any road or stretch comes into existence‖. The fallacy in this finding is, in my opinion, apparent from its bare reading. There can be no doubt that a road or a stretch of a road cannot be bypassed before a road or stretch comes into existence. To that extent, the finding of the learned Arbitral Tribunal is unexceptionable. It is plainly logical that a road can be bypassed only if the road exists. Before the road comes into existence, it is obvious that it cannot be bypassed. That is, however, altogether different from saying that the bypass could not be in existence before the road came into existence. More specifically, and pertinently to the present case, a road which was in existence prior to the project road but is not a bypass at that point of time, because it does not provide an alternative viable mode of travel, may become a bypass if, during the currency of the project, the road is made motorable to commercial traffic. The project road is, therefore, ―bypassed‖ only when the alternative road has been made viable to commercial traffic and has, therefore, become a bypass. While it is correct, therefore, to observe that a road cannot be bypassed before the road itself comes into existence, it is not, in my respectful view, correct to hold that the ―bypassing road‖ could not have been in existence prior to the project road. With Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 94 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 greatest respect, the learned Arbitral Tribunal appears to have conflated these two distinct considerations.
27.3.8 As such, no requirement existed for any separate provision, in the CA or the SSA, against conversion of an existing highway into a ―bypass‖. The fact that the CA and SSA did not contain any specific bar to the conversion of an existing highway into a bypass cannot, therefore, be treated as a ground to infer that, as understood in the CA and the SSA, an existing highway could never become a bypass.
27.4 ―All that the parties intended to say?‖ 27.4.1 The afore-extracted passages from the impugned award further hold that in incorporating Clause 8.1 of the CA and Clause 3.2 of the SSA, ―all that (the parties) intended to say was that no new road shall be constructed so as to provide an alternate route or a parallel road to the project road‖. The specification that a bypass would necessarily imply a new road, therefore, amounts to modification of Clause 8.1 of the CA and Clause 3.2 of the SSA by incorporating, into the said clauses, a stipulation not to be found therein. It would, therefore, amount to a modification, by the learned Arbitral Tribunal, of the contractual covenants.
27.4.2 It merits repetition, given the emphasis that the learned Arbitral Tribunal had chosen to place on this interpretation, accorded by it to Clause 8.1 of the CA and Clause 3.2 of the SSA, that there is no justification of excluding from the scope and ambit of the Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 95 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 expression ―bypass‖, in the said clauses, pre-existing roads. Where a pre-existing road is so modified as to make it capable of carrying commercial traffic, thereby bringing into existing a viable alternative to using the project road, a bypass, in my view, has certainly come into being.
27.5 The ―points of intersection‖ conundrum 27.5.1 The learned Arbitral Tribunal goes on to hold, in the impugned award, that a ―bypass in the ordinary course and in the very nature of the things must start from a proximate point and join the other end of the same road - at a proximate point‖.
27.5.2 This again is, in my considered opinion, a misguided presumption. There is no requirement of a bypass necessarily having to start and end at points proximate to the starting and ending points of the project road. In fact, there is no discernable reason, whatsoever, for this presumption and, if the position of the project road, vis-a-vis the alleged bypass, is to be seen in the present case, the fallacy of this assumption by the learned Arbitral Tribunal would become apparent.
27.5.3 Shahabad is, according to learned Arbitral Tribunal, almost 23 kilometres away from the starting point of the project road, which spans the length from Ambala to Zirakpur. In the accompanying map, the project road is shown in green, whereas the alleged Shahabad- Panchkula bypass is shown in red. There is no dispute that while travelling from Delhi, Ambala can be reached only by crossing Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 96 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 Shahabad. If one were to intend to travel to Panchkula, referring to the annexed map, it would be open to the commercial traveller to either proceed, having reached Shahabad, either to Ambala and, from there, take the project road till Zirakpur and till proceed to Panchkula or, alternatively, take SH-31 and NH-73 (the alleged bypass) from Shahabad, and proceed via Saha and Sahzadpur to reach Panchkula. As such, at least for the commercial traveller who intends to travel to Panchkula, there are two alternative routes available, one using the project road and the other using the alleged bypass involving SH-31 and NH-73.
27.5.4 According to GMR, the SH-31 and NH-73 route, via Saha and Sahzadpur, was earlier not viable for commercial traffic. GMR contends that, by reason of the widening and strengthening of the said route and the construction of an ROB at Kesri, the route has become viable for commercial traffic. A commercial traveller who desires to travel to Panchkula, therefore, has, according to the petitioner, now an alternative of either proceeding via the project road or branching off at Shahabad onto the SH-31 and NH-73 bypass, via Saha and Sahzadpur. If this is correct, the SH-31 and NH-73 route via Saha and Sahzadpur must be treated as a bypass which has come into existence during the currency of the CA and the SSA, which has resulted in infraction of Clause 8.1 of the CA and Clause 3.2 of the SSA.
27.5.5 The fact that Shahabad may be 23 kilometres earlier before Ambala on the project highway (NH-71 and NH-72) cannot alter this factual or legal position. The observation, of the learned Arbitral Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 97 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 Tribunal, that a bypass would necessarily have to start and end at points proximate to the starting and ending points of the project road is also, in my opinion, a presumption, which is beyond the contemplation of the parties executing the CA and the SSA and, therefore, amounts to incorporating, into the contracts, considerations not to be found therein.
27.6 Presumption that, being highways, they must have been viable to commercial traffic:
27.6.1 The final observation of the learned Arbitral Tribunal, in the afore-extracted passages is that as, the stretch of the road between Shahabad and Saha was a State Highway, and the stretch between Saha and Panchkula was a National Highway, for several years prior to the CA and the SSA, it could not be suggested that the road was unfit for commercial traffic. An Arbitral Tribunal, with greatest respect, cannot return such presumptive findings. The question of whether the road is or is not, fit for commercial traffic, is a question of fact. It has to be decided on the basis of evidence and not on the basis of any presumption. A finding returned by an Arbitral Tribunal based on presumptions, without evidence, is itself liable to interference under Section 34 of the 1996 Act.
27.6.2 The petitioner submits, per contra, that there is positive evidence to indicate that the stretch of road from Shahabad to Panchkula was not, in fact, viable for commercial traffic, prior to its widening and strengthening by the State Governments of Haryana and Punjab. That is an aspect which this judgment would address later.Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 98 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07
If, however, the submission of the petitioner is correct, quite obviously, the finding of the Arbitral Tribunal, which is presumptive in nature, has to yield place.
27.7 Deviation by the learned Arbitral Tribunal from its own understanding of the term ‗bypass':
27.7.1 ‗Bypass' stands defined, in the impugned arbitral award, as ―a stretch of road that circumvents a town or city with a view to avoiding traffic congestion which generally slows down the vehicular movement‖. There are, therefore, only two ingredients of this definition, viz. that the bypass must ―circumvent a town or city‖ and enable commuters to use the bypass to ―avoid traffic congestion‖.
The definition does not incorporate any element of ―intention‖. It does not state that the bypass must be a ―new road‖. It does not require the bypass to start and end at points proximate to the road which is bypassed. The learned Arbitral Tribunal has itself held that a road which is meant to provide, to truckers, motorists and other users thereof, the means to avoid the project road, would amount to a bypass. All that the learned Arbitral Tribunal was required to do, therefore, was to examine whether, by its act, the State of Haryana had brought into existence a road which provided, to truckers, motorists and other users of the road, a means to avoid the project road. This, in my understanding, would include a road which, thitherto, was incapable of carrying commercial (and/or other) traffic and which, by the changes brought about by the activities of the State Governments, was rendered capable of doing so.
Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 99 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:0727.7.2 The infirmities in the afore-extracted passages from the learned Arbitral Tribunal's findings are, therefore, sufficient to vitiate the impugned award in its entirety, as they form the mainstay of the reasoning of the learned Arbitral Tribunal.
27.8 Commercial contracts to be commercially construed 27.8.1 In this context, it is also relevant to note that commercial contracts have to be commercially construed. An arbitral award which accords, to the terms of a commercial contract, an interpretation which is not commercially viable, is liable to be interfered with under Section 34 of the 1996 Act, even on that score. One may refer, in this context, to South East Asia Marine Engineering & Consultants28, which holds that if the manner in which the learned Arbitral Tribunal has interpreted the contractual covenants is not ―reasonable and fair‖, the Court can interfere under Section 34. Dr D.Y. Chandrachud, J. (as he then was), in Mumbai Metropolitan Region Development Authority v. Unity Infraproject Ltd35 endorsed the dictum of Justice Cardozo in Utica City-National Bank v. Gunn36 that, in commercial contracts, ―the genesis and aim of the transaction‖ had to be construed. The decision further quotes, with approval, the following enunciation, by Diplock, LJ, in Antaios Compania Naviera S.A. v. Salen Resderiema A.B.37:
―If detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that 35 (2008) 4 Arb LR 313 (Bom) 36 1918 (118) NB 607 37 1985 AC 191 Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 100 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 flouts business common sense, it must be made to yield to business common sense.'‖ 27.8.2 The classical test in this regard is that of ―business efficacy‖, enunciated by the Supreme Court in Satya Jain v. Anis Ahmed Rushdie38, thus:
―33. The principle of business efficacy is normally invoked to read a term in an agreement or contract so as to achieve the result or the consequence intended by the parties acting as prudent businessmen. Business efficacy means the power to produce intended results. The classic test of business efficacy was proposed by Bowen, L.J. in The Moorcock39. This test requires that a term can only be implied if it is necessary to give business efficacy to the contract to avoid such a failure of consideration that the parties cannot as reasonable businessmen have intended. But only the most limited term should then be implied - the bare minimum to achieve this goal. If the contract makes business sense without the term, the courts will not imply the same. The following passage from the opinion of Bowen, L.J. in The Moorcock39 :
‗... In business transactions such as this, what the law desires to effect by the implication is to give such business efficacy to the transaction as must have been intended at all events by both parties who are businessmen; not to impose on one side all the perils of the transaction, or to emancipate one side from all the chances of failure, but to make each party promise in law as much, at all events, as it must have been in the contemplation of both parties that he should be responsible for in respect of those perils or chances.' ‖ 27.8.3 Nabha Power Ltd v. Punjab State Power Corpn Ltd40 summarized the legal position thus (in para 49 of the report):38
(2013) 8 SCC 131 39 (1889) LR 14 PD 64 (CA) 40 (2018) 11 SCC 508 Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 101 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 ―49. We now proceed to apply the aforesaid principles which have evolved for interpreting the terms of a commercial contract in question. Parties indulging in commerce act in a commercial sense. It is this ground rule which is the basis of The Moorcock39 test of giving ―business efficacy‖ to the transaction, as must have been intended at all events by both business parties.
The development of law saw the ―five condition test‖ for an implied condition to be read into the contract including the ―business efficacy‖ test. It also sought to incorporate ―the Officious Bystander Test‖ [Shirlaw v. Southern Foundries (1926) Ltd.41]. This test has been set out in B.P. Refinery (Westernport) Proprietary Ltd. v. Shire of Hastings42, requiring the requisite conditions to be satisfied: (1) reasonable and equitable; (2) necessary to give business efficacy to the contract; (3) it goes without saying i.e. the Officious Bystander Test; (4) capable of clear expression; and (5) must not contradict any express term of the contract. The same penta-principles find reference also in Investors Compensation Scheme Ltd. v. West Bromwich Building Society43 and Attorney General of Belize v. Belize Telecom Ltd.44 Needless to say that the application of these principles would not be to substitute this Court's own view of the presumed understanding of commercial terms by the parties if the terms are explicit in their expression. The explicit terms of a contract are always the final word with regard to the intention of the parties. The multi-clause contract inter se the parties has, thus, to be understood and interpreted in a manner that any view, on a particular clause of the contract, should not do violence to another part of the contract.‖ 27.8.4 On the manner in which commercial contracts are to be construed, perhaps the most recent exposition of the law is to be found in Haris Marine Products v ECGC Ltd45, which explains the legal position thus:
―A. Business common sense 41 (1939) 2 KB 206 : (1939) 2 All ER 113 (CA) 42 1977 UKPC 13 : (1977) 180 CLR 266 (Aus) 43 (1998) 1 WLR 896 : (1998) 1 All ER 98 (HL) 44 (2009) 1 WLR 1988 (PC) 45 2022 SCC OnLine SC 509 Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 102 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07
22. Reconciliation of ambiguous terms in commercial contracts has been a contentious issue across jurisdictions. A 2011 decision by the Supreme Court of the United Kingdom (hereafter, ―UK Supreme Court‖) in Rainy Sky SA v. Kookmin Bank46 was concerned with the interpretation of refund guarantees given by a ship builder to the buyers, and whether the same was triggered when the ship builder started facing financial difficulties and was subjected to a debt workout procedure. Allowing the appeal, the UK Supreme Court provided the guiding principle for resolution of such ambiguity, keeping the ‗business common sense' as central:
―The language used by the parties will often have more than one potential meaning. I would accept the submission made on behalf of the appellants that the exercise of construction is essentially one unitary exercise in which the court must consider the language used and ascertain what a reasonable person, that is a person who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract, would have understood the parties to have meant. In doing so, the court must have regard to all the relevant surrounding circumstances. If there are two possible constructions, the court is entitled to prefer the construction which is consistent with business common sense and to reject the other.‖ (Emphasis supplied)
23. This principle was further developed by the UK Supreme Court in Arnold v. Britton47. The facts were that a 99-year lease specified that service charge of £90 levied every year was subject to 10% increase annually. The lessees submitted that by the end of the lease agreement, the service charge payable would be very high, exceeding the cost of providing the services. The UK Supreme Court refused to depart from the natural meaning of the clause, holding that:
"When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to "what a reasonable person having all the 46 (2011) UKSC 50 47 (2015) UKSC 36 Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 103 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean", to quote Lord Hoffmann in Chartbrook Ltd. v. Persimmon Homes Ltd.48 And it does so by focussing on the meaning of the relevant words, in this case clause 3(2) of each of the 25 leases, in their documentary, factual and commercial context. That meaning has to be assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions of the lease, (iii) the overall purpose of the clause and the lease, (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party's intentions. In this connection, see Prenn at pp 1384-1386 and Reardon Smith Line Ltd. v. Yngvar Hansen-Tangen (trading as HE Hansen-Tangen)49, Bank of Credit and Commerce International SA (in liquidation) v. Ali50, para 8, per Lord Bingham, and the survey of more recent authorities in Rainy Sky, per Lord Clarke at paras 21-30".
(Emphasis contained in the original) 27.8.5 When interpreting commercial contracts, therefore, ―business common sense‖ is non-negotiable. No doubt, ordinarily, the Arbitral Tribunal is the sole arbiter of the manner in which contractual clauses are to be interpreted. It is only in rare cases that interpretation of the contract can constitute a justifiable basis to interfere with an arbitral award. It is also true that a Court should not interfere with the manner in which the Arbitral Tribunal has chosen to interpret the contractual covenants, merely because another interpretation appears, to the Court, to be more apposite. Nor would a Court exercising Section 34 48 [2009] UKHL 38, [2009] 1 A.C. 1101 49 [1976] 1 WLR 989 (2), 995-997 per Lord Wilberforce 50 [2002] 1 A.C. 251 Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 104 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 jurisdiction, substitute, for the interpretation placed by the learned Arbitral Tribunal, its own interpretation of the contractual clauses. The subjective satisfaction of Section 34 Court cannot be permitted to substitute the subjective satisfaction of the Arbitral Tribunal, insofar as the interpretation of the clauses of the contract is concerned.
27.8.6 There is, however, no absolute proscription against interference, under Section 34 of the 1996 Act, with an Arbitral Tribunal, on the ground that the Arbitral Tribunal has not correctly interpreted the contractual covenants. Cases in which interference on such a ground is justified are, however, restricted. Where a commercial contract is interpreted by the Arbitral Tribunal in a manner which is not keeping with commercial good sense, the Court can interfere. Where the Arbitral Tribunal, while interpreting a contractual covenant, reads into the covenant, terms, expressions or considerations, which are not to be found therein, the Court can interfere. Equally, if the interpretation, accorded by the learned Arbitral Tribunal to the terms of a commercial contract do not accord with commercial common sense, the Court, exercising jurisdiction under Section 34, would be in error if it were to merely to sit back and plead helplessness.
27.8.7 It is true that there can be no contractual proscription against development of national or state highways, which is eminently in public interest. For that matter, the construction of a bypass to an existing highway would also be an exercise guided by public interest, as it would facilitate movement of traffic. The sovereign right of the Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 105 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 Government to construct bypasses to ease traffic cannot, therefore, be curtailed by a private contract between two parties. To this legal position, there can obviously be no cavil.
27.8.8 The CA and SSAs, too, do not contain an absolute proscription against construction of a bypass even to the Project Highway, though Clauses 8.1 of the CA and 3.2 of the SSAs, read in isolation, may seem to so indicate. If, however, the construction of the bypass results in a Material Adverse Effect to the contractor - i.e. to GMR - then, GMR has to be indemnified for the loss it suffers.
27.8.9 While it is true that projections in the DPR may not be binding or final, and that contractors are required to carry out their own traffic studies, the DPR traffic projections cannot be altogether ignored either, or treated as superfluous. The Court, or the Arbitrator, dealing with the CA, is required to bear in mind the fact that the DPR traffic projections contained specific projections about the Annual Toll Revenue which would be earned by a bidder who opted for the Negative Grant route. It is useful, in this context, to reproduce the DPR, Annual Toll Revenue, as depicted in the DPR, in extenso, to know what exactly was held out to the prospective bidders. The tabular statement of Annual Toll Revenue in the DPR read thus:
Concession 3 4 5 6 7 8 9 10 11
Year
Financial 2009 2010 2011 2012 2013 2014 2015 2016 2017
Year ended
Toll Revenue 35.84 48.58 55.53 63.45 69.59 77.27 84.64 94.19 103.12
Other 0.42 0.94 1.51 1.96 2.65 3.21 3.88 4.98 6.35
Revenue
Total 36.26 49.52 57.04 65.42 72.24 80.48 88.52 99.17 109.48
Signature Not Verified
Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 106 of 133
By:SUNIL SINGH NEGI
Signing Date:28.09.2022
13:07:07
Revenue
Operating 7.04 8.86 9.38 9.86 10.40 11.13 11.78 12.47 13.25
Expenses
Major 0.00 0.00 0.00 2.63 2.63 2.63 1.92 1.92 1.92
Maintenance
expenses
Total 7.04 8.86 9.38 12.49 13.04 13.77 13.70 14.39 15.17
Operating
Expenses
Operating 29.22 40.66 47.65 52.92 59.21 66.71 74.82 84.78 94.31
Cash
Surplus
Interest 20.13 23.98 23.95 23.81 23.53 29.25 30.87 22.98 21.56
Expenses
Tax 0.00 0.00 0.00 0.00 0.00 0.21 1.24 1.54 5.12
Cash 9.09 16.68 23.70 29.12 35.67 37.24 42.71 60.26 67.63
Surplus
Loan 0.00 0.00 1.06 2.46 6.51 7.74 8.27 12.67 24.64
Repayment
Appropriation 5.98 0.26 0.32 0.94 0.13 (0.04) 0.89 2.64 3.67
to DSRA
Surplus Cash 3.11 16.43 22.33 25.71 29.03 29.54 33.54 44.95 39.32
Available for
Negative
Grant &
Shareholders
Negative 0.00 0.00 17.48 17.48 17.48 17.48 17.48 26.21 5.24
Grant
Offered
Cash 3.11 16.43 4.86 8.23 11.55 12.06 16.07 18.74 34.08
Available for
Shareholders
Actual Toll 4.89** 18.62 21.71 24.65 28.59 32.54 36.91 40.75 41.55
Revenue
Bidders, after all, bid as per the projections contained in the bid documents. Profit is a legitimate expectation of every business enterprise, and loss of profit can constitute the basis to quantify damages, as held by the Supreme Court in A.T. Brij Paul Singh v. State of Gujarat51. Pivotal, to the expectation of profit to be earned 51 (1984) 4 SCC 59 Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 107 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 through the CA, and the decision to opt for the Negative Grant or Positive Grant options thereunder, were the projections in the DPR. The recitals in the bid documents, too, held out the projections to be accurate. The decision, on the part of GMR, to opt for the Negative Grant structure, has also been guided by the said DPR projections. The Negative Grant option required GMR to invest a huge amount in the Project, to the tune of Rs 174.77 crores. To interpret the contract in such a manner as would not factor in the financial outlay of GMR, under the Negative Grant scheme, based on the DPR projections, while assessing whether the diversion of traffic and fall in toll collections consequent to the bypasses coming into being resulted in any Material Adverse Effect to GMR would, in my considered opinion, be contrary to plain commercial common sense.
27.8.10 Where the traffic volume fell much below the figures in the DPR projections, in my considered opinion, it cannot be ignored. Contractors do not contract to suffer losses. Maximizing of profit is the aim of every commercial enterprise. The CA and SSA could not, therefore, be so construed as to ignore this paramount commercial consideration. The proscription against construction of a bypass, in Clause 8.1 of the CA and Clause 3.2 of the SSAs, has to be understood in this context. Activities which have resulted in the coming into existence of an alternate route, to the Project Highway, resulting in diversion of traffic from the Project Highway onto such alternate route and consequent financial loss to GMR cannot but be regarded as resulting in Material Adverse Effect to GMR. To hold that GMR is not entitled to be indemnified for the loss it suffers would be to Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 108 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 construe the CA and SSAs in a manner which is opposed to commercial common sense. Any such construction is, therefore, vulnerable to interference under Section 34 of the 1996 Act.
27.9 Non-production of documents , by NHAI, as mentioned in Letter dated 24th July 2013 - Non-compliance with orders dated 23rd September 2013, 07th October 2013, 29th March 2014 and 13th September 2014.
27.9.1 This, in my view, is a serious infirmity in the proceedings which, applying the law laid down in Associate Builders5¸ would render the impugned award violative of the public policy of India. As many as 21 documents, which GMR had been permitted to inspect and on which GMR sought to place reliance to support its case, had been directed, by the learned Arbitral Tribunal, to be produced by the NHAI on as many as three occasions, and the NHAI failed to comply with the said direction. This failure of NHAI to comply with the directions of the learned Arbitral Tribunal had necessarily to invite an adverse interference against NHAI. Moreover, it also amounts to denial of due opportunity to GMR to substantiate its case.
27.9.2 The impugned Award merely holds, in this regard, that, in later proceedings, GMR did not again press its request for supply of documents. This finding does not appear to be correct. GMR had specifically raised the issue in paras 125, 137 and 139 of their written submissions filed before the learned Arbitral Tribunal on 29 December 2018. Reliance has also been placed, by GMR, on the judgements of the Supreme Court in Gopal Krishnaji Ketkar v. Mohd Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 109 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 3 Haji Latif and U.O.I. v. Ibrahim Uddin52, which clearly hold that withholding, by a litigant, of important documents which are in its possession, must necessarily invite an adverse inference against such litigant. These submissions have not been considered by the learned Arbitral Tribunal, merely on the ground that, during the progress of the proceedings before it, GMR did not reiterate its request for supply of the aforesaid documents.
27.9.3 With respect to these documents, GMR has, in its written submissions filed before this Court, submitted thus:
―a. Vide letter dated 24 July 2013, the Petitioner after inspecting the documents at Respondent No. 1's head office, requested for as many as 21 documents namely:
b. The Final Feasibility Report of CES for Ambala- Chandigarh Section-a consultant (CES) Report on behalf of Respondent No.1 containing the final determination on various aspects of the viability of the Project Highway including traffic studies and forecasts, cost estimation, economic evaluation, financial analysis as well as risk management.
c. Punjab State Road Sector Project- Kharar-Banur- Tepla-Final Design Report which contained the traffic study on Banur Tepla Road.
d. Letter dated 06 January 2010 along with Minutes of Meeting dated 24 December 2009, Letter dated 08 January 2010 from CGM cum RO, PIU, Chandigarh to Member (Project), Respondent No. 1, Letter dated 18 March 2010 and Letter dated 19 February 2010, which contain the determination/ assessment of the upgradation and development of the alternate routes by the Respondents and assessment of losses.
52 (2012) 8 SCC 148 Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 110 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 e. Letter dated 30 June 2010 issued by CGM cum
Regional Officer Respondent No. 1. In this letter, CGM, Respondent No. 1 after making assessment of the entire factual scenario and grievance of the Petitioner admitted that the development of alternate route from Shahbad to Panchkula has resulted in leakage of Revenue of Petitioner due to traffic getting diverted from the Project Highway which has converted the corridor from Shahbad to Panchkula into a By-Pass to the Project Highway. CW-1 referred to contents of this letter in his affidavit.
f. Letter dated 08 February 2010 and Letter dated 07 September 2010 which pertained to the assessment of claim of RS Builders, operating the Railway Over Bridge (RoB) at Dera Bassi falling on the Project Highway, towards loss of toll revenue which amount to admissions and assessment by Respondent No.1 about the effect of the opening of RoB at Kesri on SH-31.
g. File No. NHAI/BOT/11019/17/ Ghaggar Bridge Vol- 1, Letters at Pages 235 to 251, 252 to 253, 373, 375, 376 and 555 to 560 which contained relevant factual statements of the Respondent No. 1 concerning the bid documents for the Project Highway.
h. File No. NHAI/BOT/11019/17/2003 Ambala-
Chandigarh- Noting Sheets at Pages 1-2, 23-25 which contained the admissions of Respondent No. 1 concerning the viability of the Project Highway based on preliminary traffic studies and initiation of the bidding process based on the same.
i. File No. NHAI/BOT/11019/17/2003 Vol-1, Pages 96- 97, 106-118 and 131-134 which contains the evaluation and analysis of the financing documents submitted by the Petitioner which would have shown that both Respondent No. 1 and Petitioner were ad-idem to the analysis made by Petitioner in its bid.
j. And 5 other letters and file noting which also contain assessment and admissions of the Respondent No.1 qua the development/upgradation of the alternate routes by the Respondents as also the losses caused due to diversion of the commercial traffic from the Project Highway to such other Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 111 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 alternate routes. There were 4 letters which were not pressed for on account of the same being communication between Respondent No.1 and its Counsel.‖ 27.9.4 In proceeding to decide the dispute without requiring NHAI to produce the aforesaid documents, and without drawing any adverse inference against NHAI or its failure to do so, the learned Arbitral Tribunal has, in my considered opinion, proceeded in violation of Section 18 of the 1996 Act, which mandates, on the learned Arbitral Tribunal, to give each party full opportunity to present its case. Denial of such ―full opportunity‖ has been held, in Associate Builders5, to render the award infirm as being violative of the public policy of India.
27.9.5 NHAI has, effectively, reaped a premium from its disobedience of the directions issued by the learned Arbitral Tribunal, on as many as three occasions, to produce the aforesaid 21 documents sought by GMR to substantiate its case. No reason, whatsoever, was adduced by NHAI, for such failure. It is not the case of NHAI that the documents were not available with it. Its reluctance to make the documents available in the arbitral proceedings has, therefore, necessarily to be regarded with disfavour, and has to invite an adverse inference against NHAI. Even in the present written submissions, filed before this Court, NHAI has not made any reference to this aspect of the matter, despite a specific ground, to that effect, having been taken by GMR in its Section 34 petition as well as in the written submissions filed by GMR in the present proceedings.
Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 112 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:0727.10 Non-consideration of relevant material 27.10.1 The impugned Majority Award has also omitted, from consideration, the material referred to in paras 21 (21.1 to 21.7). supra. Non-consideration of relevant material, while arriving at its conclusion, would render the award ―perverse‖ in law, applying the definition of ―perversity‖ as contained in Kilasho Devi Burman v. C.I.T53and Damodar Lal v. Sohan Devi54, which holds any decision, arrived at by considering irrelevant materials, or eschewing from consideration relevant material, or arriving at a conclusion, on appreciation of evidence, which no reasonable man conversant with the facts and the material on record would arrive at, as ―perverse‖.
27.10.2 In this context, one significant ―patent illegality‖, in the impugned Award, which renders it seriously vulnerable to challenge, is the decision to ignore the internal communications between the Project Director and the CGM-cum-Regional Officer of NHAI as mere ―internal communications‖, of no evidentiary value. These communications, as per GMR, practically vouchsafe its claims, as they acknowledge the fact that (i) the widening and strengthening of the ACRs resulted in their becoming ―bypasses‖ to the Project Highway, (ii) traffic, especially commercial traffic had, consequent thereupon, diverted to the said bypasses and (iii) resultantly, GMR had suffered considerable loss. Specifically, the claims of GMR were found, in the letter dated 26th August, 2010 from CGM-cum- Regional 53 (1996) 7 SCC 613 54 (2012) 7 SCC 288 Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 113 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 officer to Member (Project) NHAI, to be genuine and merited. In the facts of the present case, the learned Arbitral Tribunal was not justified in disregarding the aforesaid communications, though addressed within NHAI from one officer to the other, as mere inter- departmental communications which were of no evidentiary value as no copy thereof had been forwarded to the GMR. In so holding, the learned Arbitral Tribunal failed to take stock of the fact that the Project Director and the CGM-cum-Regional Officer of NHAI, who had addressed the said communications, were specifically authorised during the meeting of NHAI held on 24th December 2009, to make their assessment and submit the recommendations to NHAI. This authorisation was, in turn, given consequent to the representation of GMR regarding development of alternate routes. In that view of the matter, the recommendations of the said officers could not have legitimately been ignored by the learned Arbitral Tribunal, as they were not mere inter-departmental communications, but were recommendations, consequent to the representation of GMR, by officers authorised by NHAI to make such recommendations.
Conclusion
28. Though this Court holds the learned Arbitrators comprising the learned Arbitral Tribunal in the highest esteem and regard, yet, in view of the aforesaid discussion, this Court is of the opinion that the impugned Award cannot sustain, and the matter would have to be re- examined. The reasons for this conclusion, though already set out in extenso hereinabove, may, for ease of reference, be enumerated thus:
Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 114 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07(i) The learned Arbitral Tribunal had allowed GMR to inspect the records of NHAI. After such inspection, GMR identified twenty one documents/sets of documents which were necessary for the case that GMR proposed to set up.
The relevance of the said documents has been highlighted in the written submissions filed in the present matter before this Court and stand enumerated in para 27.9 supra. The learned Arbitral Tribunal allowed the request of the petitioner and, vide order dated 7th October 2013 directed NHAI to file the said documents. The said direction was reiterated by the learned Arbitral Tribunal on 29th March 2014 and 13th September 2014. There is complete non- compliance, by NHAI, with the said direction. The arbitral proceedings could not have been allowed to continue and conclude without the said documents being made available to GMR, so that it could put up an effective case. This requirement is non-negotiable. It also flows directly from Section 18 of the 1996 Act, which requires all parties to be granted complete opportunity to represent their case. The Supreme Court has, in Associate Builders5 specifically held that denial of opportunity and, consequently, infraction of Section 18 of the 1996 Act, would render the Award contrary to the public policy of India. Such an Award is, therefore, liable to be set aside under Explanation 1(ii) to Section 34(2) of the 1996 Act.
Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 115 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07(ii) The opening findings of the learned Arbitral Tribunal, while interpreting the expression ―bypass‖ as contained in the passage reproduced in paras 17.3 and 17.4 supra are ―patently illegal‖ within the meaning of the expression as defined in the judgment of the Supreme Court in Associate Builders5, Ssangyong26, R.S Sharma9, McDermott7, Centro Trade Minerals8, for the reasons set out in the various sub-paras of para 23 (from para 23.1 to para 23.7) supra.
(iii) The learned Arbitral Tribunal has not taken into account all the material on record, to which para 21 supra in this judgment make reference. These materials, if taken into account, could have had a vital effect on the outcome of the proceedings. Applying the law enunciated in para 61 of Ssangyong26, therefore, non-consideration of the said material also renders the Award liable to be interfered with and perverse in law.
(iv) The submission of GMR with respect to Section 8A of the NH Act has also not been addressed by the learned Arbitral Tribunal on the ground that fixation of the fees chargeable by GMR from the highway users was not a subject matter of controversy in the present case. For the reasons set out in the various sub-paras of para 27.2.6 of the present judgment, the non-consideration of the submission of GMR with respect to the applicability of the said provision vitiates the award, applying the law laid down in para 61 of Ssangyong26.
Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 116 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07(v) The learned Arbitral Tribunal completely ignored the two reports of IMACS, consequent to the studies conducted in 29.09.2009 and December, 2012 respectively, on the ground that GMR had merely filed executive summaries of the reports and had not filed the complete reports. CW-1, in response to question no. 69 put to him, specifically confirmed that the executive summary which had been placed on record was an executive summary of the actual report of IMACS and undertook, should the learned Arbitral Tribunal require, to file the complete report. The learned Arbitral Tribunal never called upon GMR to file the complete report of IMACS. Inasmuch as the executive summary of the reports stood proved by the deposition of CW-1, in response to a query put to him in cross- examination, it was not open to the learned Arbitral Tribunal to reject the executive summary on the ground that it was unsigned or that the author of the summary had not come into the witness box. The learned Arbitral Tribunal has failed to take note of the aforesaid question no. 69 put to CW-1 and his response thereto. There are several decisions of the Supreme Court and other Courts in which the Courts have placed reliance on executive summaries of reports which were filed before them. The need to cite the said decisions is, however, obviated, as this objection of NHAI stands covered by the recent judgement of the Supreme Court in N.H.A.I. v. Madhukar Kumar55. In that case, too, the entire DPR had not been produced before the Court, and what was placed was only 55 2021 SCC OnLine SC 791 Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 117 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 an executive summary. The Supreme Court held that, in the absence of any challenge to the correctness of the executive summary, ―the Court can proceed on the basis of the facts, which are brought out in the Report, and in the absence of a challenge to the same, proceed on the basis that, they are correct.‖ Reliance was, in fact, placed, by the Supreme Court, in that case, on the executive summary of the DPR, even by quoting, in extenso, the relevant portions thereof. The learned Arbitral Tribunal could not, therefore, in the present case, have brushed aside the executive summary of the report, consequent to the study conducted by IMACS as of no evidentiary value whatsoever.
(vi) The consequence of the manner in which the learned Arbitral Tribunal has proceeded is that GMR has been denied a fair opportunity of establishing its case. All parties are ad idem that the entire controversy in the present case revolves only around two issues, namely, (i) whether the States of Haryana and Punjab had constructed bypasses within the meaning of Clause 8.1 of the CA and Clause 3.2 of the concerned SSA and
(ii) whether there had been diversion of traffic onto the said bypasses and resulted Material Adverse Effect on GMR. If the answers to both these questions are in the affirmative, GMR, ipso facto, would be entitled to be indemnified the loss suffered by it under Clause 37.1(2) of the CA. On this, there is no dispute.
Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 118 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07(vii) In order to prove that the upgradation and strengthening of the Shahabad-Panchkula highway had resulted in the creation of a bypass and diversion of traffic, earlier using the project highway, to the said bypass, the petitioner had placed reliance on several documents. The impugned Award, on one ground or the other, rejects the said material. The reports of IMACS have been disregarded on the ground that they were unsigned and were only in the nature of executive summaries. Inter-departmental communications of NHAI have been disregarded, which clearly bore out the case of the petitioner and acknowledged the fact that the changes carried out on SH- 31 and NH-73 had resulted in diversion of traffic on to the said highway and consequent loss to GMR, on the ground that they are merely inter-departmental communications. The DPR which formed part of the bid document has been disregarded on the ground that there was a disclaimer clause, which forewarned bidders from relying on the traffic volume projections contained in the DPR. Apart from this, CW-1, in his affidavit in evidence as well as in his cross-examination, confirmed all aspects of the case of GMR and his evidence remained unshakable. In the mediation committee meeting dated 15th July 2010, which was chaired by the Chairperson of NHAI, it was candidly acknowledged that the upgradation of the Shahabad-Panchkula highway had resulted in diversion of traffic, though NHAI sought to transfer the burden in that regard to the shoulders of the State of Haryana. The assertions in this regard, as contained in the Statement of Claim filed by Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 119 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 GMR, were not specifically traversed in the Statement of Defence filed by NHAI. The communications dated 23 rd July 2010 and 31st August 2010 from GMR to NHAI, also bore out the aforesaid facts, and were not traversed in the replies dated 17th August 2010 and 17th September 2010 from NHAI thereto.
(viii) The manner in which the Majority Award interprets the CA and SSAs is not in keeping with commercial common sense. This, therefore, amounts to ―patent illegality‖ within the meaning of Section 34 of the 1996 Act.
29. The impugned Award cannot, therefore, be sustained in law either on the finding that the upgradation of the highway stretch from Shahabad to Panchkula did not result in the creation of a bypass or that there was no evidence of diversion of traffic to the said bypass as a result thereof and consequent loss to GMR.
30. For these reasons, the impugned Award, insofar as it rejects the claim of GMR for compensation against the loss suffered by it, as a result of diversion of traffic onto the stretch of SH-31 and NH-73 from Shahabad to Panchkula, cannot sustain on facts or in law and is accordingly set aside. It is not possible, however, for this Court, 30 given the law laid down in M. Hakeem to examine the said claim on its own and return findings in that regard. The matter would have to be re-examined by a competently constituted Arbitral Tribunal in the light of the findings returned supra.
Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 120 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07OMP (Comm) 481/2020 - Re: Claim against NHAI/State of Punjab
31. Having thus dealt with the claims of GMR against the State of Haryana, the learned Arbitral Tribunal proceeded to examine the claims of GMR against the State of Punjab, thus.
32. GMR contended that the State of Punjab had, during the period 2006 to 2010, in violation of the CA and the SSA, developed, improved and strengthened (i) the Tepla-Banur-Kharar section of the State Highway and (ii) the Lehli-Banur Road. These changes, it was pointed out, were effected by (a) widening & strengthening of Dera Bassi Surat Manauli Road (Lehli-Banur) (9+200 Km to 15+350 Km);
(b) strengthening of Banur Tepla Road to Surat Manauli Road (Lehli
- Banur) (RD 0.002 Km to 8.67 Km) and (c) widening and strengthening of Kharar Landran Banur Tepla Road (Section from 0+000 Km to 39+530 Km). By so developing the aforesaid two stretches, GMR alleged that the State Highway had been made capable of catering to commercial traffic, which was not possible prior to the said development. As a consequence, GMR alleged that commercial traffic had been diverted from the project highway to the said ACRs, resulting in reduction of toll collection on the project highway.
33. GMR contended that the decision to bid had been taken by the consortium on the basis of, inter alia, the traffic volume data projected by NHAI in the DPR while inviting bids, which was also expected to increase on a year to year basis. The figures relating to Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 121 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 traffic volume, in the studies conducted by GMR, NHAI and the project lenders, before, during and after the bid, were similar. This also strengthened GMR's belief in the traffic volume projections contained in the bid documents.
34. In the aforesaid projections, GMR estimated toll collection of ₹ 13.3 lakhs per day on an average on the project highway in 2008, which would increase year by year. Owing to diversion of traffic to the ACRs, however, toll collection on the project highway in 2008 was only in the realm of ₹ 5 lakhs per day, which was less than 50% of the revenue projected in the bid documents. This, GMR alleged, substantially altered the basic understanding on which GMR offered to bid and entered into the CA.
35. GMR also relied in this context, on the IMACS report dated 29th September, 2009 and the IMACS report of December 2012. The IMACS report of December 2012, pointed out GMR indicated 40% decline in traffic volume and 80% decline in total commercial traffic volume vis-à-vis the bid forecasts on the Project Highway. As against this, during the period 2005 to 2009, post the COD, there was more than 25% growth in the neighbouring corridors. Traffic plying through Delhi/Haryana/Rajasthan/South India and Mohali/Kalka /Panchkula was now found moving along the Banur-Tepla-Kharar and the Shahabad-Saha-Panchkula routes. This indicated diversion of traffic owing to substantial improvement of the ACRs.
Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 122 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:0736. On this basis, GMR claimed, against the State of Punjab and NHAI, jointly and severally, a principal amount of ₹ 75,35,32,174/- alongwith interest of ₹ 18,94,68,333/-, working out to a total claim of ₹ 94,30,00,507/-.
37. With respect to the claims of GMR against the State of Punjab and NHAI jointly and severally, too, the following issues were framed by the learned Arbitral Tribunal:
―1. Whether the acts of State of Punjab in improving, developing and strengthening the:
i) Tepla-Banur-Kharar section of the State
Highway; and
ii) Lehli-Banur Road
And the acts of Respondents in allowing the operation of aforesaid roads to vehicular traffic has:
a. Caused the leakage/deviation of vehicular traffic (commercial & private) from the Project Highway to the aforesaid roads?
b. Any Material Adverse Effect on the performance of its obligations by the Claimant under the Concession Agreement?
c. The effect of causing the Claimant to violate any provisions of the Concession Agreement?
d. The effect of frustrating the fundamental economics on which the Concession Agreement was executed?
2. Whether Respondent No.1/NHAI is liable to determine all additional costs suffered or incurred by the Claimant due to improvement, development, strengthening and operation of the aforesaid roads on account of statutory guarantee (of Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 123 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 interest on capital invested and reasonable return) to the Claimant under the National Highways Act, 1956?
3. Whether the Respondent No.1/NHAI vide its letter dated 05.08.2011, wrongfully rejected the request of the Claimant to determine all direct additional costs suffered or incurred by the Claimant due to the improvement, development, strengthening and operation of the aforesaid roads?
4. What is the percentage traffic deviation from the Project Highway (vis-à-vis the projections of NHAI in Bid Document) and consequently the direct additional costs suffered or incurred by the Claimant on account of leakage/deviation of traffic from Project Highway?
5. Whether the Claimant is entitled to award of a direction to the Respondents to jointly and severally continue to compensate till the time the financial viability as statutorily guaranteed to the Claimant is restored by taking all appropriate steps?
6. Whether the Claimant is entitled to the award of interests both pendente lite and future on all amounts as may be awarded at the rate of SBI PLR + 2%?
7. Whether the Claimant is entitled to an Award of costs of all proceedings including the present proceeding?
8. Whether the Claimant can claim any waiver of Negative Grant under Clause 7.1 of the State Support Agreement?
9. Whether Respondent No.1 can be made to suffer any financial or other liability for the alleged breach if made by Respondent No.1 and in any of its obligations as defined in the Concession Agreement?‖
38. Re. Issue 1 38.1 The learned Arbitral Tribunal held that it was not in dispute that Signature Not Verified the respondent had not constructed any Expressway or Additional Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 124 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 Toll way within the meaning of Clause 8 of the CA or Clause 3.2 of the SSA. It was required, however, to be examined as to whether the activity of widening and strengthening of certain stretches of the highway resulted in the being converted into bypasses.
38.2 Reiterating its earlier conclusion that pre-existing roads could not be converted into bypasses by merely widening and strengthening, the learned Arbitral Tribunal held thus in its reasoning, qua the claim against the State of Haryana, also applied to the claim of NHAI against the State of Punjab. Mere increase in traffic volume on peripheral roads, held the learned Arbitral Tribunal, was not an indicator that the peripheral roads had become bypasses to the project highway. The learned Arbitral Tribunal also reiterated its finding that the prohibitions against creation of bypasses, contained in Clause 8 of the CA and Clause 3.2 of the SSA applied in futuro and that existing roads were not in the contemplation of the parties, when they agreed to prohibition against construction of bypass holding that it was improbable and implausible that the parties would contract against improvement of existing roads, the learned Arbitral Tribunal noted that there was no specific provision to that effect, either, to be found in the CA or the SSA. It was observed that Clause 8 of the CA and Clause 3.2 of the SSA prohibited construction of new roads so as to provide bypasses to the project highway and never intended to apply to existing roads.
38.3 The two roads constituting subject matter of the claims of GMR against the State of Punjab, it was noted, were Other District Roads Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 125 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 (ODRs), which formed sections of existing state highways. They were never meant, therefore, to be, nor were, constructed as bypasses to the project highway. A bypass, by its very nature could not pre- exist the road to be bypassed, but had to be in the nature of a subsequent development.
38.4 For these reasons, the learned Arbitral Tribunal held that the claim of GMR that the State of Punjab had, jointly with NHAI, created bypasses qua the project highway and had, thereby, violated the CA and the SSA, was without substance.
38.5 The remaining issues being overlapping, in nature, with the issues in respect of the dispute with the State of Haryana, the learned Arbitral Tribunal did not return any distinct or different findings with respect to the State of Punjab.
39. Submissions of GMR 39.1 Inasmuch as the reasoning of the learned Arbitral Tribunal, with respect to the claim of the GMR forming subject matter of OMP (Comm) 480/2020 is largely similar to the reasoning with respect to the claim of GMR against the State of Haryana forming subject matter of OMP (Comm) 480/2020, the submissions of GMR, by way of challenge thereto, are also similar.
39.2 As in the case of OMP (Comm) 480/2020, GMR contends, here, in OMP (Comm) 481/2020, as well, that the learned Arbitral Tribunal erred in proceeding on the ground that it was only a road Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 126 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 which was constructed with the intention of bypassing the project highway which could be regarded as a ―bypass‖ within the meaning of Clause 8.1 of the CA. Equally, the learned Arbitral Tribunal had erred in holding that existing roads - in the present case, the road from Lehli to Banur or from Tepla to Kharar via Banur, at the time they were originally created as ―other district roads‖ were never contemplated as being bypasses and that, therefore, they could not be regarded as having become bypasses irrespective of their development. The learned Arbitral Tribunal also went on to hold, as in the case of OMP (Comm) 480/2020, that the road which was bypassed had necessarily to pre-date the bypass itself, and that an existing road could not become a bypass by subsequent development, widening or strengthening. All these findings, point out GMR, are presumptive in nature and could not constitute a justification to reject GMR's claim, once the effect of widening and strengthening of the stretches of highway in the Tepla-Banur-Kharar section and the Lehli- Banur road was found to be that traffic, earlier using the project highway, was diverting to the said stretches.
39.3 GMR points out that these changes also stood acknowledged by the communications of the Project Director and the Chief General Manager-cum-Regional Officer of NHAI, dated 17th May 2010, 24th June 2010 and 26th August, 2010 respectively.
39.4 The fact of creation of the alternate route and diversion of traffic to the said road, resulting in loss to GMR, also stood Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 127 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 acknowledged in the meeting of NHAI held on 15th July 2010, chaired by the Chairperson of NHAI and in which the GMR also participated.
39.5 CW-1, too, in his affidavit in evidence, as well as in his cross- examination, confirmed the development of Tepla-Kharar and Lehli- Banur sections and the resultant diversion of traffic, which were earlier unable to cater to commercial traffic and the consequent diversion of commercial traffic, otherwise using the project highway, to the said alternate competing routes.
39.6 These assertions withstood cross-examination. Specifically with respect to the State of Punjab, CW-1 was queried, and has responded, thus:
―Q. 24 Is it correct that NHAI did not construct any alternate roads to the Project Highway in the State of Punjab?
A. Yes. But, I wish to add that when the development of alternate roads by the State of Punjab was reported by the Claimant to NHAI, NHAI did not take appropriate steps in line with the Concession Agreement, thereby indirectly encouraged development of alternate roads to the Project Highway which led to loss of revenue to the Claimant.‖ 39.7 The IMACS reports, consequent to the studies conducted in 2009 and 2012 also confirmed the fact that, consequent on the development of Tepla-Banur-Kharar and Lehli-Banur sections, traffic, earlier using the project highway, had been diverted through the said routes, which, therefore, constituted bypasses. Except for objecting to the production of the Executive Summaries of the reports instead of Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 128 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 the reports themselves, the contents of the reports were never denied or disproved either by NHAI or by the State of Punjab.
40. Submissions of NHAI and State of Punjab The submissions of NHAI and the State of Punjab, in response to those of GMR, are identical to the submissions advanced in respect of the case set up by GMR against the State of Haryana, as set out in para 22 supra. They are not, therefore, being reiterated here, to avoid repetition.
Analysis
41. The findings arrived at, hereinabove, in respect of the State of Haryana, apply, mutatis mutandis, to the State of Punjab as well. The nature of dispute is identical. The communications and observations in the Mediation Meeting dated 15th July 2010 and letter dated 26th August, 2010 apply equally in respect of the development of the Tepla-Banur-Kharar section of the State Highway and the Lehli- Banur road. The IMACS report, too, applies equally to the present dispute. The oral and documentary evidence on which GMR relies in respect of the dispute vis-à-vis the State of Punjab is identical to that with respect to the State of Haryana. As in the case of the Shahabad- Panchkula stretch, GMR relies on the same evidence to urge that, owing to the development of the Tepla-Banur-Kharar section of the State Highway and the Lehli-Banur road, traffic, which was earlier using the Project Highway, diverted to these stretches, resulting in Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 129 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 reduction of Toll Revenue on the Project Highway and consequent prejudice to GMR.
42. The infirmities, highlighting the findings in the impugned Award qua the development of the Shahabad-Panchkula stretch by the State of Haryana, apply, equally, to the findings with respect to the Tepla-Banur-Kharar section of the State Highway and the Lehli- Banur road on the State of Punjab.
Conclusion
43. For these reasons, the impugned Award, insofar as it rejects the claim of GMR for compensation against the loss suffered by it, as a result of diversion of traffic onto the Tepla-Banur-Kharar section of the State Highway and the Lehli-Banur road, cannot sustain on facts or in law and is accordingly set aside. It is not possible, however, for 30 this Court, given the law laid down in M. Hakeem to examine the said claim on its own and return findings in that regard. The matter would have to be re-examined by a competently constituted Arbitral Tribunal in the light of the findings returned supra.
Postscript
44. Penning this judgement has not been easy. This Court has been acutely conscious of the stature of the learned Arbitral Tribunal and especially of the learned Arbitrators, whom the Court holds in high regard and esteem. Their wisdom and knowledge is enviable and this Court pays all due respect thereto. The Court has been persuaded to Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 130 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 hold as it has only, primarily, because of four considerations. The first is that several documents, which GMR sought and the learned Arbitral Tribunal directed NHAI to produce, were never produced by NHAI. It seems, in the opinion of this Court, completely impermissible for NHAI to have done so and, nonetheless, invited no adverse inference against it. The second is that there appears, prima facie, material which has not been entirely appreciated by the learned Arbitral Tribunal which, keeping in mind the fact the principle that commercial contracts are required to be commercially construed, would require a fresh look, and may influence the ultimate outcome though, needless to say, this Court does not express any conclusive view thereon. The third is that the IMACS report has been disregarded from consideration largely because the original report was not produced before the learned Arbitral Tribunal and an Executive Summary thereof alone was placed on record. Given the position of law as now enunciated by the Supreme Court in Madhukar Kumar55, and the fact that, in that case, too, the Supreme Court relied on an Executive Summary without the original report being placed before it, coupled with the offer, by CW-1, to produce the complete report, it appears that GMR ought to have been permitted a chance to place it on record in case the learned Arbitral Tribunal deemed it necessary to peruse the report. Needless to say, that opportunity would be available to GMR, should the need arise, in the de novo arbitral proceedings to be held consequent on this judgement. The fourth is that the communications dated 17th May 2010, 24th June 2010 and 26th August, 2010 addressed by the Project Director and the CGM-cum- Regional Officer of NHAI and the observations in the Mediation Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 131 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 Meeting dated 15th July, 2010 have been eschewed from consideration which, for the reasons already given hereinbefore, does not appear to this Court to have been justified.
Overall Conclusion
45. The impugned Award dated 26th August 2020 is, therefore, quashed. The entire dispute is required to be referred to arbitration once again, for which the parties would be at liberty to re-initiate arbitral proceedings as per the contractual covenants and the provisions of the 1996 Act. The de novo arbitral proceedings would proceed in accordance with law, and the observations hereinabove, keeping the provisions of the CA and SSAs and the 1996 Act in mind.
46. Needless to say, all issues of fact and law would remain open to be agitated by GMR, NHAI and the States of Haryana and Punjab in the de novo arbitral proceedings.
47. O.M.P. (COMM) 480/2020 and OMP (Comm) 481/2020 stand allowed accordingly. Miscellaneous Applications also stand disposed of.
48. There shall be no orders as to costs.
C. HARI SHANKAR, J SEPTEMBER 26, 2022 r.bararia/dsn/kr Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 132 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07 Annexure -A Signature Not Verified Digitally Signed OMP (COMM) 480/2020 & OMP (COMM) 481/2020 Page 133 of 133 By:SUNIL SINGH NEGI Signing Date:28.09.2022 13:07:07