Delhi High Court
National Highways Authority Of ... vs Ssangyong Engineering & ... on 16 March, 2018
$~37
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P. (COMM) 380/2017 & IA No.12474/2017
NATIONAL HIGHWAYS AUTHORITY
OF INDIA ..... Petitioner
Through: Mr Rajiv Kapoor, Mr Srikant
Sharma and Mr Rashid Azam,
Advocates alongwith Mr Ashok
C. Prakash Malhotra, AR of the
petitioner.
versus
SSANGYONG ENGINEERING & CONSTRUCTION
CO. LTD. ..... Respondent
Through: Mr Navin Kumar, Ms Rashmeet
Kaur and Ms Arpana
Majumdar, Advocates.
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
ORDER
% 16.03.2018
VIBHU BAKHRU, J
1. The petitioner (hereafter „NHAI‟) has filed the present petition
under Section 34 of the Arbitration and Conciliation Act, 1996
(hereafter „the Act‟), inter alia, impugning an arbitral award dated
09.06.2017 (hereafter „the impugned award‟) delivered by the Arbitral
Tribunal comprising of three members, Sh. O.P. Goel, Shri S.P. Singh
and Sh. Dilip Namdeo Potdukhe (hereafter „the Arbitral Tribunal‟).
The impugned award was rendered by the majority with Sh. Potdukhe
entering a Dissent Note.
2. By the impugned award, the respondent‟s claim for price
adjustment under Clause 70.7 of the Conditions of Particular
Application (COPA) of Contract in respect of increase in the price of
High Speed Diesel (HSD) consequent to the enhancement in the Entry
Tax, was accepted by the Arbitral Tribunal.
3. Briefly stated, the controversy between the parties arise in the
following context:-
4. NHAI invited bid, for the work of "Four−Laning of
Jhansi−Lakhanadon Section from km. 297.00 to km. 351.00 of NH−26
in the State of Madhya Pradesh− (Package No. ADB−II/C−8)".
5. The respondent (Ssangyong) submitted its bid for the aforesaid
work on 27.10.2005, which was accepted by NHAI on 30.12.2005.
Thereafter, the parties entered into an agreement on 12.04.2006
(hereafter „the Agreement‟). NHAI issued a notice to commence the
works on 28.04.2006 and the same were commenced on 28.05.2006.
6. The disputes between the parties relate to the Ssangyong‟s
claim on account of increase in the rate of Entry Tax on High Speed
Diesel. The State Government of Madhya Pradesh issued a
notification dated 01.04.2007 (hereafter „the Notification‟) under the
Provisions of Madhya Pradesh "Sthaniya Kshetra Me Mal Ke Pravesh
Par Kar Adhiniyam, 1976" (hereafter „the Madhya Pradesh Entry Tax
Act, 1976‟) increasing the levy of Entry Tax on High Speed Diesel
(HSD) from 1% to 27% with effect from 01.04.2007.
7. Admittedly, the rate of Entry Tax on HSD prevailing on
29.09.2005 (that is, 28 days prior to last date of submission of bid by
Ssangyong) was 1%.
8. In view of the increase in the Entry Tax, Ssangyong sent a letter
dated 15.07.2009 claiming reimbursement of the extra amount paid on
account of increase in the Entry Tax on HSD. The said claim was
rejected by NHAI on 10.12.2010.
9. Aggrieved by the same, Ssangyong sought reference of the
dispute to Dispute Adjudication Board (DAB) under Clause 67.1 of
COPA. The disputes could not be resolved before the DAB and on
05.06.2012, the same were referred to arbitration.
10. Ssangyong filed a claim for an amount of ₹9,83,69,920/-, which
included the amount of ₹5,86,50,477/- on account of reimbursement of
Entry Tax and interest amounting to ₹3,97,19,442/- as computed up to
15.06.2015.
11. The Arbitral Tribunal held that the Notification enhancing the
Entry Tax from 1% to 27%, was a "Subsequent Legislation" as
contemplated under Clause 70.7 of COPA and, thus, was liable to be
added to the contract price. The Arbitral Tribunal allowed the
Ssangyong‟s claim for reimbursement of the amount of ₹5,86,50,477/-
paid on account of the increase in the Entry Tax.
12. The Arbitral Tribunal also awarded a sum of ₹6,07,23,720/- as
interest computed till the date of the award that is, 09.06.2017. In
addition, the Arbitral Tribunal also awarded interest on the awarded
amount of ₹11,93,74,197/- at the rate of 10% per annum from
10.06.2017 till the actual date of payment. However, the Arbitral
Tribunal also stated that no post award interest will be payable if the
sum awarded was paid within a period of ninety days from the date of
the impugned award.
13. Mr Potdukhe entered a Dissenting Note. He accepted that the
Notification under the Madhya Pradesh Entry Tax Act, 1976 was a
Subsequent Legislation. However, according to him, the extra cost
incurred was not reimbursable. Mr Potdukhe agreed with the NHAI‟s
contention that since Ssangyong had not included its claim in each of
its monthly statements in terms of Clause 60.1 of COPA, it must be
taken that Ssangyong had relinquished or waived its claim.
Submissions
14. At the outset, Mr Navin Kumar, learned counsel appearing for
Ssangyong submitted that the issue being raised by NHAI was
squarely covered by the decision of this Court in National Highway
Authority of India v. Ssangyong Engineering & Construction Co.
Ltd.: O.M.P. 1208/2014, decided on 27.11.2014, wherein a
Coordinate Bench of this Court had rejected NHAI‟s application under
Section 34 of the Act assailing an arbitral award dated 16.06.2014,
whereby the similar claim had been allowed in favour of Ssangyong.
He pointed out that the said decision was carried in appeal before the
Division Bench of this Court in FAO(OS) 25/2015 captioned
"National Highway Authority of India v. Ssangyong Engineering &
Construction Co. Ltd". The said appeal was also dismissed by a
judgment delivered by the Division Bench of this Court on
19.01.2015. NHAI had preferred a Special Leave Petition in SLP No.
14726/2015 captioned "National Highway Authority of India v.
Ssangyong Engineering & Construction Co. Ltd.", which was
converted to a Civil Appeal (Civil Appeal No. 6019/2015) and was
dismissed. The order dated 03.08.2015 passed by the Supreme Court
dismissing the said appeal reads as under:-
"SLP (C) No. 14726 of 2015
Leave granted.
Heard Mr. Pradeep K. Bakshi, learned counsel for
the Petitioner and Ms. Meenakshi Arora, learned senior
counsel for the respondents.
Having heard learned counsel for the parties, we
are of the considered opinion that the controversy is
covered by the decision in National Highways Authority
of India vs. M/s. ITD Cementation India Limited: 2015
(5) Scale 554.
Accordingly, the appeal stands dismissed. There
shall be no order as to costs."
15. Mr Rajiv Kapoor, learned counsel appearing for NHAI did not
dispute that the issue whether Ssangyong was entitled to
reimbursement on account of increase in the Entry Tax on HSD, was
squarely covered by the aforesaid decisions. He stated that
notwithstanding the above, Ssangyong would not be entitled for the
amount claimed as: (i) the claims are barred by limitation; (ii)
Ssangyong was not a dealer and, therefore, the Notification issued
under the Madhya Pradesh Entry Tax Act, 1976 was not applicable to
Ssangyong; and (iii) Ssangyong was not obliged to procure HSD from
IOCL as its refinery and, therefore, could not claim any
reimbursement of enhancement in the Entry Tax.
Reasons and Conclusion
16. The contention that Ssangyong‟s claim is barred by limitation is
unmerited. Although, the contract was to be completed within a period
of 30 months from commencement of work, it is not disputed that the
contract was extended and the Final Payment Certificate as required to
be prepared in terms of sub-clause 60.13 of COPA has not been
prepared as yet. Mr Kapoor had relied heavily on sub-clause 60.1 of
COPA which required the contractor to submit monthly statements
indicating the amounts which the contractor considers himself entitled
to. However, it is seen that the said monthly statements were required
to be prepared for monthly payments. Such payments were plainly
interim in nature.
17. At this stage, it would be relevant to refer to the relevant extract
of sub-clauses 60.1, 60.2, 60.11 and 60.13 of COPA. The same are set
out below:-
"Sub-Clause 60.1: Monthly Statements
The Contractor shall submit a statement in 3 copies to
the Engineer by the 7th day of each month for the work
executed up to the end of the previous month in a
tabulated form approved by the Engineer, showing the
amounts to which the Contractor considers himself to be
entitled.
The statement shall include the following items, as
applicable, which shall be taken account in the sequence
listed:
xxxx xxxx xxxx xxxx
(g) amounts reflecting changes in cost and legislation,
pursuant to Clause 70, expressed in the relevant amounts
for foreign and local currencies.
xxxx xxxx xxxx xxxx
Sub-Clause 60.2: Monthly Payments
Within 5 days of receipt of the monthly statement from
the Contractor in pursuant to Sub-Clause 60.1, the
Engineer shall broadly determine the amount due to the
Contractor and shall, accordingly, recommend to the
Employer for release to the Contractor up to a maximum
of 75% of net payment as part payment against the
monthly statement, pending certificate of IPC by the
Engineer. Within 2 days of the receipt of
recommendation of the Engineer, the Employer shall
make payment to the Contractor.
The said statement shall be approved or amended by the
Engineer in such a way that, opinion, it reflects the
amount due to the Contractor in accordance with the
Contract, deduction, other than pursuant to Clause 47, of
any sums which may have become due payable by the
Contractor to the Employer. In cases where there is a
difference of opinion to the value of any item, the
Engineer‟s view shall prevail.
Within 21 days‟ of the receipt of the monthly statement
referred to in Sub-Clause 60.1 Engineer shall determine
the amount due to the Contractor and shall deliver to the
Employer and the Contractor, an Interim Payment
Certificate, certifying the amounts due to Contractor
after adjusting the payment already released to the
Contractor against the statement.
Notwithstanding the terms of this Sub-Clause or any
other clause of the Contract, no amount will be certified
by the Engineer for payment until the performance
security has been provided by the Contractor and
approved by the Employer.
Sub-Clause 60.11: Final Statement
Not later than 56 days after the issue of the Defects
Liability Certificate pursuant to Sub-Clause 62.1, the
Contractor shall submit to the Engineer six (6) copies of
a draft final statement for consideration with the
supporting documents showing in detail, in the form
approved by the Engineer,
(a) the value of all work done in accordance with the
Contract; and
(b) any further sums which the Contractor considers to
be due to him under the Contract.
If the Engineer disagrees with or cannot verify any part
of the draft final statement, the Contractor shall submit
such further information as the Engineer may reasonably
require and shall make such changes in the draft as may
be agreed between them. The Contractor shall then
prepare and submit to the Engineer the final statement as
agreed (for the purposes of these Conditions referred to
as the "Final Statement").
If, following discussions between the Engineer and the
Contractor and any changes to the draft final statement
which may be agreed between them, it becomes evident
that a dispute exists, the Engineer shall issue to the
Employer an Interim Payment Certificate for those parts
of the draft final statement which are not in dispute. The
dispute shall then be settled in accordance with Clause
67. The Final Statement shall be agreed upon settlement
of the dispute.
xxxx xxxx xxxx xxxx
Sub-Clause 60.13: Final Payment Certificate
Within 28 days after receipt of the Final Statement, and
the written discharge, the Engineer shall deliver to the
Employer (with a copy to the Contractor) a Final
Payment Certificate stating,
(a) the amount which in the opinion of the Engineer, is
finally due under the Contract; and,
(b) after giving credit to the Employer for all amounts
previously paid by the Employer and for all sums to
which the Employer is entitled under the Contract, other
than Clause 47, the balance, if any, due from the
Employer to the Contract or from the Contractor to the
Employer as the same may be."
18. It is apparent from the plain reading of sub-clause 60.2 of
COPA that the purpose of submitting monthly statements to an
Engineer was to secure Interim Payment Certificate (IPC) certifying
monthly amounts due to the contractor, such payments are obviously
interim in nature and do not finally foreclose the right of the contractor
or NHAI to seek further payments if the contractor is so entitled to.
This is apparent from the plain reading of sub-clause 60.11 of COPA.
In terms of Sub-clause 60.11 of COPA, the contractor is required to
submit to Engineer 6 copies of the draft final statement for
consideration with supporting documents showing in detail in the form
approved by the Engineer (a) the value of work and in accordance
with the contract; and (b) any further sum which the contractor
considers to be due to him under the contract.
19. In view of the above, the contention that Ssangyong‟s claim is
barred by limitation, is plainly unsustainable. The said contention was
considered by the Arbitral Tribunal. The Arbitral Tribunal had noted
that the claims made by Ssangyong were rejected by the NHAI on
10.12.2009 and, therefore, claims made were within a period of
limitation. As stated above, this Court is unable to accept that any
interference in the impugned award is called for in these proceedings
as the Ssangyong‟s claim is clearly not barred by limitation.
20. The contention that Ssangyong did not qualify as a Dealer under
the Madhya Pradesh Entry Tax Act, 1976 and, therefore, the
notification dated 01.04.2007 is not applicable to Ssangyong is also
unmerited.
21. Admittedly, the Notification enhancing the rate of Entry Tax
under the Madhya Pradesh Entry Tax Act, 1976 was applicable to a
"Dealer". The term "Dealer" is not defined under the Madhya Pradesh
Entry Tax Act, 1976. However, by virtue of Section 2(2) of the
Madhya Pradesh Entry Tax Act, 1976, the definition of the terms
defined under the Madhya Pradesh Commercial Tax Act, 1994 are
incorporated by reference. Section 2(2) of the Madhya Pradesh Entry
Tax Act, 1976 reads as under:-
"2(2) All those expressions, other than expression
"goods" and "sale" which are used but are not defined in
this Act and are defined in the Vanijiyik Kar Adhiniyam
shall have the meanings assigned to them in that Act."
22. Section 2(h) of the Madhya Pradesh Commercial Tax Act, 1994
defines the term "Dealer" and there is no dispute that Ssangyong falls
within the scope of the said definition.
23. In view of the above, there can be no dispute that the
Notification is also applicable to Ssangyong. More importantly,
Ssangyong had produced challans indicating payment of the Entry Tax
at enhanced rate and there is no dispute that Ssangyong had in fact
paid the Entry Tax at such enhanced rate.
24. The contention that the impugned award is also liable to be set
aside on the ground that the Arbitral Tribunal had erred in proceeding
on the basis that Ssangyong was obliged to procure HSD from IOCL‟s
refinery, is also unpersuasive. The Arbitral Tribunal had considered
Clauses 4.1 and 4.2 of the Instructions to Bidders and had arrived at its
conclusion. However, notwithstanding the same, the NHAI has placed
no material on record that required Ssangyong to procure HSD from
Jabalpur and not from the refinery at Mathura. The Arbitral Tribunal
had also noted that despite enhancement in the Entry Tax from 1% to
27%, the actual cost of HSD procured from Mathura Refinery, with
applicable exemption on excise duty, was less than the price of HSD
prevailing at the local consumer pumps at Jabalpur.
25. In view of the above, this Court finds no ground to interfere
with the impugned award.
26. The petition is, accordingly, dismissed. The pending application
also stands disposed of. The parties are left to bear their own costs.
27. Order dasti under signatures of the Court Master.
VIBHU BAKHRU, J
MARCH 16, 2018
RK
