The Delhi High Court has reiterated that the scope of relief under Section 9 of the Arbitration Act cannot be extended to directing specific performance of the contract itself.
Brief Facts of the Case
The appellant was a Special Purpose Vehicle promoted and incorporated specifically for the purpose of executing the work of six-laning of Gurgaon- Kotputli-Jaipur Highway awarded by NHAI, in terms of Concession Agreement.
The respondent conducted a traffic sample survey, under Article 29 of the Concession Agreement for the years 2016, 2017 and 2018. The Appellant approached the Court in seeking a direction to the Respondent to give its administrative approval in accordance with the determination made by the Independent Engineer. Pursuant to a determination by the Independent Engineer, the concession period was extended by 28 months and 24 days. Even though the factual determination was made by the Independent Engineer the senior lenders who are respondent 2 in this case wanted a formal
letter from respondent acknowledging the extension.
The respondent communicated its acknowledgements for an interim extension of 14 months out of the total 28 months and 24 days. The senior lender wrote to the respondent for it’s to communicate its approval for 28 months 24 days, as per Article 29 of the CA. Appellant approached the court seeking direction of the respondent. Later, respondent issued Letters of Awards where selected entities
were supposed to pay a fixed lump-sum to the respondent, irrespective of actual toll collection. The Appellant filed a writ petition challenging the tendering process, which was, however, dismissed as it was withdrawn, on account of pendency of the Section 9 petition.
The learned single Judge dismissed the Section 9 petition and the Respondent forcibly took possession of the toll plazas.
Submissions of the Counsels
The learned senior Counsel on behalf of the Appellant stated that, Article 29 showed that the extension of concession period is automatic on a mere determination that the Actual Traffic is less than the Target Traffic is less than the Target Traffic during concession Period. The IE had factually determined the extension; there was no scope for further approval from the Respondent.
The Respondent had called bids from third-parties to collect the toll, which is illegal and Appellant cannot be ousted in wake of the fact that the CA is continuing and has not been terminated. As the IE had determined the extension, then there was no scope for any further approval from the Respondent. As a cure period notice of 60 days was required to be issued and if the defaults are not cured in that case the Respondent has a right to issue Notice of Termination granting time to the Appellant that he would make a representation as well time to the lenders to exercise their rights to substitute the Concessionaire.
High Court's Observation
The Court took note of the fact that a TPA was entered for disbursing the toll collected in a waterfall mechanism which is enshrined under Article 6(h). The Respondents had called for bids from the third-parties to collect the toll, which is illegal and Appellant cannot be ousted in the wake of the fact that the CA was continuing.
The Court was of the view that the learned Single Judge erred in his holding, granting relief by the Appellant would amount to extending the CA, and that the Appellant was only seeking status quo pending further orders by the Arbitral Tribunal.
Learned Senior Counsel on behalf of the Respondent stated that, the respondent had conveyed the decision to the Appellant that not to grant any further extension in the Concession Period and that the same shall come to an end. A limited extension was granted with a caveat that the OTFIS infused by the Respondent would be refunded.
The plea regarding 96% of the work was misplaced. No specific performance could be granted in a Section 9 petition on account of the provisions of sections 14(b), 16(c), 41 (e) and 41(h) of the Specific Relief Act, 1963, stated the court and if in case if the Appellant succeeds before the Arbitral Tribunal, it can be compensated by way of damages.
Noting that Learned single Judge was of the prima facie view that there is no automatic extension of the Concession Period, more so, as the Appellant had itself filed two writ petitions in terms of Article 29 of the CA and the Court had directed the Respondent to take a decision and placed reliance on the case of C.V. Rao v. Strategic Port Investments KPC Ltd, the Court opined that there was no infirmity in the prima facie view taken by the learned Single Judge that there is no automatic extension of the Concession Period and the extension pre-supposes approval of the Competent Authority .
"Law on the scope of interference in Section 9 petition was noted to be no longer res integra. The learned Single Judge held that the prayer made by the Appellant in the Section 9 petition
cannot be granted as that would amount to extending the contract to the decision. It was well –settled that powers under Section 9 can only be exercised for preservation of the subject matter of the dispute till the decision of the Arbitral Tribunal cannot be extended specific performance of the contract itself."
The view expressed by the learned Single Judge was clearly a prima facie view and the Appellant has been granted the liberty to seek such remedies as may be available in law., the Court concluded
Therefore, the appeal is dismissed.
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