Award holding introduction of the GST regime as being an actionable 'change in law' event upheld by HC [Read Judgment]

The Delhi High Court in, NATIONAL HIGHWAYS AUTHORITY OF INDIA v. SAHAKAR GLOBAL LIMITED upheld the arbitral award where the petitioner was NHAI, that said that the GST regime qualified as ‘change in law’ and hence would be considered under the ambit of force majure where the respondents suffered from heavy losses.

Facts

The Petitioner, in this case, NHAI, assails the award passed in arbitration wherein it was supposed to pay Rs 1,40,60,784 +interest @ 9% per annum as compensation for loss generated in revenue triggered due to the implementation of GST on 1.07.2017. Bids were invited by petitioner for undertaking toll collection from users of the Vaghasia Fee Plaza. The respondent’s bid was accepted on 21.06.2017. The agreement was entered on 30th June and operation started 2.07.2017. However the government a few days prior introduced the GST that led to a tremendous loss to respondents, and they requested a traffic survey. The respondent subsequently submitted a statement of loss citing GST as force majure which was rejected and the petitioners asked to deposit the outstanding toll collections with penal interest. The respondents invoked arbitration which went in their favour for the reason that GST that was ‘change in law’ fell under the ambit of force majure.

Petitioner’s Contentions

The petitioner claimed that since the GST was originally proposed to be implemented w.e.f. 01.04.2017, instead of 01.07.2017, much before the execution of the contract agreement on 30.06.2017, the fact of implementation of GST was always in the respondent’s knowledge and hence can’t be called force majure.

Respondent’s Contention

The Counsel for respondents supported the award passed by the arbitrator. They also relied on public notice of petitioner that said that GST qualified as force majure. However the same was rejected by the petitioner stating that the notice has been misinterpreted.

Court’s Analysis and Ruling

The Court said that the petitioner’s contention that the respondents were aware of the implementation of the tax regime was presumptuous and unsupported since the new dates of implementation after the postponement from 1.04.2017 was unknown. The new dates were informed by GOI on 28th June when the contract was entered. The court acknowledged that the tax regime had a rippling effect on the markets. The petitioner’s notice that whether GST would be force majure or not would depend on the facts of the case, was perused by the court. The Court hence concluded, “I find no merit in the petitioner’s contention that the implementation of GST could not be construed as a ‘change in law’ to qualify as a Force Majeure Event in the respondent’s case.” The arbitrator even conducted a thorough examination of the data pertaining to traffic volume and toll collections and came to the conclusion that GST would qualify as force Majeure. The same reasoning was acknowledged by the court while dismissing the petition.

Case Details

Counsel for Petitioner- Mr.Balendu Shekhar, Adv. with Mr.Vipul Singh, Adv. & Mr.Rajkumar Maurya, Adv.

Counsel for respondent- Mr.Neeraj Kishan Kaul, Sr. Adv. with Mr.Rakesh Sinha, Adv., Mr.Pawan Kumar, Adv. & Mr.Ramchandra Madan, Adv.

Coram- HON’BLE MS. JUSTICE REKHA PALLI

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