Reserved judgment in ARBP No.522-11.doc.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION NO.522 OF 2011
Maharashtra Maritime Board
having its office at Indian Mercantile
Chambers, 3rd floor, 14, Ramjibai
Kamani Marg, Ballard Estate,
Mumbai - 400 001. ..Petitioner
(Org. Claimant)
Versus
M/s. PNP Maritime Services
Pvt. Ltd., a Private Company
functioning under Provisions of the
Companies Act, 1956 and having
its Administrative Office at A-5,
Ionic, 18, Arthur Bunder Road,
Colaba, Mumbai - 400 005 ..Respondent
(Org. Respondent)
Mr. Mustafa Doctor, Senior Advocate a/w Mr. Narayan Sahu, Mr.
Yogesh Chawak, Ms. Anuja Desai, Ms. Krishna Baruah i/by M/s.
Legasis Partners for the Petitioner.
Mr. Atul S. Rajadhyaksha, Senior Advocate a/w Mr. C. G. Gavnekar
i/by Mr. G. S. Hiranandani for the Respondent.
CORAM : R. M. SAVANT, J.
RESERVED ON : 17.04.2017
PRONOUNCED ON : 22.06.2017
JUDGMENT
1 By the above Arbitration Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 (For short "the Arbitration Act, 1996"), the Petitioner takes exception to the Award dated 04.02.2011 BGP. 1 of 55 ::: Uploaded on - 23/06/2017 ::: Downloaded on - 24/06/2017 00:59:26 ::: Reserved judgment in ARBP No.522-11.doc.
passed by a majority of two Arbitrators out of a Tribunal consisting of three Arbitrators. By the said Award, the Arbitrators have directed that the Respondent herein pay the Petitioner at the rate of Rs.3/- per metric tonne for cargo handled by it at Dharamtar Creek between the period 21.10.1999 and 18.08.2005. The third Learned Arbitrator has given his own independent Award thereby dissenting from the majority view. The third Learned Arbitrator has held that the Respondent is not entitled to pay charges as per the 1996 policy but is covered by the 1995 policy and would therefore have to pay for the loading and unloading of cargo at the rates fixed by the Government from time to time.
The Petitioner herein which is the Maharashtra Maritime Board is the original Claimant whilst the Respondent herein is the original Respondent in the said Arbitral proceedings and would be referred to as per the said nomenclature hereinafter. 2 The facts giving rise to the challenge raised in the above Arbitration Petition can be stated thus :-
The Claimant is established under the provisions of the Maharashtra Maritime Board Act, 1997 ("M. B. Act" for short), the Minor Ports and Jettys in the State of Maharashtra vest in it and that it is BGP. 2 of 55 ::: Uploaded on - 23/06/2017 ::: Downloaded on - 24/06/2017 00:59:26 ::: Reserved judgment in ARBP No.522-11.doc.
entitled to deal with the same. The Government of Maharashtra on 26.06.1995 by passing a resolution framed a policy, under which, it was decided to give land under water to private industrialists for building Jettys. The Government of Maharashtra thereafter by another Government Resolution dated 15.03.1996 formulated a policy for the development of Ports. As per the policy contained in the said Government Resolution, the Ports under the said policy (which contemplated an elaborate bidding process) were entitled to pay fees/charges to the Claimant for the loading and unloading of goods at a special rate of Rs.3/- per metric tonne as opposed to the regular tariff which was applicable under the Government Resolution dated 26.06.1995. It seems that the Respondent herein made a representation to the State Government on 01.04.1998 stating that the Respondent was created to provide Port and Port based services and it intended to develop a Port to handle cargo which is imported or exported. The Respondent undertook to develop a small Port at Dharamtar and requested for allotment of 5 acres of foreshore land. It seems that pursuant to the said application the Claimant by its letter dated 06.04.1998 called upon the Respondent to submit the particulars about the project. An Agreement was thereafter entered into between the parties on 07.11.1998 for a period of 11 months and thereafter another Agreement was entered into on BGP. 3 of 55 ::: Uploaded on - 23/06/2017 ::: Downloaded on - 24/06/2017 00:59:26 ::: Reserved judgment in ARBP No.522-11.doc.
07.02.2001, by which a licence was granted to the Respondent for a period of 30 years for loading and unloading of cargo meant for import and export and also postal cargo at the existing Dharamtar Creek Jetty to make upon the said Jetty and to operate and to maintain the same. In terms of clause 28 of the said Agreement dated 07.02.2001 the Respondent was required to pay charges in respect of loading and unloading as per the existing scale of rates fixed by the Government of Maharashtra and as may be modified from time to time by it. The said Agreement also provides for payment of interest for outstanding amount at the rate of 18% per annum. The dispute between the parties was triggered of on account of the fact that the Respondent claimed that it was liable to be charges at the rate of Rs.3/- per tonne for loading and unloading cargo as per the 1996 policy and was not liable to pay as per the existing scale of rates fixed by the Government of Maharashtra and as may be modified from time to time by it.
3 The Government of Maharashtra by notification dated 19.08.2005 fixed the charges for the loading and unloading of cargo at multipurpose terminal/Jettys at 1.5 times of the rate prescribed by the Government of Maharashtra in case of captive Jettys. It seems that when the Claimant made a demand on the basis of the said rate fixed by the Government of Maharashtra, the Respondent made a representation to BGP. 4 of 55 ::: Uploaded on - 23/06/2017 ::: Downloaded on - 24/06/2017 00:59:26 ::: Reserved judgment in ARBP No.522-11.doc.
the Claimant to refer the matter to Arbitration as per clause 41 of the said Agreement dated 07.02.2001, after the Claimant turned down the said request, the Respondent approached the then Hon'ble Minister of Ports, Government of Maharashtra under Section 95 of the M. B. Act, who by order dated 04.05.2006 held that the activities undertaken by the Respondent at the place were not a Port but a Jetty and that the Respondent was liable to pay the loading and unloading charges to the Claimant as per the applicable rate and further ordered that the Respondent was liable to pay to the Claimant at the rate of 1.5 times of the rate from 19.08.2005 and the Hon'ble Minister thereafter referred the dispute as regards the arrears i.e. period between 1999 to 2005 to the Arbitrator. The Claimant accordingly claimed a sum of Rs. 17,90,76,922.00 alongwith interest at the rate of 18% per annum and service tax and educational cess at the rate of 12.24% on the total outstanding amount of Rs. 22,49,10,802.00 amounting to Rs. 2,75,29,082.16 totally amounting to Rs. 25,24,39,884.16 which was set out in the claim filed by the Claimant before the Arbitral Tribunal on 22.01.2007.
4 In so far as the said claim of the Claimant is concerned, it was the case of the Respondent herein that the Government of Maharashtra had come out with the policy in the year 1996 as contained BGP. 5 of 55 ::: Uploaded on - 23/06/2017 ::: Downloaded on - 24/06/2017 00:59:26 ::: Reserved judgment in ARBP No.522-11.doc.
in the Government Resolution dated 15.03.1996. Under the said policy, the Government of Maharashtra had declared that on account of paucity of funds, lack of technical expertise in harbour engineering and port development with the State Government, the State Government to realize the potential for development decided to develop 48 minor Ports with the help of private investment. According to the Respondent, 7 Ports were identified for such development and that the said Ports were to be developed on the principle of Build, Own, Operate and Transfer basis (BOOT). The period of BOOT was to be 30 years which could be extended for a further period of 20 years. According to the Respondent, the party entrusted with the development of the Port was to raise the required capital for the development of the Port and create all facilities in the Port according to the contract with the State Government and was also required to maintain and manage the said Port. It was the case of the Respondent that the party responsible for development and running the Port was to have complete freedom in fixing the Port tariff for all the services and the State Government was to recover Rs.3/- per tonne on the cargo handled and that the said rate could only be revised at the end of five years subject to the condition that it could not be more than double of the prevailing rate. It was the case of the Respondent that it is on the basis of the said policy that pursuant to the representation made by it to BGP. 6 of 55 ::: Uploaded on - 23/06/2017 ::: Downloaded on - 24/06/2017 00:59:26 ::: Reserved judgment in ARBP No.522-11.doc.
the State Government, the first Agreement dated 07.11.1998 came to be entered into between the Claimant and the Respondent for a period of 11 months and thereafter the second Agreement dated 07.02.2001 came to be entered into between the Claimant and the Respondent which was for a period of 30 years. It was the case of the Respondent that by letter dated 27.04.2000 the Claimant agreed to its request for development at Dharamtar Creek and called upon it to execute an Agreement and that is how the Agreement dated 07.02.2001 came to be entered into between the parties. It was the case of the Respondent that it has obtained the permissions from various authorities including the authorities concerned with the environment and have thereafter started full-fledged Port activities at Dharamtar. It was therefore the case of the Respondent that the development of Port and Port facilities at Dharamtar were carried out by it pursuant to the representation contained in the said 1996 policy and it was therefore entitled to be charged at the rate of Rs.3/- per tonne for the cargo that was to be loaded and unloaded. The Respondent also pleaded estoppel against the Claimant and thereby claimed that the Claimant cannot be permitted to charge as per the rates prescribed by the Government of Maharashtra. In view of the demand made by the Claimant on the basis of the notification dated 19.08.2005 that the Respondent had issued a notice to the Claimant to refer the dispute as BGP. 7 of 55 ::: Uploaded on - 23/06/2017 ::: Downloaded on - 24/06/2017 00:59:26 ::: Reserved judgment in ARBP No.522-11.doc.
regards the rate payable by the Respondent to Arbitration under clause 41 of the said Agreement dated 07.02.2001 and on its refusal to refer the dispute to Arbitration, the Respondent had filed an application before the Hon'ble Minister of Ports, Government of Maharashtra under Section 95 of the M. B. Act. As indicated above, the said application filed by the Respondent came to be disposed of by the Hon'ble Minister of Ports by his order dated 04.05.2006. The contention of the Respondent that the developments were carried out by it at the Dharamtar Creek under the 1996 policy was negated by the Hon'ble Minister. The Hon'ble Minister directed the Respondent to pay the further loading and unloading charges at the rate mentioned in the notification dated 19.08.2005 and with respect to the arrears it was decided to refer the parties to Arbitration as per clause 41 of the said Agreement dated 07.02.2001, that is how the parties came to be referred to Arbitration. As indicated above, the Arbitral Tribunal consisted of three Learned Arbitrators, out of whom two have concurred whereas the third Learned Arbitrator Mr. M. P. Pinto has given his own separate Award in view of the fact that he did not agree with the findings recorded by the other two Learned Arbitrators. The Arbitral Tribunal framed the following issues in the said Arbitral proceedings.
"(i) At what rate should the Respondents pay the BGP. 8 of 55 ::: Uploaded on - 23/06/2017 ::: Downloaded on - 24/06/2017 00:59:26 ::: Reserved judgment in ARBP No.522-11.doc.
Claimants for cargo handled by them at the Dharamtar facility between the period 21.10.1999 and 18.08.2005 ?
(ii) Is the plea of the Claimant for payment at a rate higher than that actually given by the Respondent during the above period hit by the law of limitation ?
(iii) If it is not and if claims of the Claimant are accepted either the delayed payment and, if so, at what rate ?
(iv) Similarly if the claims of the Claimant are accepted either wholly or partially whether the Respondents are liable to pay service tax on the amount awarded ?"
5 The parties led evidence both oral and documentary. The Arbitral Tribunal marked the documents filed on behalf of the Claimant as Exh.C and the documents on behalf of the Respondent as Exh.R. The Arbitral Tribunal also visited and inspected the facilities developed by the Respondent at Dharamtar Creek. The Arbitral Tribunal by a majority of two held that the Respondent was liable to pay to the Claimant at the rate of Rs.3/- per metric tonne for the cargo handled by it at Dharamtar Port between the period 21.10.1999 and 18.08.2005. The Arbitral Tribunal rejected the claim of the Claimant in so far as the anterior period is concerned on the ground that the said claim would be hit by Section 45 of the M. B. Act. In so far as the third Learned Arbitrator is concerned, he has held that the Respondent would be liable to pay as per the scale of rates fixed by the Government of Maharashtra from time to time and BGP. 9 of 55 ::: Uploaded on - 23/06/2017 ::: Downloaded on - 24/06/2017 00:59:26 ::: Reserved judgment in ARBP No.522-11.doc.
more specifically as contained in Exh.C4, 5, 6 and 19 of the Claimant's compilation and that the rates prescribed by the notification dated 19.08.2005 would not be applicable for the said period. The third Learned Arbitrator held that the Claimant is entitled to interest at the rate of 6% for the period when the claims fell due until the time they are actually paid. It is aggrieved by the said Award dated 04.02.2011 that the jurisdiction of this Court under Section 34 of the Arbitration Act, 1996 has been invoked.
6 SUBMISSIONS OF THE LEARNED SENIOR COUNSEL MR.
MUSTAFA DOCTOR ON BEHALF OF THE PETITIONER :-
I) That the impugned Award is contrary to the terms of the Agreement dated 07.02.2001 entered into between the parties. The said Agreement envisages the development of the existing 'Jetty" at Dharamtar and not a 'Port' at Dharamtar as wrongly held by the Arbitral Tribunal.
II) That the Award is perverse being based on no evidence or has been rendered by taking into account irrelevant evidence and by ignoring the relevant evidence.
III) That the Award is unreasonable and is one that shocks the
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conscience of the Court in as much as by the impugned Award a windfall financial benefit is conferred on the Respondent to which it is not legally entitled to, and that too at the cost of the public exchequer. IV) That the finding of the Arbitral Tribunal that the Respondent has developed a 'Port' and not a 'Jetty' at Dharamtar is ex-facie contrary to the terms of the Agreement between the parties and completely ignores the plain language of the Agreement. Reliance is placed on the judgments of the Apex Court reported in (2001) 5 SCC 101 in the matter of Her Highness Maharani Shantidevi P. Gaikwad Vs. Savjibhai Haribai Patel & Ors. and (2006) 6 SCC 293 in the matter of State Bank of India & Anr. Vs. Mula Sahakari Sakhar Karkhana Ltd.
V) That the said finding of the Arbitral Tribunal is based on evidence that is completely irrelevant and ignores vital evidence to the contrary. VI) That the Arbitral Tribunal has completely ignored the documents which conclusively establish that the development at Dharamtar which was carried out by the Respondent was of a 'Jetty' and not a 'Port'. The relevant material which the Arbitral Tribunal has ignored is as follows :-
i) The first recital of the Agreement dated 07.02.2001 which refers to a letter dated 31.07.2000 of the Maharashtra Coastal Zone Management BGP. 11 of 55 ::: Uploaded on - 23/06/2017 ::: Downloaded on - 24/06/2017 00:59:26 ::: Reserved judgment in ARBP No.522-11.doc.
Authority by which it has withdrawn its previous status-quo order dated 12.05.2000. The said letter specifically states that the status-quo order dated 12.05.2000 in so far as it refers to the old Jetty is withdrawn.
ii) That the aforementioned letter ex-facie shows that the only permission that the Respondent had at the relevant time was a permission for carrying out improvements in respect of the existing Jetty at Dharamtar.
iii) The second and third recital of the Agreement dated 07.02.2001 wherein it has been stated that the licensee i.e. the Respondent herein had agreed to improve upon the existing Jetty at village Shahabad.
iv) That at the relevant time when the Agreement between the Petitioner and the Respondent was entered into, the Respondent did not have permission to do anything other than to improve upon the existing Jetty at village Shahabad.
v) That as per the operative part of the said Agreement dated 07.02.2001 the Respondent was entitled to use the existing Jetty for the purpose of loading and unloading cargo for a period of 30 years commencing from October 1999.
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vi) That the said Agreement dated 07.02.2001 is an Agreement only
for the use and improvement of an existing Jetty and it does not entitle the Respondent to construct any new Jetty at the said site.
vii) That the Agreement dated 07.02.2001 is ex-facie a licence Agreement and not a lease Agreement as is required to be executed under the 1996 policy.
viii) The order of the Collector dated 02.06.2000 allotting land to the Respondent specifically refers to the construction of Jetty and to the 1995 policy.
ix) The Respondent had addressed a letter dated 16.09.2003 to the Joint Secretary, Ministry of Environment and Forest. By the said letter, the Respondent had applied for permission to build a 100 meter Jetty and represented to the Ministry of Environment and Forest that the cost of the project would be Rs.3.21 crores.
x) By its letter dated 06.10.2003, the Ministry of Environment and Forest has granted the Respondent permission to build a minor Jetty of 100 meters. It is an admitted position that apart from this permission, the Respondent has no other permission for construction of any other structure at Dharamtar, much less any permission for the construction of BGP. 13 of 55 ::: Uploaded on - 23/06/2017 ::: Downloaded on - 24/06/2017 00:59:26 ::: Reserved judgment in ARBP No.522-11.doc.
an entire port.
VII) The Arbitral Tribunal in so far as the site visit is concerned has disregarded its own site inspection report dated 10.04.2007. The said site inspection report, which is signed by all three Arbitrators and the advocates of both parties does not refer to any of the buildings or constructions referred to by the Arbitrators in paragraph 21 of the impugned Award, but states that "3 Jettys were seen and it was told that one Jetty was in existence and two Jettys were constructed subsequently". The finding of the Arbitral Tribunal as recorded in paragraph 23 is therefore contrary to the said site inspection report. VIII) That the impugned Award disregards the plain language of clause 28 of the Agreement between the parties. The said clause 28 makes no reference whatsoever to the rate of Rs.3/- as prescribed under the 1996 policy, but provides for the licensee to pay to the licensor cargo or vessel related charges as per the existing scale of rates fixed by the licensor as may be modified by the State Government from time to time. IX) That the Arbitral Tribunal erred in holding that the claim of the Petitioner with respect to all amounts due prior to 05.10.2002 are barred by the provisions of Section 45 of the M. B. Act and therefore cannot be BGP. 14 of 55 ::: Uploaded on - 23/06/2017 ::: Downloaded on - 24/06/2017 00:59:26 ::: Reserved judgment in ARBP No.522-11.doc.
recovered by the Petitioner. The Arbitral Tribunal failed to appreciate that Section 45 of the M. B. Act has no applicability in the facts of the present case.
X) That the Tribunal had erred in ignoring the finding recorded by the Hon'ble Minister whilst considering the application filed by the Respondent under Section 95 of the M. B. Act. The Arbitral Tribunal whilst holding that the Hon'ble Minister did not have the authority to decide any dispute between the parties and has thereby exceeded its authority and jurisdiction by rendering a finding with regard to the legality of an order passed by the Hon'ble Minister under Section 95 of the said M. B. Act.
XI) That the case made out by the Respondent for the first time in this Court that the Respondent was entitled to the benefit of 1996 policy even if it had only constructed a Jetty and that it did not require to construct a Port for the purposes of getting the benefit of the said policy, the said submission is completely contrary to the case made out by the Respondent before the Arbitral Tribunal and therefore cannot be entertained by this Court for the first time in a Petition under Section 34.
XII) The impugned Award is therefore required to be interfered with in
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exercise of the jurisdiction under Section 34 of the Arbitration Act, 1996 on the ground that the same has been passed in disregard to the terms of the Agreement between the parties, is based on no evidence and/or ignores vital evidence and also shocks the conscience of the Court. 7 SUBMISSIONS OF THE LEARNED SENIOR COUNSEL MR.
ATUL S. RAJADHYAKSHA ON BEHALF OF THE RESPONDENT :- A) That the policy dated 26.06.1995 and the policy dated 15.03.1996 were promulgated to initiate the development and operation of Jettys and Minor Ports along the Konkan Seashore/Coastline with the help of private participation.
B) That the policy dated 26.06.1995 was promulgated for the operation and development of captive Jettys. Whilst the policy dated 15.03.1996 was promulgated for the operation and development of Ports and Jettys generally. Hence the policy dated 15.03.1996 includes both Jettys as well as the development of minor Ports.
C) That the State Government has prescribed the charges for loading and unloading cargo at the rate of Rs.3/- per tonne which may be revised every five years at the discretion of the State Government but which would not be increased to the extent of double of the fees existing BGP. 16 of 55 ::: Uploaded on - 23/06/2017 ::: Downloaded on - 24/06/2017 00:59:26 ::: Reserved judgment in ARBP No.522-11.doc.
immediately prior thereto.
D) That the State Government prior to the rate declared in the said policy dated 15.03.1996 had issued notifications under Section 5 of the Bombay Lending & Wharfage Fees Act, 1882 dated 16.11.1996 and 30.06.1997 and in spite of the same, the State Government had decided to levy charges at the rate of Rs.3/- per tonne. The said rate was fixed as the private parties were required to invest for development of such facilities.
E) That it is pursuant to the policy dated 15.03.1996 that the State Government enacted the Maharashtra Maritime Board Act, 1996. The Petitioner has a limited power of leasing of a Port or Jetty for a term not exceeding 5 years. For a longer period of leasing for a term of 30 years, the previous approval of the State Government is necessary. The Respondent having been leased out the Jetty as well as the Government Land for a longer period of 30 years with the previous sanction of the State Government, it is not open for the Petitioner to claim the rate higher than prescribed in the Government policy dated 15.03.1996 which is at Rs.3/- per tonne.
F) That the notification dated 19.08.2005 fixing the rate at 1.5 times
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of the applicable to a captive Jetty cannot be applied to the Petitioner in view of the fact that the facilities started by the Petitioner had commenced with the application dated 01.04.1998 and were completed long before the issuance of the said notification. G) That the order passed by the Hon'ble Minister dated 04.05.2006 cannot be said to have decided the nature of development carried out by the Respondent at Dharamtar Creek. The occasion to approach the Hon'ble Minister had arisen in view of the fact that the Chief Executive Officer of the Claimant had declined the request of the Respondent to refer the dispute for Arbitration as per clause 41 of the said Agreement dated 07.02.2001. If the contention as raised on behalf Claimant is to be accepted, then there was nothing to be referred to the Arbitrator for adjudication.
H) That the Claimant is barred from claiming the amounts as claimed by the notices dated 26.09.2005 and 05.10.2005 for the period prior to three years thereto in view of Section 45 of the M. B. Act. I) That the impugned Award does not suffer from any illegality nor is it perverse or shocks the conscience of the Court for it to be interfered with under Section 34 of the Arbitration Act, 1996. Reliance is placed on BGP. 18 of 55 ::: Uploaded on - 23/06/2017 ::: Downloaded on - 24/06/2017 00:59:26 ::: Reserved judgment in ARBP No.522-11.doc.
the judgment of the Apex Court reported in (2015) 3 SC 49 in the matter of Associate Builders Vs. Delhi Development Authority. That this Court whilst exercising jurisdiction under Section 34 of the Arbitration Act, 1996 is not entitled to re-assess or re-appreciate the evidence as it is not exercising appellate jurisdiction. The interpretation of the terms of the Agreement dated 07.02.2001 also cannot be interfered with. In support of the said submission reliance is placed on the following judgments of the Apex Court reported in (2003) 7 SCC 396 in the matter of State of U. P. Vs. Allied Constructions, (2009) 5 SCC 678 in the matter of Madhya Pradesh Housing Board Vs. Progressive Writers and Publishers and (2009) 10 SCC 63 in the matter of Steel Authority of India Vs. Gupta Brother Steel Tubes Limited. The impugned Award therefore requires no interference at the hands of this Court under Section 34 of the Arbitration Act, 1996.
CONSIDERATION 8 The issue which is at the heart of the controversy is whether the Respondent has developed a Port or a Jetty, the answer to the said issue would fix the rate at which the Respondent is to make payment to the Petitioner for the loading and unloading of cargo at Dharamtar. In the said context, the 1995 policy as also the 1996 policy assumes importance.
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By the 1995 policy as contained in the Government Resolution dated 26.06.1995, the State Government had decided to give land under water to private industrialist for building Jettys. Hence the 1995 policy was principally formulated by the Government of Maharashtra to facilitate the land to be allotted to the industrialist for building Jettys. The relevant clauses (2C and 8) of the 1995 policy are reproduced hereinunder for the sake of ready reference :-
"C) In order to give land under water to private industrialists for building Jetties, such land will be transferred to the Collector concerned in the first instance who will transfer the same to the Water Transport Commissioner for the purpose of building a Jetty. Thereafter, with the permission of the Government, the Water Transport Commissioner will give right to use the land under water either on lease or on license."
"8) It shall be binding to pay the loading and unloading charges prescribed by the Government. If the charges are not paid within the prescribed period, the Government/Water Transport Commissioner will have absolute right to revoke the lease/license and take over possession of the Jetty."
9 The 1996 policy as contained in the Government Resolution dated 15.03.1996 pertains to the development of Ports. The said policy in a way exemplifies the policy of the State Government to facilitate the development of Ports on BOOT basis. The said policy as can be seen from the Government Resolution contemplated a bidding process and also BGP. 20 of 55 ::: Uploaded on - 23/06/2017 ::: Downloaded on - 24/06/2017 00:59:26 ::: Reserved judgment in ARBP No.522-11.doc.
contemplated concession in the matter of loading and unloading charges that an industrialist would have to pay to the Petitioner. Under the 1995 policy, the rate for loading and unloading of cargo was to be as fixed by the State Government from time to time under the Wharfage Act. However in contra distinction the rate applicable under the 1996 policy was Rs.3/- per tonne. The relevant clause of the said 1996 policy is reproduced hereinunder :-
"(I) From the private port, the Government will recover fees based on each ton and this fee will be Rs.3/- per ton and it may be changed every year at discretion of the Government which will not be increased to extent of double of the fees existing immediately before".
Hence the said two policies stand apart in so far as the payment to be made by the industrialist who has developed a Jetty and an industrialist who has developed a Port under the 1996 policy for loading and unloading of cargo at the Dharamtar creek.
10 As indicated above, the Petitioner and the Respondent had entered into an Agreement dated 07.11.1998 permitting the Respondent to develop a Jetty at Dharamtar for landing bulk cargo. The 1998 Agreement was valid for a period of 11 months. Thereafter Agreement dated 07.02.2001 which is the Agreement in contention was entered into between the parties. Clause 28 of the Agreement is material in the BGP. 21 of 55 ::: Uploaded on - 23/06/2017 ::: Downloaded on - 24/06/2017 00:59:26 ::: Reserved judgment in ARBP No.522-11.doc.
context of the challenge raised in the above Petition and is therefore reproduced hereinunder :-
"In consideration of the Licensor granting the License, the Licensee agrees and undertakes to pay to the Licensor and/or vessel related charges as per the existing scale of rates fixed by the Licensor as may be modified by them from time to time and notified in the Government Gazzete".
The recitals of the said Agreement dated 07.02.2001 are also relevant in the context of the challenge raised in the above Petition. The said recitals are reproduced hereinunder for the sake of ready reference :-
"AND WHEREAS the Maharashtra Coastal Zone Management Authority vide its letter No.MCZMA/21 dated 31.07.2000 had withdrawn the status quo order passed vide their letter No.MCZMA/B-3399 dated 12.05.2000 stating that the said jetty being used by M/s. PNP Marine Services Pvt. Ltd. was an old Jetty which has been in existence for the last 20 years based on a report given by the District Collector, Raigad. The Authority has further stated that it has discussed the matter at length at it's meeting held on 05.07.2000 and it has been decided to withdraw the status quo order.
WHEREAS as Dharamtar, the Licensee has agreed to improve upon the existing jetty at village, Shahabad and to operate an maintain the said Jetty belonging to the Maharashtra Martime Board, the Licensor".
11 The Arbitral Tribunal having regard to the dispute as regards the rate applicable and whether the case of the Respondent is covered by the 1996 policy, held that it is necessary to determine whether the BGP. 22 of 55 ::: Uploaded on - 23/06/2017 ::: Downloaded on - 24/06/2017 00:59:27 ::: Reserved judgment in ARBP No.522-11.doc.
Respondent has constructed a Port or a Jetty upon which would hinge the rate which would be applicable to the Respondent for loading and unloading of cargo. The Arbitral Tribunal referred to the 1996 policy, which provides for allotment of land for construction work of development of Jetty and Multipurpose Ports to private sector. The Arbitral Tribunal referred to the preamble of the said policy, wherein it was stated that the 48 Ports in the State of Maharashtra could not be developed for want of financial resources. The Arbitral Tribunal observed that there was no dispute about the fact that at the relevant time Dharamtar was one of the 48 Ports because it was mentioned in the said policy. The Arbitral Tribunal also adverted to the fact that under the said policy the Claimant i.e. Maharashtra Maritime Board was established which was inter-alia for the purpose of regulating the development activities in the maritime field. The Arbitral Tribunal has principally relied upon the letter dated 27.04.2000 which according to the Tribunal supports the claim of the Respondent that the Government of Maharashtra as well as the Claimant was aware that the Respondent was developing Port facilities at Dharamtar and not requesting the Claimant to lease one of its dilapidated Jettys. The Arbitral Tribunal in so recording a finding has referred to the letter dated 02.06.2000 by which the Collector, Raigad had allotted land to the Respondent. The Arbitral BGP. 23 of 55 ::: Uploaded on - 23/06/2017 ::: Downloaded on - 24/06/2017 00:59:27 ::: Reserved judgment in ARBP No.522-11.doc.
Tribunal also referred to the letter dated 02.09.1998 by which the Claimant has permitted the Respondent to use 200 meters of water front for development of landing facilities. The Arbitral Tribunal in the process of recording the finding based on the letter dated 27.04.2000 has negated the case of the Claimant that the said 1996 policy was applicable only to the Green Field Ports. The Arbitral Tribunal held that there is no such reference in the said policy to Green Field Ports. The Arbitral Tribunal also arrived at the said finding on the basis of what was found in the site visit. The Arbitral Tribunal has observed that on the site visit it was found that there was extensive development on the site including construction of building for office of the Respondent, customs department office, compound walls, internal roads and other marine facilities required for handling the cargo including godowns. The Arbitral Tribunal has also referred to the assessment orders passed by the Income Tax Department which were numbered as Exhs.8, 9 and 10, which returns according to the Respondent support its claim that the department has accepted its claim of being engaged in the business of developing, operating and maintaining the Port. The Arbitral Tribunal in support of the said finding held that the entire facilities at Dharamtar creek were developed by the Respondent at its own cost.
12 The Arbitral Tribunal in so far as the order dated 04.05.2006
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passed by the Hon'ble Minister of Ports, Government of Maharashtra is concerned, held that the provisions of Section 95 of the M. B. Act goes to show that it is neither an appellate provision nor a revisional provision, though the letter preferred by the Respondent was in the form of revisional application preferred under Section 95 of the M. B. Act. The Arbitral Tribunal held that it is clear from the said Section 95 that it empowers the State Government only to issue directions and there is no authority whatsoever to decide any kind of dispute between the parties. The Arbitral Tribunal thereby negated the case of the Claimant that the Respondent was liable to be charged in terms of clause 28 of the Agreement and not as per the policy of 1996 as the said contention of the Respondent was negated by the Hon'ble Minister by his order dated 04.05.2006. The Arbitral Tribunal further held that the said order of the Hon'ble Minister dated 04.05.2006 cannot be construed to have determined the issue, of whether the Respondent has constructed a Port or a Jetty as is sought to be contended by the Claimant. The Arbitral Tribunal therefore concluded that the Respondent is liable to pay to the Claimant for the loading and unloading of cargo at Dharamtar Port between the period of 21.10.1999 and 18.08.2005 at the rate of Rs.3/- per metric tonne as mentioned in the 1996 policy.
13 The Arbitral Tribunal thereafter proceeded to consider
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whether the plea of the Claimant for payment at the higher rate on the basis of the notification dated 19.08.2005 for the period 21.10.1999 and 18.08.2005 is justified. The Arbitral Tribunal held that the said notification having come into force on 19.08.2005, the liability on the basis of the said notification could not be fastened on the Respondent from an anterior date. The Arbitral Tribunal therefore held that the demand of the Claimant to apply the said rate retrospectively prior to 19.08.2005 could not be sustained.
14 In so far as the issue of limitation for recovery of the amount is concerned, the Tribunal adverted to Section 45 of the M. B. Act. The said Section 45 provides for issuance of a notice calling for payment of charges short levied or erroneously refunded. The said Section provides that such a notice cannot be issued after the expiry of three years from the date the amount became due. The Arbitral Tribunal held that a composite notice could not have been issued in respect of the amounts which had become due more than three years prior to the issuance of the said notice. The Arbitral Tribunal held that as per the said provision i.e. Section 45, the notice can cover only the transactions that have taken place between 05.10.2002 and 05.10.2005 and therefore, the short levied charges prior to the said date i.e 05.10.2002 could not be recovered by the Claimant, as the same being barred by Section 45 of the M. B. Act.
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The Arbitral Tribunal held that the Claimant is not entitled for interest in view of its finding that the Respondent was liable to pay at the rate applicable under the 1996 policy and that the rate prescribed by clause 15 of the Government Notification dated 19.08.2005 was not applicable and since the Tribunal has held that the rate mentioned in the 1996 policy would be applicable and the rates prescribed in the scale of rates dated 16.11.1996 and 29.10.1997 were not applicable to the facility of the Respondent. The Arbitral Tribunal held that since during the disputed period i.e. 21.10.1999 and 18.08.2005 the Respondent had handled 97,439.00 metric tonne and the amount paid Rs.5,71,339.00 and since the Respondent was liable to pay at the rate of Rs.3/- per metric tonne, the payment made by the Respondent was on the higher side and therefore the Claimant was not entitled to any interest. The Arbitral Tribunal thereafter held that the Respondent was not liable to pay service tax on the amount it has recovered from its clients. The Arbitral Tribunal has concluded that the Claimant was liable to pay at the rate of Rs.3/- per metric tonne for the period 21.10.1999 and 18.08.2005. 15 At this stage, it would be necessary to refer to the judgments of the Apex Court, wherein the scope of a Petition filed under Section 34 of the Arbitration Act, 1996 has been enunciated. The Apex Court in Associate Builders case (supra) was dealing with a case where the BGP. 27 of 55 ::: Uploaded on - 23/06/2017 ::: Downloaded on - 24/06/2017 00:59:27 ::: Reserved judgment in ARBP No.522-11.doc.
Division Bench of the High Court of Delhi had interfered with the Award passed by the Arbitrator. The Division Bench in the said case while considering claims 9, 10, 11 and 15 found fault with the application of Hudsons formula which was set out by the Arbitrator in order to arrive at the claim made under the said heads. The Division Bench held that it was not possible for an Arbitrator to mechanically apply a certain formula however well understood in the trade. This, the Apex Court found to be going outside the jurisdiction to set aside an Award under Section 34 of the Arbitration Act, 1996, especially in view of its judgment in Mc Dermotts case, wherein it has been held that a different formula can be applied in different circumstances and the question as to whether damages should be computed by taking recourse to one or the other formula, having regard to the facts and circumstances of a particular case, would eminently fall within the domain of the Arbitrator. The Apex Court also found fault with the Division Bench in interfering with a pure finding of fact recorded by the Arbitrator which the Apex court found was obviously exceeding its jurisdiction. The Apex Court also found fault with the Division Bench on the ground of its endeavour to apply "rough and ready justice". The Apex Court observed that this could not be done by any Court under the jurisdiction exercised under Section 34 of the Arbitration Act, 1996. The Apex Court held that the expression "justice"
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when it comes to setting aside an Award under the public policy ground would only mean that an award shocks the conscience of the Court. The Apex Court held that it possibly cannot include what the Court thinks is unjust on the facts of a case and it cannot substitute its views for the views of the Arbitrator. The Apex Court in the said case expounded as to what is meant being against the public policy of India. The Apex Court elaborated the different sub-heads which would come under the public policy of India and explained the different sub-heads. The same are as follows :-
HEADS OF "PUBLIC POLICY OF INDIA"
I. Fundamental Policy of Indian Law (i) Compliance with statutes and Judicial precedents
Violation of Indian status i.e. the award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect the administration of justice and would be regarded as being contrary to the fundamental policy of Indian law.
(ii) Need for judicial approach
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In every determination whether by a court or other authority that affects the rights of a citizen or leads to any civil consequences, the court or authority concerned is bound to adopt what is in legal parlance called a "judicial approach" in the matter. The Apex Court elaborated that when the rights or obligations of the parties are in contention the court or authority cannot act in an arbitrary, capricious or whimsical manner.
(iii) Natural justice compliance Whilst determining the rights and obligations of the parties before it, the Court or authority has to adhere to the audi alteram partem rule meaning thereby that the court or the authority deciding the matter must apply its mind to the antecedent facts and circumstances whilst taking a view one way or the other.
(iv) Wednesbury reasonableness The decision arrived at has to be tested on the application of the Wednesbury principle of reasonableness meaning thereby that a decision which is perverse or is so irrational that no reasonable person would have arrived at would be open to challenge in a court of law on the said ground.
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II Interest of India
An award can be set aside on the ground that it is contrary to the interest of India.
III Justice or Morality (i) Justice
An award can be said to be against justice only when it shocks the conscience of the court.
(ii) Morality Interference under the aforesaid ground would also be on the ground that something shocks the conscience of the Court. Morality unnecessarily cover such Agreements as are not illegal but would not be enforced given the prevailing mores of the day.
IV Patent Illegality Under the said ground an Award can be set aside if there was an error of law committed by the Arbitrator.
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(i) Contravention of substantive law of India
A contravention of substantive law of India would result in the deathknell of Arbitral Award.
(ii) Contravention of A & C Act, 1996 A contravention of the Arbitration Act 1996 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 Arbitration Act, 1996.
(iii) Contravention of the terms of the contract In all cases, the Arbitral Tribunal shall decide in accordance with the terms of the contract. The Apex Court after expounding on the ground of public policy of India and explaining what is meant thereby has observed that it does not act as a Court of Appeal and consequently errors of fact cannot be corrected.
16 The next judgment as regards the jurisdiction of the Court whilst adjudicating upon an Award is the judgment in Associated Engineering Company's case (supra). The said case was under the 1940 BGP. 32 of 55 ::: Uploaded on - 23/06/2017 ::: Downloaded on - 24/06/2017 00:59:27 ::: Reserved judgment in ARBP No.522-11.doc.
Arbitration Act. In the said case, the challenge to the Award was on the ground that Arbitrator had granted escalation of cost in the price of napa slabs. The contract provided escalation provision only related to labour, diesel oil, tyres and tubes, as provided in Item 35 thereof. There was no escalation provision in the contract in so far as napa slabs were concerned. The parties to the contract were therefore bound by that price and the arbitrator, therefore, had no jurisdiction to award any escalation in price of the napa slabs. In the absence of any provision in the contract, it was the case of the Government that the arbitrator had no jurisdiction to make an award for escalation. In so far as the escalation on account of labour charges is concerned, the arbitrator in the said case had awarded very much more than what was warranted under the agreed formula. A specific formula had been prescribed under Item 35 and the function of the umpire was to make an award in accordance with that formula. He had therefore no jurisdiction to alter the formula, which he has done, as seen from the award. The Apex Court held that the contract prohibited payment of any escalation under claim No.III for napa slabs or claim No.VI for extra lead of water or claim No.IX for flattening of canal slopes or claim No.II for escalation in labour charges otherwise than in terms of the formula prescribed by the contract. In the light of the fact that the Arbitrator had awarded escalation which was beyond the terms of the BGP. 33 of 55 ::: Uploaded on - 23/06/2017 ::: Downloaded on - 24/06/2017 00:59:27 ::: Reserved judgment in ARBP No.522-11.doc.
contract, the Apex Court held that the Arbitrator cannot act arbitrarily, irrationally, capriciously or independently of the contract. An arbitrator who acts in manifest disregard of the contract acts without jurisdiction. The Apex Court concluded that in the said case, the umpire acted unreasonably, irrationally and capriciously in ignoring the limits and the clear provisions of the contract. The Apex Court resultantly upheld the judgment of the High Court which had set aside the award in so far as the said four claims were concerned. However had upheld the claim in so far as the claim No.II is concerned.
17 A reference to the judgments cited by the Learned Counsel for the Respondent which are on the scope of the jurisdiction under Section 34 of the Arbitration Act, 1996 would have to be made. In the case of State of U. P. (supra), the Apex Court was concerned with the application for setting aside the Award under Section 30 of the Arbitration Act, 1940. In the said case the Arbitrator had rejected the claim of the Contractor on account of the loss sustained on account of the unprecedented rain. Clause 47 of the Agreement involved in the said case protected the State from liability and damage occasioned by unprecedented flood which could not have been foreseen or avoided as a prudent person. The Contractor had not lead any evidence that the rain on account of which the loss was sustained by the respondent was BGP. 34 of 55 ::: Uploaded on - 23/06/2017 ::: Downloaded on - 24/06/2017 00:59:27 ::: Reserved judgment in ARBP No.522-11.doc.
unprecedented and in fact was an act of God. In the absence of such evidence, the arbitrator as well as the High Court has recorded a finding of fact that the flood which has caused loss to the respondent was not due to the unprecedented rain and therefore, clause 47 of the Agreement was not attracted. The Apex Court held that the Court cannot reappraise the evidence and that interpreting a contract is within the jurisdiction of the arbitrator.
In Steel Authority of India Limited's case (supra), the Apex Court held that the view taken by the arbitrator as to meaning of a contractual clause if possible one and not absurd, then irrespective of its correctness or otherwise, held, was not subject to judicial review. The Apex Court in the said case crystallized the legal position that emerges from its decisions in para 18 which is reproduced hereunder :-
"18. It is not necessary to multiply the references. Suffice it to say that the legal position that emerges from the decisions of this Court can be summarised thus :
(i) In a case where an arbitrator travels beyond the contract, the award would be without jurisdiction and would amount to legal misconduct and because of which the award would become amenable for being set aside by a court.
(ii) An error relatable to interpretation of the contract by an arbitrator is an error within his jurisdiction and such error is not amenable to BGP. 35 of 55 ::: Uploaded on - 23/06/2017 ::: Downloaded on - 24/06/2017 00:59:27 ::: Reserved judgment in ARBP No.522-11.doc.
correction by courts as such error is not an error on the face of the award.
(iii) If a specific question of law is submitted to the arbitrator and he answers it, the fact that the answer involves an erroneous decision in point of law does not make the award bad on its face.
(iv) An award contrary to substantive provision of law or against the terms of contract would be patently illegal.
(v) Where the parties have deliberately specified the amount of compensation in express terms, the party who has suffered by such breach can only claim the sum specified in the contract and not in excess thereof. In other words, no award of compensation in case of breach of contract, if named or specified in the contract, could be awarded in excess thereof.
(vi) If the conclusion of the arbitrator is based on a possible view of the matter, the court should not interfere with the award.
(vii) It is not permissible to a court to examine the correctness of the findings of the arbitrator, as if it were sitting in appeal over his findings."
In Madhya Pradesh Housing Board's case (supra), the Apex Court once again reiterated the scope of the jurisdiction under Section 30 of the Arbitration Act, 1940. The Apex Court held that interpreting a contract is a matter within the jurisdiction of the Arbitrator, the Award passed by the arbitrator is ordinarily final, it cannot be interfered with unless the reasons/findings contained therein are totally perverse or BGP. 36 of 55 ::: Uploaded on - 23/06/2017 ::: Downloaded on - 24/06/2017 00:59:27 ::: Reserved judgment in ARBP No.522-11.doc.
Award is based on wrong proposition of law.
18 Now coming to the judgments cited on behalf of the Claimant in Her Highness Maharani Shantidevi P. Gaikwad's case (supra). The Apex Court in the said case held that in case of unambiguous documents, a plain meaning has to be given to its terms.
In State Bank of India's case (supra), the Apex Court held that the surrounding circumstances are not to be looked into when the terms of the contract are clear and unambiguous. Paragraph 32 of the said report which is material, is reproduced hereinunder :-
"32. It is one thing to say that the nature of a transaction would be judged by the terms and conditions together with the surrounding and/or attending circumstances in a case where the document suffers from some ambiguities but it is another thing to say that the court will take recourse to such a course, although no such ambiguity exists."
The Apex Court in the said judgment reiterated its view in Bishwanath Prasad Singh Vs. Rajendra Prasad reported in (2006) 4 SCC 432.
19 It is in the context of the aforesaid legal position in so far as the jurisdiction under Section 34 is concerned, that the above Petition BGP. 37 of 55 ::: Uploaded on - 23/06/2017 ::: Downloaded on - 24/06/2017 00:59:27 ::: Reserved judgment in ARBP No.522-11.doc.
would have to be adjudicated.
20 The Arbitral Tribunal whilst recording a finding that the Respondent has developed a Port and not a Jetty at Dharamtar has accepted the case of the Respondent that the Claimant agreed to its request for development of Port at Dharamtar creek and therefore entered into the said Agreement dated 07.02.2001. The said finding is recorded in paragraphs 5 and 6 of the impugned Award which for the sake of ready reference are reproduced hereinunder :-
"(5) It is the Respondents case that by the letter dated 27/04/2000 (Exh. R-10), Claimants agreed to their request for "development of Port at Dharamtar Creek" and called upon them to execute an agreement and therefore, they entered the Agreement dated 07/02/2001 (Exhibit C-18). The Respondents further claimed that they obtained the permissions from various authorities including Environment Authorities and started fullfledged port activities at Dharamtar.........."
"(6)The Respondents, therefore, contend that the development of port and port facilities at Dharamtar was carried out by them by pursuant to the representation contained in the policy of 1996 and therefore, they were entitled to be charged at the rate of Rs.3 per ton for the goods loaded and unloaded.........."
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intended nor agreed with the Claimant to take its Jetty on lease but it always intended to develop the facility as per the 1996 Port Development Policy. The Arbitral Tribunal after considering whether the development carried out by the Respondent is a Port or a Jetty concluded that the concessional fees under the said 1996 policy was an incentive to be given to the private industrialist for the investment required to be made on their part for the development of the Port. The Arbitral Tribunal whilst arriving at the said finding as regards Port or Jetty had laid much emphasis on the letter dated 27.04.2000 addressed by the Claimant to the Respondent. In so far as the said letter is concerned, the Arbitral Tribunal held that the said letter conclusively supports the claim of the Respondent that the Government of Maharashtra as well as the Claimant was aware that the Respondent was developing Port facilities at Dharamtar and not requesting the Claimant to lease one of its dilapidated Jettys. The Arbitral Tribunal has also relied upon the report of the site visit carried out by the members of the Arbitral Tribunal. The Arbitral Tribunal has observed that it was found on such site visit that there was extensive development on the site including construction of building for office of the Respondent, customs department office, compound wall, internal roads and other marine facilities required for handling the cargo including godowns. The Arbitral Tribunal has also taken into BGP. 39 of 55 ::: Uploaded on - 23/06/2017 ::: Downloaded on - 24/06/2017 00:59:27 ::: Reserved judgment in ARBP No.522-11.doc.
consideration irrelevant material like the assessment orders passed by the Income Tax authorities in respect of the returns filed by the Respondent. As indicated above, the Arbitral Tribunal after coming to a conclusion that the Respondent had developed Port facilities at Dharamtar held that the Respondent would be liable to pay the Claimant at Rs.3/- per metric tonne for cargo handled by it at the Dharamtar Port between the period 21.10.1999 and 18.08.2005 as per the 1996 policy.
Whist the Arbitral Tribunal took into consideration the letter dated 27.04.2000 as also the site visit, it has not taken into consideration other relevant material which was germane for rendering a decision as to whether the Respondent has developed a Port or a Jetty. The said material would have to be considered in the context of the submission urged on behalf of the Claimant that the finding rendered by the Arbitral Tribunal is contrary to the terms of the Agreement dated 07.02.2001 between the parties and ignores the plain language of the said Agreement. Hence amongst the material which has not been taken into consideration is the said Agreement dated 07.02.2001 itself. In so far as the said Agreement is concerned, the first recital of the said Agreement refers to a letter dated 31.07.2000 of the Maharashtra Coastal Zone Management Authority. In the said letter, it has been mentioned that the Maharashtra Coastal Zone Management Authority has withdrawn its BGP. 40 of 55 ::: Uploaded on - 23/06/2017 ::: Downloaded on - 24/06/2017 00:59:27 ::: Reserved judgment in ARBP No.522-11.doc.
previous status-quo order dated 12.05.2000. The Arbitral Tribunal as can be seen has completely ignored this letter dated 31.07.2000 which specifically states that the status-quo order dated 12.05.2000 in so far as it refers to the old Jetty is withdrawn and that any proposal for the construction of a new Jetty must be made after obtaining permission from the Ministry of Surface Transport. It would be relevant to produce the excerpt of the said letter, which for the sake of ready reference is reproduced hereinunder :-
"The District Collector - Raigad, Alibag has informed that jetty being used by you is in existence for last 20 years. It has also been informed that the height of the jetty has been increased which is permissible activity under the CRZ notification.
The matter was discussed at length in the meeting of the Authority held on 05.07.2000 and it was decided to withdraw the status quo order as regards the old jetty. In case you have any proposal for the construction of new jetty you may approach Ministry of Surface Transport for obtaining necessary permission. You are also directed not to undertake construction of new jetty till necessary clearance as stated above is obtained by you."
The above mentioned letter which was a precursor to the Agreement dated 07.02.2001 between the parties clearly goes to show that at the relevant time the only permission that the Respondent had was a permission for carrying out improvements in respect of the existing Jetty at Dharamtar.
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The second and third recitals of the Agreement dated 07.02.2001 are also relevant in the context of the challenge raised in the above Petition. The same are reproduced hereinunder for the sake of ready reference :-
"AND WHEREAS the Maharashtra Coastal Zone Management Authority vide its letter No.MCZMA/21 dated 31.07.2000 had withdrawn the status quo order passed vide their letter No.MCZMA/B-3399 dated 12.05.2000 stating that the said jetty being used by M/s. PNP Marine Services Pvt. Ltd. was an old Jetty which has been in existence for the last 20 years based on a report given by the District Collector, Raigad. The Authority has further stated that it has discussed the matter at length at it's meeting held on 05.07.2000 and it has been decided to withdraw the status quo order.
WHEREAS as Dharamtar, the Licensee has agreed to improve upon the existing jetty at village, Shahabad and to operate an maintain the said Jetty belonging to the Maharashtra Maritime Board, the Licensor".
A reading of the said recitals therefore makes it clear that the Agreement dated 07.02.2001 is only in respect of the existing Jetty. At the relevant time when the Agreement was entered into, the Respondent did not have any permission to do anything other than to improve upon the existing Jetty at village Shahabad. The said fact cannot be disputed in any manner.
21 Now comes the operative part of the said Agreement dated
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07.02.2001. In terms of the operative part of the said Agreement, the Respondent was entitled to use the existing Jetty for the purpose of loading and unloading cargo for a period of 30 years commencing from October 1999. Clause 3 of the said Agreement specifically provides as under :-
"(3) The Licensee agrees and undertakes that they shall not without prior written permission of the Licensor construct temporary/permanent/ floating structure of any nature whatsoever at the waterfront nor shall expand the existing jetty. The Licensor reserves its right to grant such permission on such terms and conditions as it may deem fit."
Hence the aforesaid recitals and covenants of the Agreement dated 07.02.2001 make it clear that the said Agreement was an Agreement for the use and improvement of an existing Jetty and it does not entitle the Respondent to construct any new Jetty on the said property. The said Agreement makes it ex-facie clear that the same is a licence Agreement and not a lease Agreement as is required to be executed under the 1996 policy. Hence the finding of the Arbitral Tribunal that the Respondent has developed a Port and not a Jetty at Dharamtar can be said to be contrary to the terms of the Agreement entered into between the parties and completely ignores the plain language of the Agreement.
22 It is also required to be noted that prior to the execution of
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the said Agreement dated 07.02.2001, the Collector had issued an order for allotment of the land to the Respondent. The said order is dated 02.06.2000. The said order specifically refers to the construction of Jetty and to the 1995 policy, pertinently the said letter has also been ignored by the Tribunal. The Arbitral Tribunal has also failed to take into consideration the letter dated 16.09.2003 addressed by the Respondent to the Joint Secretary, Ministry of Environment and Forest, Government of India. By the said letter, the Respondent had applied for permission to build a 100 meter Jetty at Dharamtar and represented to the Ministry of Environment and Forest that the cost of the project would be to the tune of Rs.3.21 crores. It is pursuant to the said application that the Ministry of Environment and Forest by its letter dated 06.10.2003 granted the Respondent permission to build a minor Jetty of 100 meters. The said letter sets out the conditions on which such a permission was granted. The conditions were inter-alia to the effect that the construction of the proposed structure should be undertaken meticulously confirming to the existing central, local rules and regulations and that all construction design drawings relating to the proposed construction must have approval of the State Government and its agencies. There can be no dispute about the fact that apart from the said permission, the Respondent has obtained no other permission for construction of any BGP. 44 of 55 ::: Uploaded on - 23/06/2017 ::: Downloaded on - 24/06/2017 00:59:27 ::: Reserved judgment in ARBP No.522-11.doc.
other structure at Dharamtar, much less any permission for construction of a Port. In the correspondence that is between the Respondent and the Claimant the reference is always to a landing point or a Jetty and not to a Port. Merely because the term "Port facilities" is used in the letter dated 27.04.2000 would not aid the Respondent. The use of the term "Port facilities" can be said to be a case of casual and careless drafting. It is notwithstanding the said position that the Respondent has claimed that it has constructed a Port at Dharamtar at the cost of approximately Rs.26 crores.
23 The impugned Award also disregards the plain language of clause 28 of the said Agreement dated 07.02.2001 between the parties. The said clause 28 is reproduced hereinunder for the sake of ready reference :-
"In consideration of the Licensor granting the License, the Licensee agrees and undertakes to pay to the Licensor and/or vessel related charges as per the existing scale of rates fixed by the Licensor as may be modified by them from time to time and notified in the Government Gazzete".
A reading of the said clause 28 therefore makes it clear that it nowhere makes reference whatsoever to the rate of Rs.3/- as prescribed by the 1996 policy but provides that the licensee pay to the licensor charges for loading and unloading as per the existing scale of rates fixed by the BGP. 45 of 55 ::: Uploaded on - 23/06/2017 ::: Downloaded on - 24/06/2017 00:59:27 ::: Reserved judgment in ARBP No.522-11.doc.
licensor as may be modified by it from time to time and notified in the Government Gazette. The Award therefore can be said to have been passed in disregard to the terms of the Agreement between the parties and has been passed without taking into consideration the relevant material and evidence.
24 In so far as the site visit is concerned, it is required to be noted that all the three members of the Arbitral Tribunal had carried out a site visit on 10.04.2007 and a report was prepared of the said site visit. The said site inspection report is signed by all the three Arbitrators and the Advocates of both the parties. In the said site report, there is no mention of any of the buildings or constructions mentioned in paragraph 21 of the impugned Award. In the said report, it is mentioned to the following effect :-
"03 Jetties were seen and it was told that one Jetty was in existence and two Jetties were constructed subsequently." The finding of the Arbitral Tribunal therefore as recorded in paragraph 23 to the effect that "there was extensive development on the site including construction of building for office of the Respondents, customs department office, compound walls, internal roads and other marine BGP. 46 of 55 ::: Uploaded on - 23/06/2017 ::: Downloaded on - 24/06/2017 00:59:27 ::: Reserved judgment in ARBP No.522-11.doc.
facilities required for handing the cargo including godowns", is therefore contrary to the site inspection report of the Arbitrators. The Arbitral Tribunal has not taken into consideration the aforesaid report of the site inspection carried out on 10.04.2007 but has sought to rely upon some other site inspection. Hence the finding of the Tribunal can be said to be contrary to its own site inspection report dated 10.04.2007. 25 Now coming to the order dated 04.05.2006 passed by the Hon'ble Minister of Ports, Government of Maharashtra. The said order was passed in a proceeding filed under Section 95 of the M. B. Act on the application made by the Respondent to the Hon'ble Minister on the refusal of the Claimant to refer the dispute in respect of payment of the loading and unloading charges to Arbitration. By the said order, the Hon'ble Minister has come to the conclusion that the Respondent has not constructed a Port at Dharamtar, but has constructed a Wharf or a Jetty. The Arbitral Tribunal has ignored the said finding recorded by the Hon'ble Minister on the ground that the Hon'ble Minister who had passed the said order dated 04.05.2006 in exercise of powers under Section 95 of the M. B. Act, did not have the authority to decide any dispute between the parties. In so rendering a finding, the Arbitral Tribunal can be said to have exceeded its jurisdiction and authority by recording a finding in respect of legality of an order passed by Hon'ble Minister under BGP. 47 of 55 ::: Uploaded on - 23/06/2017 ::: Downloaded on - 24/06/2017 00:59:27 ::: Reserved judgment in ARBP No.522-11.doc.
Section 95 of the M. B. Act when the said order could never have been a subject matter of the challenge before the Arbitral Tribunal. There is therefore merit in the contention urged by the Learned Senior Counsel appearing on behalf of the Claimant that the Tribunal in recording the said finding has exceeded its jurisdiction.
26 The Arbitral Tribunal has also recorded a finding that the claim of the Claimant with respect of all the amounts due prior to 05.10.2002 are barred by the provisions of Section 45 of the M. B. Act and cannot be recovered by the Claimant. The Arbitral Tribunal has recorded the said finding on the premise that the amounts due to the Claimant from the Respondent are on account of short levy covered by the provisions of Section 45 of the M. B. Act. The question that arises therefore is whether Section 45 of the M. B. Act has applicability in the facts of the present case. It is required to be noted that it is the contention of the Claimant that Section 45 of the M. B. Act has no application. Section 45 of the M. B. Act is reproduced hereinunder for the sake of ready reference :-
"45. (1) When the Board is satisfied that any charge leviable under this Chapter has been short levied or erroneously refunded, it may issue a notice to the person who is liable to pay such charge or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice :
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Provided that, no such notice shall be issued after the expiry of three years,-
(a) when the charge is short levied, from the date of the payment of the charge,
(b) where a charge has been erroneously refunded, from the date of the refund.
(2) The Board may, after considering the representation, if any, made by the person to whom notice has been issued under sub-section (1), determine the amount due from such person and thereupon such person shall pay the amount so determined."
A reading of Section 45 discloses that it provides for recovery of a charge leviable under Chapter VI, which pertains to the imposition and recovery of rates at Ports. The said recovery can be in respect of a charge which has been short levied or erroneously refunded and provides for a time limit of three years from the date when the charge is short levied or from the date it has been erroneously refunded. The said period of three years is therefore the limit within which the said charge can be recovered. In the instant case, the Respondent has paid charges for loading and unloading as per the 1996 policy till the notification dated 18.10.2005 came to be issued. The said amount came to be accepted by the Claimant. The issue is as to whether there was a short levy in the matter of recovery of the charges for loading and unloading.
27 In the said context, it is required to be noted that the
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Claimant has constantly demanded payment for loading and unloading of cargo at the Dharamtar creek as per the Agreement dated 07.02.2001 i.e. as per the rates laid down by the Government from time to time. It is further required to be noted that initially the Respondent had made payments as per the scale of rates laid down by the Government. It was only later on that the Respondent raised a demand that it should be allowed to pay at the rate of Rs.3/- per tonne as per the 1996 policy. The said demand was contained in the letter dated 19.07.2001 of the Respondent. The said letter was replied to by the letter dated 10.08.2001 by the Claimant rejecting the claim made by the Respondent and asking the Respondent for payment to be made as per the terms of the Agreement dated 07.02.2001. The correspondence exchanged between the parties regarding the rate at which the payment was to be made has come on record. It is on the refusal of the Claimant to accept the claim made by the Respondent that the Respondent went to the Hon'ble Chief Minister of Maharashtra with a request that suitable instructions be issued to the Claimant to accept their claim that they be charged at Rs.3/- per tonne as per the 1996 policy. The Hon'ble Chief Minister ordered that till the matter was finally decided, the rate at Rs.3/- per tonne should be accepted by the Claimant. It is in deference to the said direction of the Hon'ble Chief Minister that the Claimant honoured the said direction, but BGP. 50 of 55 ::: Uploaded on - 23/06/2017 ::: Downloaded on - 24/06/2017 00:59:27 ::: Reserved judgment in ARBP No.522-11.doc.
at no time agreed that this was the final word on the subject. It is also required to be noted that the issue had again cropped up when the Respondent had requested for arbitration of the matter and the Claimant took a stand that there was nothing to arbitrate and that the Respondent should pay as per the rate laid down by the Government from time to time. Hence, the issue as to whether the Respondent was entitled to be charged at the rate of Rs.3/- as per the 1996 policy was kept alive till the end. It is in the context of the said controversy that the Arbitral Tribunal had also framed the issue as to whether the Respondent had developed a Port or a Jetty. Hence, it could not be said that the Claimant had short levied the charges for loading and unloading, but it is the Respondent who had refused to pay in terms of the Agreement dated 07.02.2001 and therefore it could not be said that there was a short levy on the part of the Claimant. Hence, Section 45 of the M. B. Act would have no application. However, though such a contention was raised on behalf of the Claimant, the same has not been adjudicated upon by the Arbitral Tribunal which has proceeded on the basis that the rate mentioned in the 1996 policy would be applicable as the Respondent had developed a Port and not a Jetty.
28 The incidental question that arises is whether the Claimant is entitled to claim charges for loading and unloading as per the notification BGP. 51 of 55 ::: Uploaded on - 23/06/2017 ::: Downloaded on - 24/06/2017 00:59:27 ::: Reserved judgment in ARBP No.522-11.doc.
dated 19.08.2005 for the period anterior thereto i.e. from 21.10.1999 till 18.08.2005. As mentioned hereinabove, it is on the intervention of the Hon'ble Chief Minister of Maharashtra, who directed that the charges for loading and unloading be levied at the rate of Rs.3/- per tonne till the matter was finally decided and that the Respondent paid at the said rate and the Claimant accepted at the said rate. If there was no intervention or no direction as aforesaid, then the Respondent would have been obliged to pay at the rates prevailing prior to the issuance of the notification dated 19.08.2005. Hence, the said notification dated 19.08.2005 cannot be applied retrospectively. It would therefore have to be held that the Respondent is liable to pay loading and unloading charges at the rates laid down by the Government from time to time till 18.08.2005.
29 During the course of the hearing of the above Arbitration Petition, on behalf of the Respondent it was sought to be contended that the Respondent was entitled to the benefit of the 1996 policy, even if it had constructed a Jetty and that it did not require to construct a Port for the purposes of getting benefit of the said policy. It is required to be noted that all along before the Arbitral Tribunal it was the case of the Respondent that it had developed a Port and not a Jetty and was therefore entitled to the benefit of the said 1996 policy. This case was BGP. 52 of 55 ::: Uploaded on - 23/06/2017 ::: Downloaded on - 24/06/2017 00:59:27 ::: Reserved judgment in ARBP No.522-11.doc.
sought to be developed in view of the fact that the said 1996 policy envisages the benefit only to be granted to the entrepreneurs who have developed Ports and not Jettys. The submission now sought to be advanced is therefore contrary to the case and submission made before the Tribunal on behalf of the Respondent. Hence, the said case/ submission not urged before the Tribunal cannot be considered by this Court for the first time in a Petition filed under Section 34 of the Arbitration Act, 1996. It cannot be lost sight of, that in view of the said case of the Respondent that the Arbitral Tribunal decided first to adjudicate upon the issue whether the Respondent has developed a Port or a Jetty before arriving at a conclusion whether it was entitled to the benefit of the 1996 policy. Since it is not necessary to consider the said submission, it would therefore be not necessary to consider the material on which reliance was sought to be placed on behalf of the Respondent in support of the said submission.
30 The upshot of the above discussion is that the Arbitral Tribunal has rendered the finding that the Respondent has developed a Port and not a Jetty against the terms of the Agreement dated 07.02.2001, and also by overlooking relevant material and taking into consideration irrelevant material. The consequence of the said finding is that the Respondent has been conferred with a financial bonanza to BGP. 53 of 55 ::: Uploaded on - 23/06/2017 ::: Downloaded on - 24/06/2017 00:59:27 ::: Reserved judgment in ARBP No.522-11.doc.
which it is not entitled to and which has a result of causing wrongful loss to the Claimant and thereby to the public exchequer. The conferment of the said financial bonanza therefore shocks the conscience of the Court. The impugned Award passed by the Arbitral Tribunal is therefore to the said extent not sustainable, it is therefore required to be set aside and is accordingly set aside, however the part of the Award which holds that the Respondent is not entitled to recover charges at the rate mentioned in the notification dated 19.08.2005 for the anterior period is sustained. On setting aside of the impugned Award to the extent as above this Court affirms the Award passed by the third Learned Arbitrator Mr. M. P. Pinto in so far as it directs the Respondent to pay the charges as per the rates fixed from time to time by the State Government and as mentioned in the answer to Point No.1 in the said Award which reads thus :-
"In the light of the discussion in paragraphs 3 to 27 above I hold that the Respondents are liable to pay as per the scale of rates fixed by the Government from time to time and as contained more specifically in Exhibits C 4, 5, 6 and 19 of the Claimants compilation. The rates laid down in the GR of 19.08.2005 will not be applicable for this period."
31 Since in terms of the Agreement dated 07.02.2001 the Respondent is liable to pay interest for the amount due from it, the Respondent would be liable to pay interest @ 6% per annum on the BGP. 54 of 55 ::: Uploaded on - 23/06/2017 ::: Downloaded on - 24/06/2017 00:59:27 ::: Reserved judgment in ARBP No.522-11.doc.
amount now payable in terms of this judgment. The Respondent is accordingly granted 10 weeks time to make the payment in terms of the directions as contained in this judgment.
32 The above Arbitration Petition is allowed to the aforesaid extent and disposed of.
[R.M.SAVANT, J] th After Pronouncement of Judgment on 22 June 2017 :-
At this stage, the Learned Counsel Mr. C. G. Gavnekar appearing for the Respondent applies for stay of the instant judgment. In view of the fact that time of 10 weeks has been granted to make the payment in terms of the directions as contained in this judgment, the need to grant stay is obviated. The said prayer is therefore rejected.
[R.M.SAVANT, J]
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