Bombay High Court
Mharashtra Maritim Board vs Pnp Maritime Services Pvt. Ltd on 22 June, 2017
Bench: R.M. Savant
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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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
BGP. 24 of 55
Reserved judgment in ARBP No.522-11.doc.
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
BGP. 25 of 55
Reserved judgment in ARBP No.522-11.doc.
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.
BGP. 26 of 55
Reserved judgment in ARBP No.522-11.doc.
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
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"
BGP. 28 of 55
Reserved judgment in ARBP No.522-11.doc.
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
BGP. 29 of 55
Reserved judgment in ARBP No.522-11.doc.
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.
BGP. 30 of 55
Reserved judgment in ARBP No.522-11.doc.
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.
BGP. 31 of 55
Reserved judgment in ARBP No.522-11.doc.
(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
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
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
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
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
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
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.........."
The Arbitral Tribunal also accepted the case of the Respondent that the
said Agreement dated 07.02.2001 cannot be read in isolation as it never
BGP. 38 of 55
Reserved judgment in ARBP No.522-11.doc.
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
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
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.
BGP. 41 of 55
Reserved judgment in ARBP No.522-11.doc.
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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Reserved judgment in ARBP No.522-11.doc.
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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Reserved judgment in ARBP No.522-11.doc.
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
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
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
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
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 :
BGP. 48 of 55
Reserved judgment in ARBP No.522-11.doc.
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
BGP. 49 of 55
Reserved judgment in ARBP No.522-11.doc.
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
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
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
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
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
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]
BGP. 55 of 55
