Delhi High Court
M/S National Highways Authority ... vs M/S Sunway Construction Sdn Bhd on 22 January, 2019
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on : 3rd December, 2018
Date of decision :22nd January, 2019
+ O.M.P. 160/2012
M/S NATIONAL HIGHWAYS AUTHORITY OF
INDIA ..... Petitioner
Through: Dr. Maurya Vijay Chandra, Advocate.
(M:9999714802)
versus
M/S SUNWAY CONSTRUCTION SDN BHD ..... Respondent
Through: Mr. Amit George, Mr. Rishabh
Dheer, Mr. Swaroop George and Ms.
Rajsree Ajay, Advocates.
(M:9910524364)
CORAM:
JUSTICE PRATHIBA M. SINGH
JUDGMENT
Prathiba M. Singh, J.
1. The present petition under Section 34 of the Arbitration &
Conciliation Act, 1996 (`Act‟) has been filed by the National Highway
Authority of India (hereinafter, „NHAI‟) challenging the impugned award
dated 3rd October, 2011. The said award was passed by a three-member
tribunal by a 2:1 majority.
2. The Respondent-Sunway Construction SDN BHD (hereinafter,
„Contractor‟), a Malaysian company was awarded the contract for
"Rehabilitation and upgrading of Km 406.00 to km 449.150 of NH-76 to 4-
lane configuration in the State of Rajasthan (Contract Pkg. RJ-9)" (herein
after „Project‟). The contract was awarded vide NHAI's letter dated 30th
June, 2005, however a formal contract was signed between NHAI and the
Contractor only on 11th August, 2005. The time for completion of the work
was 30 months from the scheduled date. Thus, date of completion was 25 th
April, 2008. The total value of the awarded contract was Rs.286,85,00,000/-
excluding provisional sums. The price including provisional sums was
Rs.329,64,75,000/-.
3. The work was to be executed by the Contractor on NH-76, in the State
of Rajasthan. The contractor was to carry out new construction as also
widening/strengthening and maintenance of the existing road and
carriageway.
4. The General Conditions of Contract agreed to between NHAI and the
Contractor were the Conditions of Contract published by FIDIC i.e.,
International Federation of Consulting Engineers (hereinafter, „FIDIC‟).
The conditions of contract as stipulated by FIDIC, were supplemented by
the parties by entering into a detailed contract called the Conditions of
Particular Application (hereinafter, „COPA‟), which were customised for the
present contract. Accordingly, the applicable conditions of contract in the
present case, were the FIDIC conditions as modified or added to by the
COPA. The entire work under the aforesaid contract was divided into
various items, which was to form part of the Bill of Quantities (hereinafter,
„BOQ‟). These items, as contained in the BOQ, was to be executed by the
Respondent as per the technical specifications. The payment for works
executed was to be released to the Contractor on the basis of the
measurements recorded for the various items contained in the BOQ. The
Contractor was to raise IPCs (Interim payment certificates or Interim bills)
which was to be paid in terms of the contract. In one such IPC raised in
August 2007, the Contractor claimed Price adjustment by adding excise duty
in the price of concerned materials. This was objected to by the Engineer,
leading to a dispute between the parties. Thereafter the Contractor also
claimed reimbursement of amounts paid by it towards toll collected by the
State of Rajasthan on the Kalisindh Bridge and the Parvati River Bridge on
NH-76 in Baran Dist., State of Rajasthan.
5. Thus, two disputes arose between the parties which were referred to
the Dispute Adjudication Board under Clause 67.1 of the COPA. Both, in
respect of the dispute on price adjustment and payment of toll tax, the DAB
decided in favour of the Contractor. Dissatisfied with the said decisions and
pursuant to clause 67.2 of the COPA, the NHAI conveyed its intention to
refer the said disputes to arbitration vide letters dated 15 th December, 2009
and 21st January, 2010, respectively. Thus, vide letters dated 4th January,
2010 and 25th January, 2010, the disputes were referred to arbitration. The
Arbitral Tribunal entered reference on 2nd March, 2010 and passed the
impugned award dated 3rd October, 2011 by a 2:1 majority, in favour of the
Contractor. The present petition has been filed challenging the said award in
respect of the said two disputes/claims which are as under: -
"Dispute No.2: Payment of Price Adjustment in
accordance with Clause 70 of COPA.
Dispute No.3: Reimbursement of Toll Tax collection
at Kalisindh Bridge & Parvati River
Bridge on NH-76 in Baran district."
6. The Arbitral Tribunal by a 2:1 majority held in favour of the
contractor in respect of both the claims. NHAI has challenged the findings
of the Tribunal in the present petition. The objections raised in respect of
each of the disputes is considered and decided herein below: -
A. Dispute No.2: Payment of Price Adjustment in accordance with
Clause 70 of COPA
7. The said dispute relates to the manner of calculation of price
adjustment for Bitumen and for fuel. As per the terms of COPA, the
payment of price adjustment was being certified by the Engineer and paid by
NHAI, under the monthly IPCs, based on the monthly statements submitted
by the Contractor under clause 60.1 of COPA. During the currency of work,
the NHAI Policy Matter Circular dated 14th February, 2005 was issued, and
the Engineer informed the Contractor that sub-clause 70.3 of the COPA,
which prescribed the formulae for calculation of price adjustment, is
superseded by the said circular. The circular pertained to the
inclusion/exclusion of component of excise duty from the base and current
rates of materials for the purpose of payment of price adjustment. The
Engineer, thus, in IPC 19 excluded the excise duty while calculating the
percentage of the material used in the completion of the work for that
month. Thus, the question whether the component of excise duty should be
considered while working out the Price Adjustment under clause 70 of the
COPA, is the subject matter of the present dispute. Price Adjustment was to
be determined as per sub-clause 70.3 of the COPA. The relevant extract of
the said clause reads as under: -
"Sub-Clause 70.3: Adjustment Formulae
i)..........iv)........
v) Adjustment for Bitumen Component
Price adjustment for increase or decrease in the cost of
Bitumen shall be paid in accordance with the following
formula:
Vb = 0.85 x Pb x RI x (Bi - Bo)
100 Bo
Vb = increase or decrease in the cost of work during
the month under consideration due to changes
in the rates for bitumen.
Bo = the average official retail price of bitumen at
the IOC refinery for the place as defined in
Appendix to Bid, on the day 28 days prior to
the date of submission of Bids.
Bi = the average official retail price of bitumen at
the IOC refinery for the place as defined in
Appendix to Bid, on the day 28 days prior to
the last day of the period to which a particular
interim payment certificate is related.
Pb = Percentage of bitumen component of the
work.
vi) Adjustment for Fuel and Lubricants
Price adjustment for increase or decrease in the cost
POL (fuel and lubricants) shall be paid in accordance
with the following formula:
Vf = 0.85 x Pf x Ri x (Fi - Fo)
100 Fo
Vf = increase or decrease in the cost of work during
the month under consideration due to changes
in the rates for fuel and lubricants.
Fo = the average official retail price of High Speed
Diesel (HSD) at the existing consumer pumps
of IOC for the place defined in the Appendix to
Bid, on the day 28 days prior to the date of
submission of Bids.
Fi = the average official retail price of High Speed
Diesel (HSD) at the existing consumer pumps
of IOC for the place defined in the Appendix to
Bid, on the day 28 days prior to the last day of
the period to which a particular interim
payment certificate is related.
Pf = Percentage of fuel and lubricants component
of the work.
Note: For the application of this clause, the price of
High Speed Diesel oil has been chosen to
represent Fuel and Lubricants group."
8. The case of NHAI was that the project which was awarded to the
Contractor was a World Bank aided project and hence the Contractor was
exempted from paying any excise duty on the cost of materials used in the
project. On this fact, there is no dispute. The question is as to whether excise
duty is to be included while calculating and determining the price
adjustment for Bitumen and fuel. Both Bitumen and fuel have a similar
formula for determination of price adjustment. Bitumen is represented by the
letter 'B' in the formula and fuel is represented by letter the 'F':
"A. Formula for Bitumen
Vb = 0.85 x Pb x RI x (Bi - Bo)
100 Bo
B. Formula for Fuel
Vf = 0.85 x Pf x Ri x (Fi - Fo)
100 Fo"
9. The manner of determining the price adjustment is by applying the
above formula both for Bitumen and Fuel. The formulae are identical. For
the sake of convenience, the Bitumen formula is being referred to. The
formula has three clear segments. Vb represents the increase or decrease
caused in the cost of the work, due to changes in the rate of Bitumen, i.e., it
represents the value to be attributed to Bitumen in a particular month due to
rise or fall in the rates of Bitumen. Vb is, therefore, what is to be determined
as the price adjustment to be given to the contractor.
10. Bi and Bo are the official retail price of Bitumen at the Indian Oil
Corporation Refinery in Mathura. Bo refers to the price which was prevalent
28 days prior to the submission of the bid. Bi is the retail price of Bitumen
at the same refinery, prevalent 28 days prior to the submission of the IPC.
The retail price of Bitumen, 28 days prior to the date of submission of the
bid, would thus be a fixed amount during the entire period of the contract, as
the same would have been ascertained by the contractor at the time of
submission of the bid itself. The value of Bi, however, changes on a month
to month basis. By inserting Bi value every month, part 'C' of the formula
can be easily determined. The manner of calculation of Bi and Bo is not an
issue inasmuch as the retail price would always include the excise duty. This
is clear from the clarifications issued by NHAI annexed as Annexure P-5 in
the Petition.
11. However, what is in issue is the manner in which Pb is to be
determined.
12. Pb stands for the percentage of Bitumen component in the work
executed in a particular month. It is the submission of NHAI that the value
of Bitumen as part of the total value of the work, executed in a particular
month, should be taken without the excise duty. The contractor argues to the
contrary. Submissions have been made from both the sides.
13. The impugned award conflates the issue. The award proceeds on the
basis that the issue is in respect of determining Bi and Bo, which is not the
case. The retail price would obviously include the excise duty. If Bo
included the excise duty then Bi would naturally include the excise duty.
This is clear from the following extract of the award:
"7.4.1(d)(v) Bitumen
As per the formula stipulated for component of
„Bitumen‟ the increase or decrease in the cost of
Bitumen is to be worked out based on variation in the
average official retail price of bitumen at the IOC
Refinery on the day 28 days prior to the closing date of
submission of Bids i.e., „Bo‟ and the average official
retail price of bitumen at the IOC refinery prevailing
on the day 28 days prior to the last day of the period to
which a particular IPC is related to i.e., „Bi‟. The
above stipulations read together with stipulations at
Sub-clause 70.5 of Clause 70, would indicate that „Bo‟
is „Base Price‟ and „Bi‟ is „Current Price‟ of Bitumen
for the purpose of adoption in the formula. This price
adjustment is not based on „Indexed cost‟ but is based
on „official retail price‟ at the IOC refinery at KOTA
..................
The retail price is the price at which the
material/goods are sold to consumers. It has also been
found in para (iii) above in case of adjustment of Fuel
& Lubricants that the retail price for consumers at
pumps shall always be inclusive of excise duty. Any
material which comes out of the storage place of
factory or place of manufacture has to pay the excise
duty before it is sold in retail or wholesale. The AT
therefore finds that such retail price, at which the
goods are sold to he consumers/general public, shall
be inclusive of excise duty. The value of „Bo‟ and „Bi‟
shall therefore be inclusive of the excise duty.
.....................
The reading of definition of „Bo‟ together with the
definition of „Base Price‟ under clause 70.5 makes it
clear that the „base price‟ of the bitumen shall be the
official retail price prevailing in the previous month
prior to the closing date for submission of bids.
..................
The AT has already found above that the „official retail
price‟ includes the excise duty."
14. It is settled by the Supreme Court in National Highway Authority of
India v. Progressive MVR (JV) AIR 2018 SC 1270, where the Supreme
Court has held in respect of the same formula as under:
"31. The DAB thereafter worked out the formula in
the following manner:
x, y, z percentages are to be worked out as per
provisions note below Sub-clause 70.3(ix).
Thus, p(x,y,z) percentages
= Cost of material consumed during the months x 100
Work done in that month as per IPC
= Quantity of material consumed during the month x
Rate of material x 100
Work done
The Contractor has quoted rates in the tender based on
base rates of material and IPC is based on BOQ rates
quoted by the contractor on base rates of material.
Therefore for working out actual percentage of cost of
material of bitumen, cement and steel used in execution
of work as per the IPC for the month, base rate of
material can only be used as per the provisions of
contract in order to arrive at actual percentage,
numerator and denominator is based on BOQ rates
determined on base rates. The numerator should also
be based on base rates. This is why rate of material in
numerator should be rate of material at the time of bid.
This is a fixed rate and not variable as claimed by the
contractor. The contract provision is quite clear in this
regard and there is no ambiguity.
32. It is also pointed out that if the current cost of
material is adopted, instead of base case as claimed by
the contract, price adjustment will be paid twice. One
due to increase in percentage factor (x, y and z) due to
use of current rate instead of base rates and second
due to application of price adjustment factor b1-bo/bo.
It also demonstrated, by giving examples, that when the
base rate is adopted, the price adjustment was quite
proximate with the prevailing price which compensated
the contractor realistically. On the other hand, on
adoption of current rate, the calculation of price
adjustment was almost three times the amount of
increase in cost of bitumen incurred by the contractor.
33. We are quite in agreement with the aforesaid
analysis carried out by the DRB.
34. As mentioned above, the majority Award has held
that even the intention of the parties was to take into
consideration the current cost. For this purpose, it had
taken into consideration the manner in which IPC
payments were made. However, we find here, though
unfortunately, that there was no consistent practice.
Sometimes the payments were made on the basis of
current cost and sometimes on the basis of base cost.
Maybe different officers understood the formula in a
different manner which resulted in the aforesaid varied
approach. However, when it came to the knowledge of
the Authorities at appropriate level, directions were
given to pass the IPC keeping in view only the base
rate. ........................
35. We find due rationale in the aforesaid approach.
As a result, we hold that while applying price
adjustment formula for calculating the price
adjustment of bitumen, it is the base rate which is to be
applied and not the current rate."
Thus, the Supreme Court held that while passing IPCs, the comparison has
to be between the base rate and the prevailing price.
15. Thus, there is no issue as to how Bi and Bo are to be determined.
However, the question raised in the present petition is the determination of
Pb and whether excise duty is to be included while determining Pb. The
ground raised by the NHAI in its petition is set out below:
Clause 70.3(v) of COPA which deals with the
calculation of Price Adjustment of Bitumen is as under:
Vb = 0.85 x {Pb x RI} x {(Bi - Bo)}
100 Bo
(3) (2) (1)
In the present case there is no dispute between the
parties regarding the values and manner in which Ri,
Bi and Bo have to be calculated. As far as Pb is
concerned the same has to be found out in accordance
with clause 70.3(xi)(4) of COPA.
The purpose of this formula is to adjust the price of
Bitumen in every IPC from the levels which prevailed at
the time when the bids were submitted and prices
agreed between the parties.
The formula is divided into three parts:
Part 1- Value/extent of rise and fall in the markets in
relation to Bitumen. This is calculated by dividing the
difference of the current average official retail price of
Bitumen (Bo) at the Indian Oil Corporation‟s refinery
in Mathura. This is the value by which the price of
Bitumen will be adjusted in any particular IPC. These
figures are available from the aforesaid refinery and
have no connection with the actual cost incurred by the
Respondent in getting Bitumen for the project. It is
immaterial whether this average official retail price
includes the element of Excise Duty or not. This is just
a measure for ascertaining the movement of prices of
Bitumen in a given period of time. In other words this is
just a scale for finding out market movement.
Part 2 - Indicates the amount in a particular IPC
which is to be adjusted by the value calculated from
Part 1 above. For this purpose it is necessary to find
out the percentage value of Bitumen out of the total
value of work done i.e. value of R (value of work done
in an IPC on BOQ rates and value of secured advance
towards materials). This is calculated by applying the
following equation:
If 'Rs.A' worth of bitumen is involved in work of the
value of 'Rs.B' (at BOQ Rates) then how much worth
of bitumen will be involved in the total value work i.e.
'Rs.R' (value of work done in an IPC on BOQ rates
and value of secured advance towards materials)?
The answer to the above is: (A/B) X R.
It is pertinent to note here that the factor A/B is what
existed at the time of bidding and can only be
calculated by adopting the cost of bitumen taken into
account by the bidder at that point of time. This factor
is then used to find the value of bitumen which has to
be adjusted in each IPC.
The dispute in the present case pertains to this part of
the formula where the petitioner says that the price of
bitumen should be taken without the Excise Duty
component because admittedly bitumen was available
to the respondent without payment of excise duty for
this project and the BOQ prices were based on cost of
bitumen without excise duty element.
Part 3 - Only 85% of the product of Parts 1 and 2 will
be paid as price adjustment. That is why part 3 consists
of the fixed value of 0.85.
For finding out the value of Pb or percentage „X‟ in
respect of any particular IPC, the actual physical
quantity of bitumen used in the works covered by the
said IPC is considered. Thereafter it is necessary to
find out the value (in terms of money) of this quantity of
bitumen used in the works in that particular IPC. This
money value of the quantity of bitumen used in the work
in a particular IPC is then divided by the total value of
work executed in that particular IPC after rebate (Ri)
and multiplied by 100. Therefore it is apparent that the
denominator in this question insofar as value of the
work done in a particular IPC is on BOQ rates. On the
basis of basic mathematical principles, the numerator
must also be based on factors other than BOQ rates (eg
inclusion of Excise Duty when no such duty was levied
or paid), it would come from a family which would be
different from that of the denominator and would
therefore lead to an incorrect and absurd conclusion.
This would be contrary to the basic mathematical
principles governing fractions and percentages. This
could not be the intent and purpose of this term of the
contract.
According to the note appended below clause 70.3(xi)
the actual percentage of costs mentioned therein is in
relation to the material used for execution of work as
per the „interim payment certificate‟ for the month. In
this regard attention is invited to Clause 60.1 of COPA
of the contract where it is clear that the value of the
work done in any IPC would be based on the BOQ
rates. It clearly indicates that by this reference too the
value of the three materials for calculating the
percentages X, Y and Z has to be from costs of these
materials as incurred by the respondent. In the present
case since admittedly such costs to the respondent did
not involve payment of any Excise Duty in its
calculations is contrary to the contract and leads to
absurdity."
16. In response the Contractor pleads as under:
"The further contention of the Petitioner that the
numerator and denominator are different is also
incorrect. The note under Clause 70.3(xi) clearly
stipulates X, Y, Z are actual percentages of material
i.e. cost of material of bitumen, cement and steel used
for execution of work in a particular IPC. Nowhere is
it indicated that it has to be based on the base price,
without excise duty, of items X, Y, Z of 28 days prior to
the acceptance of bids.
The Respondent gave a reference to the following
formula with respect to determination of Pb:
Vb = 0.85 x Pb/ 100 x Ri x [Bi - Bo/Bo]
The Petitioner has stated that there are three factors in
the formula, however, there are four factors in the
formula as can be seen as under:
1) First part - 0.85
2) Second part - Pb/100
3) Third part - Ri
4) Fourth part - Bi-Bo/Bo
Part I, Part III and Part IV
There is no dispute in the interpretation of the first
part, as far as the understanding of the Petitioner and
the Respondent is concerned. Regarding the third part
i.e. R1, it is very clear from Clause 60.2 (a)(iv) that it
has to be based on the work done as per BOQ and
material in advance calculated in a particular IPC,
which is based on the material brought at site minus
material consumed when priced at the relevant price
level at that particular IPC, which is a clear indication
that it has to be priced at the market rate. There is no
dispute in the determination and understanding of the
fourth part of the formula also between the Petitioner
and the Respondent.
Part II
Both numerator and denominator are of the same
nature i.e. both are represented by 'Rs.' only and both
represent the cost and there is no other relationship
between the two. So the question of any different
relationship between the numerator and denominator
does not exist. Hence, the argument that the claim is
contrary to the basic mathematical principles
governing fractions and percentages has no validity
since both the numerator and the denominator are
expressed in terms of 'Rs.' only and there is no other
relation between numerator and denominator in as
much as numerator is the value of the material priced
at base rates in the particular IPC and denominator is
the value of work done as per BOQ rates. The note
under Clause 70.3 (xi) clearly stipulates that the
percentage of material has to be worked out by
multiplying the quantity of bitumen with the base price
prevalent in the previous month of the date of receipt of
bids. It is also seen that in its contracts the Petitioner
accepts that there is no rationale/logic in the
determination of percentages to be used in the
formulas nor any set practice is being followed by the
Petitioner. The Petitioner has adopted different
permutations and combinations for the purpose of
determination of such percentages. Therefore, the
provisions in each agreement have to be given effect to
as they are and these cannot be modified by way of any
alleged logic or rationale that illegally furthers the
interest of the Petitioner. While determining the
percentage of bitumen, cement and steel it is possible
that in some cases the other materials may become
negative. If the price indices go down during the
execution of work, then the price adjustment will
become negative. So in determination of the
percentages, if a negative reading comes in case of
other materials, there cannot be any objection. Even if
excise duty is not included, the other materials can still
go negative in the formula and such a contention
therefore has no relevance in this issue."
17. The manner in which inclusion or exclusion of excise duty would
change the value of the price adjustment can be easily illustrated with an
example:
Illustration:- If the total value of the work executed by the contractor
is Rs.1 lakh and the value of the Bitumen used with excise duty as per
the retail price is Rs.1,100/- (100/- for excise duty) then the value of
Bitumen would constitute 1.1% of the total value of work done. If,
however, the value of Bitumen is taken without excise duty i.e.
Rs.1,000/- divided by the total value of the work i.e. Rs.1 lakh then
the value of Bitumen would be 1% of the total value of work done.
There is a clear difference of 10% in the value to be attributed to Bitumen,
in the above illustration.
18. Thus, by taking a higher value as the value of Bitumen and including
excise duty in it, which excise duty the Contractor is not expected to pay to
the government, the Contractor is able to ascribe a higher value to Bitumen
and seek price adjustment on that basis. This would clearly not be
permissible. Since the project was a World Bank aided project and the
Contractor is not expected to pay excise duty, the value of Bitumen as a
percentage of the total value of the work executed, has to be taken without
the component of excise duty included therein. If this is not to be so, the
Contractor would be able to seek a higher value for Bitumen and keep the
excise duty part of the said value of Bitumen to himself without depositing
the same with the Government, in view of the exemption. This would result
in a double benefit to the contractor - first, that the contract is exempt from
excise duty and secondly, excise duty is loaded for the purpose of
calculating price adjustment, which duty the contractor is not expected to
pay or deposit with the government. The contractual provisions cannot be
interpreted in this manner.
19. The Contractor relies upon the clarifications issued by the NHAI
when clarifications were sought by bidders. The said clarification is in
respect of whether the retail price at IOC refinery at Mathura should include
excise etc., The query raised and the clarification given is extracted below:
6. Sub- It is stated that average official The average
Clause retail price of bitumen at IOC rate is only
70.3 C refinery at Mathura is to be w.r.t. the
v) of considered to calculate Price variability
COPA Adjustment for bitumen component. within the
Bitumen emulsion and bitumen of period
various grades are to be used on considered
the work. Following clarifications and is
may please be given in this regard: inclusive of
i) Grade of bitumen/bitumen all taxes.
emulsion which is to be
considered to calculate price Grade of
adjustment for bitumen Bitumen is
component. as per
ii) Whether average official retail specification
price of bitumen/ bitumen s.
emulsion will be inclusive of
excise duty, sales tax and other
taxes if any.
20. The above clarification is in respect of Bi and Bo and not Pb. Insofar as
the retail price to determine Bi and Bo is concerned, there is no doubt that the
same would include excise duty. But the issue is in respect of calculation of
Pb. The award, on this aspect, has missed the point. The award has
proceeded on the basis that the question is determination of Bi and Bo which
it clearly is not.
21. The fact that the parties may not have adequate clarity and some
payments may have been made by calculating base price of Bitumen and
fuel wrongly, does not by itself mean that the clause does not require to be
correctly interpreted.
22. In order to calculate Pb, the rate of Bitumen and fuel has to be the
BOQ rate and not the retail price announced by the IOC refinery, 28 days
prior to the bid. The rate of Bitumen and fuel at BOQ rate is not to be
confused with Bo, which is the error the Arbitral Tribunal has committed.
While excise duty would be included in Bo and Bi, for calculating Pb, which
is the value of Bitumen and fuel used in the project as a percentage of the
total value of the work, excise duty cannot be included.
23. It is, therefore, held that while calculating the value of Bitumen and
fuel as a percentage of the total value of the work executed, excise duty shall
not be included. The award, on this claim, is accordingly set aside.
B. Dispute No.3: Reimbursement of Toll Tax collection.
24. The dispute, on this issue arose as the Kalisindh bridge, where some
part of the work was to be executed, was not handed over to the Contractor.
The Rajasthan Government had retained the carriageway and the bridge. The
Contractor was thus forced to pay toll to the Rajasthan Government in
respect of its vehicles which were transiting through the bridge. The
question that arose before the Tribunal was as to whether the contractor was
to pay the toll or is entitled to reimbursement/adjustment.
25. The work on this project commenced on 24th October, 2005 on the
stretch of road consisting of a bridge on the river Kalisindh. The Contractor
was entitled to complete exemption of toll tax for the vehicles which were
deployed for the purposes of construction. Various IPCs were raised by the
Contractor and paid by NHAI, reimbursing the toll which was paid by the
Contractor. However, in one IPC, the entire toll collected in the past bills
was withheld due to which the Contractor raised the present claim. It is the
Contractor's case that it was never disclosed to it that the toll would be
liable to be paid, as it was unusual, in a project of this nature, not to hand
over complete physical possession of the bridge to the Contractor. The
Contractor further argued that NHAI had disputes with the Rajasthan
Government, because of which the bridge was not handed over fully and toll
continued to be collected.
26. The NHAI, however, argued that payment of toll is mandatory and the
contract does not have any provision for reimbursement of the toll. NHAI
relies on Rule 11 of the National Highways (Fees for the use of National
Highways Section and Permanent Bridge - Public Funder Project) Rules,
1997 to argue that toll tax is collected in perpetuity and there can be no
exemption. NHAI further relies upon the tender document to argue that the
Contractor had to satisfy himself as to the physical condition of the bridge,
prior to submitting the bid. Reliance is placed on clause 11.1 of the
conditions of contract which reads as under: -
"11.1 The Employer shall have made available to
the Contractor, before the submission by the
Contractor of the Tender, such data on hydrological
and sub-surface conditions as have been obtained by
or on behalf of the Employer from investigations
undertaken relevant to the Works but the Contractor
shall be responsible for his own interpretation thereof.
The Contractor shall be deemed to have inspected and
examined the Site and its surroundings and
information available in connection therewith and to
have satisfied himself (so far as is practicable, having
regard to considerations of cost and time) before
submitting his Tender, as to:-
(a) the form and nature thereof, including the sub-
surface conditions,
(b) the hydrological and climatic conditions,
(c) the extent and nature of work and materials
necessary for the execution and completion of the
Works and the remedying of any defects therein, and
(d) the means of access to the Site and the
accommodation he may require.
and, in general, shall be deemed to have obtained all
necessary information subject as above mentioned, as
to risks, contingencies and all other circumstances
which may influence or affect his Tender. The
Contractor shall be deemed to have based his Tender
on the data made available by the Employer and on his
own inspection and examination, all as
aforementioned."
27. The scope of the work as described in the instructions to bidders was
very clear. The same is described as under: -
"SCOPE OF WORKS
1. The Works consists of:
(a) Construction of new flexible/rigid 2/3-lane
pavement parallel to existing carriageway,
construction of new, flexible/rigid 4 lane
road/bypasses/detours/service roads and
reconstruction/strengthening/widening of the
existing carriageway.
(b) Construction of culverts, minor and major
bridges and grade separators, rail over/under
bridges, widening/rehabilitation, repair of existing
bridges.
..................
2A. Road Works
a).........d).........
e) widening and strengthening/reconstruction of
the existing carriageway including raising;
f).........m).........
n) maintenance of existing road during the
construction period.
2B. Bridge Works
k) construction of approaches on either side of the
bridge, R.C.C. retaining walls/reinforced earth
walls;
l) rehabilitation/repair/widening of existing
bridges.
m) maintenance of existing bridges during
construction."
28. A perusal of the scope of work and the road work described above
clearly shows that the Contractor needed physical possession of the bridge.
It defies logic for the NHAI to argue that the Contractor is expected to carry
out the widening, strengthening and reconstruction of the existing
carriageway and construct a new four lane road/bypass, without having free
access to the existing carriageway. In a project of this nature, vehicles of the
Contractor use the existing carriageway and bridge extensively and to
collect toll from them every time the Contractor's vehicles passes through
the bridge, in effect constitutes levying a penalty which negates the very
purpose of awarding the project. The Contractor, without there being a clear
stipulation in the contract, cannot be expected to imagine that it would not
get free access to the existing carriageway and free access to the space
where the new carriageway/bridge is to be built. The finding of the Arbitral
Tribunal that the bridge was handed over to the Contractor and was to be in
the possession of the Contractor is correct. The observations of the Tribunal
in this regard are as under: -
"8.4.1...... The AT perused the terms and conditions of
the Contract in this respect and observations are as
under:
(i) The short description of the work as per
Agreement dated 11.08.2005 is Rehabilitation
and Upgrading of km. 406.000 to Km. 449.15 of
NH-76 to 4-lane configuration." The Bill no.7 of
BOQ is for "Rehabilitation of existing bridges."
The scope of work is described at Annexure 1,
„Instructions to Bidders.‟ It includes, repairs of
existing bridges vide clause 1(b), maintenance of
existing road during the construction period vide
clause 2A (n), rehabilitation/repair/widening of
existing bridges vide clause 2B(1), and
maintenance of existing bridges during
construction vide clause 2B(m). Moreover it has
also been stipulated vide clause 2813 of
Supplementary Technical Specifications which
are the amendments/modifications/additions to
the existing clauses of general technical
specifications, that, "Existing brick
masonary/concrete wing wall shall be
dismantled for construction of adjacent 2 lane
bridge as shown in drawings or as directed by
the Engineer. This stipulation is obviously with
reference to existing Kalisindh Bridge, as the
new 2 lane bridge was to be constructed
adjacent to the existing 2 lane Kalisindh bridge.
Taking cognizance of all the above stipulations
of the contract, which envisage some work to be
done for existing bridges including maintenance
during construction period, and ·in the absence
of any provision regarding exclusion of
Kalisindh bridge from handing over to the
claimant the AT finds that the existing Kalisindh
bridge is part and parcel of the works to be
executed under the Contract and therefore
contract envisages its handing over to the
Claimant. In this respect Respondent‟s only
contention is that the contract provides for two
lane new bridge and as such the existing
Kalisindh bridge is not the part of the contract
and therefore was not to be handed over is not
getting substantiated by any term or condition of
the contract. The AT finds that there is no clause
in contract which stipulates that the Kalisindh
Bridge is not the part of the Contract.
(ii) The Respondent has contended that the existing 2
lane Kalisindh Bridge was not to be handed over
to the contractor as new 2 lane bridge was being
constructed on different alignment near the existing
bridge. The Claimant has contended that it has been
stipulated vide clause 3 "Availability of the Project
area" that "The Employer shall provide the right-
of-way for road and bridge works and other
appurtenance works to the contractor as per details
in Schedule A in Section VIII, at page 122 of Part
1(A). The AT observes that the section relevant to
Section IX, at page 258 of Part 1(B) of contract.
The Claimant has contended that the Employer (i.e.
Respondent) has no where specified that the said
stretch will be handed over except the Kalisindh
Bridge. The Claimant also contended that the
bridge was within 20 km road stretch which was to
be handed over immediately on commencement of
work. The Claimant also contended that Kalisindh
Bridge was critical being a long major bridge; he
had planned to commence works at Kalisindh
Bridge in January, 2006. The AT observes from
clause 42.1 that the Employer will give so much site
and the extent of portions of the site from time to
time, in accordance with programme referred to in
Clause 14 and also from the Schedule A - Section
IX of contract which is "HANDING OVER OF
SITE" (Clause 42.1 - Possession of site and Access
thereto) that the entire site is to be handed over
after 6 months of commencement of work. As such
the AT finds that as per the Contract, the entire site,
which includes Kalisindh Bridge shall be handed
over to the Claimant after six month of
commencement of work.
(iii) The Respondent has denied, vide para 2 on page 3 of
its Statement of Defence that the stretch of NH-76
having Kalisindh bridge and its approaches was not
handed over to the contractor till completion of the
project and justified it by stating that how
contractor could complete the work if the alleged
portion of the site would not have been handed
over to it and that possess on of 25.3 km of stretch
and access thereto was provided to the contractor
in terms of clause 42.1 of the contract agreement
vide letter dated 19.11.2003 (exhibit R-3). In other
words the Respondent admits that the Kalisindh
Bridge with its approaches was handed over to the
Claimant. This is a contention contrary to its earlier
contention that the Kalisindh bridge was not to be
handed over as per the Contract.
(iv) In view of the findings at (i) and (ii) above the
contentions made by the Respondent for non
handing over of said bridge to the claimant are not
found tenable and that in accordance with the
various stipulations referred to (i) and (ii) herein
above as per the contract, the Kalisindh bridge is to
be handed over to the Claimant for the execution of
this work."
29. The Kalisindh bridge was a part and parcel of the contract and in any
event, there is no stipulation in the contract that toll has to be paid by the
Contractor. If that was to be so, the stipulation had to be expressly provided.
The same cannot be attempted to be read into or hidden in any manner. The
liability for paying the toll is considerable and the Contractor could not have
been expected to imagine that the toll would be required to be paid every
time its vehicles pass through the very bridge which had to be repaired. Such
a stipulation would run contrary to the very purpose of awarding the project
itself. The finding of the Tribunal that the existing bridge is a part and parcel
of the work to be executed by the Contractor does not deserve to be
interfered with. The objections on this count are rejected.
30. The OMP is disposed of in the above terms
PRATHIBA M. SINGH
Judge
JANUARY 22, 2019
Rekha
