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Through: Sh. Praveen Kumar Jain and Ms. Komal Pandey, Advocates.

CORAM:

HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE A.K. CHAWLA MR. JUSTICE S. RAVINDRA BHAT %
1. Arguing that the judgment and order of a learned Single Judge rejecting its petition under Section 34 of The Arbitration and Conciliation Act, 1996 (hereafter "the Act") is erroneous, the State of Gujarat (hereafter "the State") or "the appellant") approaches this Court. The State challenged an award dated 10.12.2010 made by the sole Arbitrator in disputes between it and the respondent (hereafter "Ashvika") which arose out of a tripartite Build, Operate and Transfer (hereafter "BOT") Agreement dated 19.09.1996 between the Government of India on the one part, the State and Ashvika on the other hand. The agreement was for building a four-lane Road Over Bridge (hereafter "ROB") and its approaches from km 259/4 to km 263/4 in the Ahmedabad-Mumbai section of NH-8 on BOT basis in place of the then existing two-lane Railway level crossing No. 13-A, between km 261/2 to km 261/4 of the said section of the National Highway.
2. Under the BOT scheme, the selected entity, had to design and construct the four-lane ROB and its approaches and also maintain it for an agreed period known as the „Concession Period‟ at its own cost. The contractor (Ashvika) was allowed the rights to collect and retain the fees from the users of the facility at agreed rates during the „Concession Period‟, so as to recover its investment with returns. Ashvika‟s tender was successful; the BOT agreement was signed. The construction period was 18 months and the „Concession Period‟ was 23 months and 5 days. Under Clause 3.10 of the BOT Agreement, Ashvika could levy fees on vehicles using the facility in accordance with the National Highways Act, 1956 (hereafter "NH Act") after the Central Government issued a notification to that effect. On 10.07.1998, a Notification was issued by Central Government of India in exercise of the powers conferred under Sections 7 and 8A of the NH Act authorizing Ashvika or its authorized legal representative to collect and retain fees in terms of the rates specified in the Schedule appended to the Notification from 13.07.1998 to 17.04.2000 for use of the part of NH-8 i.e., four-lane ROB from km 261/2 to km 261/4 including its approaches from km 259/4 to km 263/4 in Ahmedabad-Mumbai Section NH-8. Separate rates were specified for different classes of vehicles including heavy vehicles (i.e. trucks, trailer combinations laden with goods / passengers both loaded and unloaded @ ` 15 per trip per vehicle etc.).

8. The tribunal assessed damages at ` 1,05,68,915 for the loss suffered on account of not being able to realise the user fee from local users during the Concession Period together with simple interest at 14% per annum from 01.10.2000. The parties were to bear their own costs.

9. The State objected to the award, urging that the interpretation of the contract by the tribunal was palpably unreasonable, because what the parties consented to in the BOT agreement was Ashvika‟s right to charge only those who traversed the highway and facility and not those who did not use it. The State relied on the notification issued which authorized the collection of toll, to emphasize this aspect. It was also argued that the SG had to function within the parameters laid down in Clauses 1.2 and 1.8 of the BOT Agreement. It was argued that the SG did not have the authority to decide on compensation. In doing so, it acted beyond its jurisdiction. Therefore, it was futile for the Arbitrator to have relied upon the decision of the SG erroneously hold that the understanding of the parties from the beginning was that the fees could be collected from even part users of the facility. The tribunal‟s understanding of the Clause 11.3 of the BOT Agreement was also erroneous. The mere passing of an injunction by a Civil Court would not attract Clause 11.3.

16. The tribunal held that "the toll booths on the central verge of the highway on either side would have captured the outward traffic from Chaltan also." It also noted that in the State‟s affidavit and that of the Union Government in the Court of the Civil Judge, Ashvika‟s right to collect fee even from part users of the facility who did not cross the ROB was acknowledged. Thus, design of the BOT Agreement acknowledged the right of the Concessionaire to recover its investments, other expenses and profit by realizing fee from the highway users of the facility constructed and maintained by it. The contract framework was premised on estimated traffic that was expected to use the facility. The Concessionaire, of course, bore the risk of reduced traffic. However, where reduction of traffic was not due to action within the concessionaire‟s control, it had to be compensated on account of Clause 11.3 of the BOT Agreement, which specifies reduction in the fee due to "injunction from any court" as a force majeure event. Consequently, the Court is unable to agree with the submission of the Petitioner that the learned Arbitrator proceeded on an erroneous interpretation of Clause 11.3 of the BOT Agreement. In this view, the interpretation given by the tribunal of the injunction order, which resulted in its inability to collect fees for part use, was not only plausible but justified and warranted. This Court, therefore, holds that the construction of the contract in this regard was within the scope and jurisdiction of the arbitral tribunal. Likewise, factually, there can be no quibble about the fact that the SG‟s ruling was accepted and in fact payments were made to Ashvika by the State. Furthermore, SG meetings were presided over by the officials of the Union Ministry of Surface Transport, and, thus, the genuineness of the claims of compensation by Ashvika were accepted in principle. The quantum of compensation was a matter of dispute. In this regard, the learned Single Judge noted that the tribunal based its decision on an elaborate discussion and reasoning, justifying why the SG‟s opinion was not acceptable, because it merely considered truck traffic were engaged exclusively for the Chaltan sugar factory, ignoring other traffic, for no reason. The tribunal, therefore, rejected the SG‟s calculation. The learned Single Judge noted that the State was unable to point out any flaw, through any evidence why the calculation of damages (which was based on a joint survey) was patently or manifestly erroneous. Even before this Court, no attempt was made to support the allegation that compensation awarded was unprincipled.