Delhi High Court
Ministry Of Road Transport And ... vs L&T; Transportation ... on 11 October, 2019
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P. 289/2015
Reserved on: 07.08.2019
Date of Decision: 11.10.2019
MINISTRY OF ROAD TRANSPORT AND HIGHWAYS
..... Petitioner
Through: Mr.Sandeep Sethi, Sr. Adv.with
Mr.Ruchir Mishra, Mr.Mukesh Kr.
Tiwari, Mr.Sanjiv Kr. Saxena,
Mr.Ramneek Mishra, Mr.Abhishek
Rana and Mr.Sidhant Kumar,
Advs.
versus
L&T TRANSPORTATION INFRASTRUCTURE LTD. & ANR.
..... Respondents
Through: Mr.Dayan Krishanan, Sr.Adv. with
Mr.Arpan Behl, Adv. for R-1.
Mr.D.Balaraman and Mr.Anand
Sathiyaseelan, Advs. for R-2.
CORAM:
HON'BLE MR. JUSTICE NAVIN CHAWLA
1. This petition under Section 34 of the Arbitration and Conciliation
Act, 1996 has been filed by the petitioner challenging the Arbitral Award
dated 12.12.2014 passed by the Arbitral Tribunal adjudicating the
disputes that have arisen between the parties in relation to the Tripartite
Concession Agreement dated 03.10.1997, executed between Larsen and
Toubro Ltd. (L&T Ltd.) with the petitioner and the respondent no.2. The
respondent no.1 herein is the assignee of L&T Ltd. under the Deed of
O.M.P. No.289/2015 Page 1
Assignment dated 25.11.1997. It is a subsidiary of L&T Ltd. and is the
Special Purpose Vehicle created under the terms of the contract and for
discharge of the obligations of L&T Ltd. contained therein.
2. Before adverting to the challenge to the Arbitral Award, some
basic facts in relation to the Concession Agreement need to be noticed.
The Concession Agreement was awarded on Build, Operate and Transfer
(BOT) basis. It includes design, construction, maintenance and
operation of 28 km of the Coimbatore Bypass on NH-47 at KM 141/00
on the Salem side merging with KM 171/200 on Palghat side of the same
highway. It further included construction of an additional Two Lane
Bridge across river Noyyal which is the Athupalam Bridge, as also
maintenance of existing bridges.
3. The Arbitral Tribunal noticed the important dates in regard to the
Concession Agreement in paragraph 8 of the Award, which is reproduced
hereinbelow:
Invitation of Tender on BOT basis September 1995
Invitation of re-submission of bids for 16/12/1995
additional scope of work by including 2 lane
Athupalam Bridge
Date of submission of bid by M/s L&T 05/06/1997
Date of signing the Concession Agreement 03/10/1997
Deed of Assignment to M/s L& T TIL by L&T 25/11/1997
Ltd.
Date of commencement of work of Athupalam 03/12/1997
Bridge & Bypass
Date of commissioning of Athupalam Bridge 03/12/1998
Date of commissioning of Bypass 03/12/1999
End of Concession period for Athupalam 03/12/2018
Bridge
End of Concession period for Bypass 03/12/2029
O.M.P. No.289/2015 Page 2
Length of Bypass About 28 km
Cost of Project Rs.104.40
Crores
4. The majority of the Arbitral Tribunal, consisting of two Arbitrators
has awarded a sum of Rs.136.22 crores to the respondent no. 1 along with
interest towards loss of revenue sustained by the respondent no.1 for the
Athupalam Bridge. This claim of the respondent no.1 was however,
rejected by the Arbitrator in minority.
5. The first challenge to the Award is to the grant of the said claim in
favour of the respondent no.1.
6. The learned senior counsel for the petitioner submits that this claim
of the respondent no.1 was barred by limitation. He submits that in terms
of Clause 2.14 of the Concession Agreement, a Steering Group (SG) was
constituted for taking all project level decisions for the smooth
implementation of the Concession Agreement. It had the representatives
of the petitioner, the respondent no.2 as also the respondent no.1, the
Concessionaire. Respondent no.1 raised a claim of financial
compensation for loss of revenue in the form of collection of toll from
Athupalam Bridge, however, the SG in its meeting held on 21.07.1999
recorded that the Concession Agreement does not provide for any cash
compensation. Even in the meeting of the SG held on 18.04.2001, the
respondent no.1 was advised to submit a proposal for compensation
against loss of toll revenue considering the possible options of extension
of period of concession or increase in toll rates or both. Grant of
compensation in form of cash was not one of the options given to the
O.M.P. No.289/2015 Page 3
respondent no.1. The respondent no.1, if aggrieved by these decisions,
could have challenged the same through arbitration only within a period
of three years from the date of such decisions. However, the respondent
no.1 invoked arbitration only on 18.03.2010, therefore, the claim of the
respondent no.1 for grant of compensation in the form of cash was clearly
barred by limitation.
7. On the other hand, the learned senior counsel for the respondent
no.1 submits that the cause of action for claiming the above amount arose
only on 12.03.2010 when the decision of the SG to affirm illegal
termination of the Concession Agreement by the petitioner was
communicated to the respondent no.1. As far as the Minutes of Meeting
dated 21.07.1999 is concerned, the same did not create any cause of
action and, in fact, amounts to an admission of liability on the part of the
petitioner to compensate the respondent no.1 for the loss of toll revenue.
It merely provided for the manner in which the respondent no.1 would be
compensated for such loss. It is only with the illegal termination of the
Concession Agreement that it became clear that the petitioner would not
compensate the respondent no.1 for the loss suffered by it and therefore,
invocation of arbitration by the letter dated 18.03.2010 was within the
period of limitation.
8. I have considered the submissions made by the learned senior
counsels for the parties and I am in agreement with the submissions made
by the learned senior counsel for the respondent no.1.
9. The Minutes of Meeting dated 21.07.1999, though stated that the
petitioner and respondent no.2 cannot compensate the respondent no.1 for
the loss suffered by it in collection of toll as the Concession Agreement
O.M.P. No.289/2015 Page 4
does not provide for any such remedy, at the same time further stated that
all legitimate claims of the respondent no.1 will be examined and
considered as per provisions of the Concession Agreement. In a
subsequent meeting held on 18.04.2001, the respondent no.1 was called
upon to submit its proposal for compensation against the loss of toll
revenue duly supported by the detailed cash flow and considering the
following options:
(a) Extension of concession period with the same toll rates as in
the Agreement:
(b) Suitable increase in toll rates keeping the concession period
same as in the Agreement;
(c) Suitable combination of A and B above.
10. The Arbitral Tribunal records that by a letter addressed by CE NH
TN to a Regional Officer of the petitioner, the loss of revenue till
31.03.2001 suffered by the respondent no.1 was arrived at
Rs.9,40,90,783/- on the basis of details worked out by Pallavan Transport
Consultancy Services Ltd., which is a State undertaking, and respondent
no.2 in consultation with the respondent no.1. Paragraph 51 of the
Impugned Award is reproduced hereinbelow:
"(51)The loss of revenue till 31.3.2001 was arrived at Rs.
9,40,90,783/- on the basis of details worked out by PTSCL
State Undertaking and Second Respondent in consultation
with the claimant M/s L&T TIL. This figure of LOR has been
intimated by CE NH TN to regional officer of First
Respondent. The detailed calculations for the same are
available in Exhibit C-25 SOC Vol-II. The GOI did not
attempt to reduce nor even disputed this loss of revenue."
O.M.P. No.289/2015 Page 5
11. Respondent no.1 in turn, from time to time, intimated the
respondent no.2 about the loss sustained by it. Reference has been drawn
to letters dated 22.11.2007 and 06.02.2010.
12. From the above, it is clear that the liability to compensate the
respondent no.1 for the loss of toll revenue suffered by it at Athupalam
Bridge, was not disputed. It was only the mode of recovery thereof, that
was discussed. Whether the respondent no.1 is entitled to compensation
in form of cash or not is a question distinct from the liability of the
petitioner to so compensate the respondent no.1. As the petitioner has
not produced any document on record by which it categorically denied its
liability to compensate the respondent no.1 for the alleged loss of
revenue, it cannot be said that the cause of action had arisen in favour of
the respondent no.1 to claim such amount at any date prior to the date of
decision of the SG to uphold the termination of the Agreement by the
petitioner. Consequently, the claim of the respondent no.1 cannot be said
to be barred by limitation.
13. On the merits of the claim, the learned senior counsel for the
petitioner submits that the petitioner was under no obligation to
indemnify any loss suffered by the respondent no.1 towards deficient
recovery of toll from the Athupalam Bridge. He submits that the
responsibility of the toll fee collection and the risk attached thereto was
solely on the respondent no.1. He submits that in terms of Clauses 5.2
and 25.1 of the Concession Agreement, it was the sole responsibility of
the respondent no.1 to take all steps for proper implementation of the
Agreement. In terms of Clause 10.4 of the Agreement, the respondent
O.M.P. No.289/2015 Page 6
no.1 was in fact entitled to charge fees lesser than the agreed fee without
affecting the concession period. There was no obligation on the
petitioner for ensuring recovery of full toll for the respondent no.1. In
fact, in terms of Clause 5.4 of the Concession Agreement, the respondent
no.1 was to have carried out necessary field surveys and investigations
with respect to the site of the Bridge. The respondent no.1, therefore,
should have been aware of all local conditions prevalent at the site
thereby bearing the risk attached thereto. He submits that in absence of
any obligation on the part of the petitioner to ensure full recovery of the
toll for the respondent no.1, the petitioner cannot be held to be guilty on
the performance of the contract or liable to compensate the respondent
no.1 for alleged loss of toll revenue.
14. I have considered the submissions made by the learned senior
counsel for the petitioner, however, find no merit in the same. As noted
hereinabove, the liability of the petitioner to compensate the respondent
no.1 for loss of toll revenue was never denied. In fact, not only the
Minutes of Meeting of the SG accept such liability of the petitioner, but
also by the letter dated 01.04.1999, a senior Officer of the petitioner
informed the respondent no.2 that the shortfall in revenue is due to
refusal/reluctance on part of the users including Tamil Nadu State
Corporation to pay the toll fee, which sends a wrong signal to the users of
the bridge who use this as an excuse for evasion of toll. The letter further
advised the respondent no.2 to ensure that respondent no.1 is extended
help in checking the evasion of toll or as an alternate respondent no.2
may have to compensate the respondent no.1 for the loss being incurred
by respondent no.1, which was to the tune of Rs.40 lacs per month. Later
O.M.P. No.289/2015 Page 7
by a letter dated 25.06.1999, even the Minister for Railways and Surface
Transport, Government of India, advised the respondent no.2 of a similar
consequence.
15. The Arbitral Tribunal has further noted that the loss of revenue on
Athupalam Bridge accrued due to inefficiency and total negligence of the
Government of India and refusal of the petitioner and respondent no.2 to
provide support to the Concessionaire. The police did not render any
assistance in enforcing toll, rather it encouraged vehicles to pass through
defiantly without paying toll fee.
16. The relevant findings of the Arbitral Tribunal are reproduced
hereinbelow:
"(82) The AT is of the majority view that the loss of revenue on
Athupalam Bridge occurred due to inefficiency and total neglect of
GOT and refusal to provide support, timely steps not being taken
by respondents. There is the tripartite agreement signed and the
terms of the same have to be acted upon and honoured by all the
three parties. Five DO letters, two from Minister for MORTH and
three from L&T officers apart from enumerable demand in writing
from L&T officers did not cut much ice. The police did not render
assistance in enforcing toll and help for collection of toll. Rather it
encouraged vehicles to pass through defiantly without paying toll
fee by creating scenes of violation even though they were in a
position to render the required assistance.
(83) L&T TIL wrote to every level of police officers i.e. DIG,
Commissioner police, SP, DSP. The EE NH also wrote to police.
The EE supplied, list of non paying vehicles category wise to RTO
and police. The concessionaire requested for 4x1 police at its own
cost. There was only lip sympathy to L&T and empathy towards
cause of collection of toll fee.
xxxxxx
(85) Can such a situation help in building roads on BOT basis
when the very first project is treated casually and made to fail? As
O.M.P. No.289/2015 Page 8
vehemently argued by both the respondents, no doubt under para
4.1 CA it is the duty of concessionaire to collect toll but AT can't
and should not ignore the fact that in absence State support by
creating proper environs by way of effective police help etc. the
concessionaire was made to fail. Under Clauses 6.6, 6.7 and 14.2
of the concession agreement it is the duty of Govt. of TN to check
and monitor the quality, progress and standards of the toll facility
through Engineer-in-charge. It has right to check the fee collection
to ensure that the same is as per terms of the CA. The Govt. of TN
has to supervise the work of construction, maintenance and
operation of the toll facility at its own cost. It is realizing Rs.15
lacs supervision fee (subject to WPI linked price variation] per
annum in advance from L&T. The GOT has miserably failed in
implementation of the project. It is our [majority AT] strong view
that LOR is payable by respondents and due to concessionaire.
........................."
17. The petitioner having awarded the contract on a Build, Operate and
Transfer basis to the respondent no.1, wherein the respondent no.1 is to
recover its costs and reasonable return from the collection of toll, cannot
wash its hands of its responsibility to ensure a conducive environment for
collection of such toll. The power of 'State' could only have been
exercised by the petitioner and the respondent no.2 for ensuring
collection of the toll in fact, as noted by the Arbitral Tribunal, the major
defaulters were the Tamil Nadu State Road Transportation and Kerala
State Road Transport.
18. Therefore, the petitioner can certainly not claim immunity from
compensating the respondent no.1 of the loss suffered by it.
19. It is further contented by the learned senior counsel for the
petitioner that, in any case, there was no provision in the agreement for
O.M.P. No.289/2015 Page 9
grant of compensation, in form of cash to the respondent no.1.
Compensation, if any, could have been granted only in form of extension
of the concession period or increase in the toll rates or a combination of
both. In absence of any term in the contract providing for compensation
in form of cash, the Arbitral Tribunal has no right in granting the same.
20. I again cannot agree with the submissions made by the learned
senior counsel for the petitioner. It is not the case of the petitioner that
there is any clause in the Concession Agreement prohibiting grant of
compensation in the form of cash. In the absence of any such
prohibition, it cannot be said that the Arbitral Tribunal has awarded a
claim in contravention of any contractual term. The relief to be granted
by the Arbitral Tribunal has to be considered by the Arbitral Tribunal in
the facts of each case and the Award passed by the Arbitral Tribunal
cannot be set aside merely because the relief could have been molded in a
manner other than the one adopted by the Arbitral Tribunal.
21. I may also note that the Arbitral Tribunal has, while granting
compensation in form of cash, also relied upon a similar grant of cash
compensation by the petitioner itself for the additional work granted to
the respondent no.1 for construction of Chettiaplayam Road Over Bridge.
In terms of Clause 6.9 of the Concession Agreement, incase, the
petitioner desires to have additional works to be carried out by the
respondent no.1, the compensation was in form of the increase in the
concession period and/or fee rates. Therefore, even in such a case, the
contract did not provide for compensation in form of cash, however,
admittedly, it was given to the petitioner.
O.M.P. No.289/2015 Page 10
22. On the claim of compensation, the learned senior counsel for the
petitioner lastly argued that there was no proof submitted by the
respondent no.1 with respect to quantification of this claim. In the
absence of any proof, the same could not have been granted. He submits
that the Arbitral Tribunal has wrongly proceeded on an assumption that
the petitioner accepted such quantification. The Arbitral Tribunal itself
has recorded objection of the petitioner towards the quantification of such
claim and absence of proof in support thereof.
23. As far as the quantification of the claim is concerned, the Arbitral
Tribunal, though has noted that the petitioner did not challenge the same,
has also based its findings on other factors. The relevant finding of the
Arbitral Tribunal is reproduced hereinbelow:-
"(76) LOR upto 31.3.2001 is Rs. 9.409 Cr. as per PTSCL's report, and
worked out jointly with Second Respondent being the aggregate loss (C-
32) sustained. The project was viable only after adding one additional
bridge at Athupalam even according to both respondents.
Loss as intimated during the meetings on 12.02.1999 Rs. 0.935 Cr.
Reported by L&T TIL Upto June 2000 Rs. 7.46 Cr.
As worked out by Executive Engineer, NH &PTSCL's upto 31.03.2001
Rs.9.409 Cr.
Reported by L&T TIL to Sery. MoRTH vide letter dated 15.05.2003
Reported by L&T TIL upto 31.03.2003 Rs.17.13 Cr.
Reported by L&T TIL upto 31.05.2004 Rs.20.63 Cr.
Reported by L&T TIL upto 31.07.2005 Rs.23.899 Cr.
Reported by L&T TIL upto 31.08.2005 Rs.24.14 Cr.
O.M.P. No.289/2015 Page 11
Reported by L&T TIL upto 31.10.2007 Rs.31.58 Cr.
Cumulative LOR from 12/98 to June 2011 Rs.71.96 Cr.
(without interest)
and Rs.134.91 Cr.
(with interest)
Cumulative LOR from 12/98 to Oct. 2011 works out to Rs.77.09 Cr.
(without interest) and
Rs.146.07 Cr.
(with interest)
As per MoRTH Minister's DO letter dated 25.06.1999 to the
Chief Minister TN was required to pay Rs. 40.00 lacs per month
to L&T TILL from 01.01.1999 upto 31.12.2014 i.e. 16 years
without any interest
Rs. 76.80 Cr."
xxxxxx
(89) The claims of Claimant, which has been calculated on the
basis of traffic study conducted by PTSCL (Govt. of TN
Organization] and acceptable to both the parties the total of claim
comes to Rs. 77.09 cr. till 31.10.2011 as per C-43 of SOC. This is
the principal amount. The AT by majority view allows 12 % simple
interest per annum on this amount from 31.10.2011 till the date of
award i.e. 12.12.2014.
The SG in its meeting held on. 18.4.2001 has allowed a sum
of Rs. 4.13 cr. against claim of Rs. 6.32 cr. in cash for
construction of Chettipalayam ROB. This over bridge was
an additional work within the 28 km boundary limits of the
bypass project. This was obviously got executed under this
very concession agreement. The SG in case of Athupalam
bridge is contending that there is no way GOVT of
Tamilnadu or Govt. of India can compensate the
concessionaire in cash but allowed the construction of said
O.M.P. No.289/2015 Page 12
over bridge and compensated the same concessionaire in
cash. This is quite strange. For the same project the SG in
the same meeting dated 18.4.2001 allowed cash payment for
construction of over bridge being additional work on
Chettipalayam ROB. It is irrational to apply two different
yard sticks for the compensation? While the cash
compensation is valid for additional ROB, yet it is strange to
contend as not possible to compensate the loss of revenue in
respect to Athupalam Bridge. The calculation of loss of
revenue as set out in the written response of claimant is
fairly correct and the same deserves to be accepted."
24. A reading of the above would clearly show that the Arbitral
Tribunal has quantified the claim on the basis of the report of PTSCL, a
Government Organization, as also the letters written by the petitioner and
the Minister, MoRTH. It cannot, therefore, be said that the quantification
is without any evidence. I see no reason to interfere with this finding of
the Arbitral Tribunal.
25. The learned senior counsel for the petitioner further challenges the
Arbitral Award holding the termination of the contract as illegal. He
firstly submits that the termination of the Agreement had been accepted
by the respondent no.1 and the only dispute to be adjudicated by the
Arbitral Tribunal was the amount of compensation payable by the
petitioner to the respondent no.1.
26. Relying upon the letter dated 24.02.2006, issued by respondent
no.1 to the petitioner, he submits that the respondent no.1 itself claimed
termination payments under Clause 16 of the Concession Agreement
claiming force majeure conditions. The only dispute thereafter was with
respect to the quantification of the claim of the respondent no.1. As far
O.M.P. No.289/2015 Page 13
as the factum of termination of the contract is concerned, the same could
not have been put to dispute.
27. On the other hand, the learned senior counsel for the respondent
no.1 submits that the letter dated 24.02.2006 was clearly addressed as
being without prejudice to the rights of the respondent no.1 under the
Concession Agreement. He submits that this letter was not admissible in
evidence under Section 23 of the Indian Evidence Act, 1872. In fact,
thereafter various options were tried to make the contract workable,
however, the petitioner remained adamant on terminating the contract.
This was clearly put in issue before the Arbitral Tribunal and therefore, it
cannot be said that the Arbitral Tribunal has no right to consider the
validity of the termination of the Concession Agreement.
28. I have considered the submissions made by the learned senior
counsel for the parties. Admittedly, letter dated 24.02.2006 of the
petitioner was marked 'without prejudice' to its rights under the
Concession Agreement. Though, the respondent no.1 raised a claim for
termination payment, the same was not accepted by the petitioner. In a
subsequent meeting held on 29.03.2007, the respondent no.1 was called
upon to give proposal for four laning of the Coimbatore bypass which
included the continuation of the Concession Agreement. It was only by
the letter dated 11.05.2009, that is much after the letter dated 24.02.2006
relied upon by the petitioner, that the petitioner issued a notice of
termination under Clause 16.2.3 (ii) of the Concession Agreement, which
was confirmed by the SG in its meeting held on 12.02.2010. The
respondent no.1 never accepted this termination and in fact, not only
O.M.P. No.289/2015 Page 14
invoked arbitration but also filed an application under Section 9 of the
Act before the Court.
29. This Court by an order dated 26.03.2010 inter alia directed as
under:
"7. Accordingly, therefore, until further orders unless so
varied by the court, the respondent is restrained from in any
manner interfering with the operations and maintenance of
the BOT project as constructed by the petitioner under the
Concession Agreement dated 3.10.1997. The respondent is
injuncted from in any manner taking over possession of the
project except through the due process of courts and law."
30. In view of the above, it cannot be said that the question of legality
of the termination notice was not an issue before the Arbitral Tribunal or
could not have been adjudicated upon by the Arbitral Tribunal. It also
cannot be said that the letter dated 24.02.2006 of the respondent no.1
amounted to acquiescence or waiver on its part to challenge such
termination of the Concession Agreement.
31. On the merits of the termination, the learned senior counsel for the
petitioner defends the termination by contending that not only was the
respondent no.1 in breach of its contractual obligations under Clause 6.5
of the Concession Agreement to construct additional lanes on the bypass,
but also because the parties could not arrive at a settlement on the terms
of such construction of the bypass, the petitioner acted within its rights to
terminate the Agreement. He submits that Clause 6.5 of the Concession
Agreement clearly provides that the petitioner had a right to call upon the
respondent no.1 to construct additional lanes, failing which the petitioner
could either construct a new bypass or terminate the Concession
O.M.P. No.289/2015 Page 15
Agreement for the default of the respondent no.1. For such additional
lanes to be constructed, in terms of Clause 6.9, the respondent no.1 could
seek compensation only in form of increase of the concession period and
/or fee rates. The respondent no.1, however, started demanding arbitrary
compensation for construction of the additional lanes and thereafter
proposed allotment of additional work as a condition for such
construction. As the same was not agreeable to the petitioner, the
petitioner had no choice but to terminate the Agreement.
32. On the other hand, the learned senior counsel for the respondent
no.1 submits that the termination notices dated 11.05.2009 and
19.11.2009 were clearly unsustainable under Clause 16 of the Concession
Agreement. He submits that the respondent no.1 never refused to
construct the additional lanes. In fact, even without asking the
respondent no.1 to construct the same, the petitioner had issued a tender
which included the Coimbatore bypass. This was immediately protested
by respondent no.1. In the meeting held on 29.03.2007, the respondent
no.1 was called upon to submit a proposal for carrying out the work of
four laning of the bypass. This included allotment of additional area.
The respondent no.1 submitted such proposal which also included the
option of the increase in the toll rates. He submits that the petitioner,
therefore, can neither claim breach of contract by respondent no.1, nor
occurrence of any force majeure condition to justify the termination of
the contract and equally, the finding of the Arbitral Tribunal in this
regard cannot be faulted.
33. I have considered the submissions made by the learned senior
counsels for the parties. Before adverting to them in detail, a few clauses
O.M.P. No.289/2015 Page 16
of the Concession Agreement may be noticed and are reproduced
hereinbelow:
"6.5 The Government of Tamilnadu shall ensure that no alternate
facility to the bypass is constructed within a radius of 20 km during
the concession period. However, if the traffic on the bypass
substantially increases, the Company shall on a notice being given
to this effect by GOI provide additional lanes in the bypass within
a specified period failing which the Government may either
construct a new bypass or terminate the Concession agreement for
Company's default."
XXXXXX
"6.9 In case GOI desires to have additional works to be carried
out by the company beyond the Scope of the Project detailed in
Clause 7, the concession period and/or fee rates shall be suitably
increased based on analysed market rates to be approved by the
Steering Group to compensate the Company on this account as
decided by the Steering Group."
XXXXX
"16. FORCE MAJEURE
16.1 As used in this Agreement a Force Majeure Event shall
mean any or all of the acts or events set out in Section 16.2
hereinafter which completely prevent the party claiming Force
Majeure (the "Affected Party") from performing its obligations
under this Agreement or complying with any conditions required
by other parties hereto under and in accordance with the
provisions of this Agreement and which act or event is (i) beyond
the reasonable control and not the fault of the Affected Party, and
(ii) the Affected Party has been unable to overcome such act or
event and its effect on the obligations of the affected party under
this agreement by the exercise of due diligence and reasonable
efforts.
O.M.P. No.289/2015 Page 17
16.2 For the purposes of this Section 16 of the Agreement, Force
Majeure Event shall mean one or more of the following acts or
events:
xxxxxxxxxxxxxx
16.2.3 GOI Political Event
(i) Change in Law adversely and materially affecting toll
rights of the Concession Company.
Explanation: (a) the enactment of any new Indian law or
Indian Directive;
(b) the repeal in whole or in part (unless re-
enacted with the same effect), or
modification of any existing Indian law or
Government Directive;
(c) A change in the interpretation or
application of any Indian law or Government
Directive such interpretation being legally
binding on the parties to this Agreement.
(ii) expropriation or compulsory acquisition by any Indian
Governmental Agency or any State Government Agency of
any material assets or rights of the Company.
(iii) any other unlawful or unauthorized action on the part
of GOI occurring after Financial Close which is directed
against the Project (other than action taken in connection
with or pursuant to a commercial contract between the GOI
and the Company)."
XXXXX
"16.9.2 Any notice pursuant to this Article shall include full
particulars of:
(i) the nature of each Force Majeure Event which is the
subject of any claim for relief under this Agreement;
(ii) the effect which such Force Majeure Event is having
on the affected party's performance of its obligations
under this Agreement;
O.M.P. No.289/2015 Page 18
(iii) the measures which the affected party is taking, or
proposes to take, to alleviate the impact of those
Force Majeure Events; and
(iv) any other information relevant to the affected party's
claim.
For so long as the affected party continues to claim to
be affected by a Force Majeure Event, it shall provide
the other party with regular (and not less than
monthly) written reports containing;
(1) the information called by this Article; and
(2) such other information as the other party may
reasonably request the affect party claiming the relief."
XXXXXX
"17. TERMINATION ON COMPANY DEFAULT:
17.1 Save as otherwise provided in this Concession Agreement, if
the company:
i fails to commence the works on Site within three months
from the date of commencement; or
ii fails to complete the construction works within the
construction period from the date of commencement or
within such extension as may be granted by the Government;
or iii repeatedly and persistently remains in breach of any
of his material obligations under this Concession
Agreement; or
iv Undergoes winding up proceedings or goes into
liquidation whether compulsory or voluntary (except for the
purpose of reconstruction, amalgamation or other similar
purposes not involving the realization of the assets) or
suffers an execution on his goods, or becomes insolvent or
compounds with or makes similar arrangements with its
creditors or does any act frustrating his ability to fulfill his
obligations under this Concession Agreement;
v If the Company reduces its equity in the SPV to less than
51% during the construction period and to less than 26%
equity during the balance of concession period arising from
O.M.P. No.289/2015 Page 19
the sale, assignment, transfer or other disposition of capital
stock by the SPV during the Concession Period.
the GOI may, without prejudice to any other right or remedy
it may possess, terminate this concession at any time after
expiry of 90 (ninety) days after issuing of written notice to
the company indicating GOI's intention to terminate this
concession.
17.2 If the Concession is terminated in accordance with
Clause 17.1 the company shall not be compensated."
34. The termination notice dated 11.05.2009 invoked Clause 16.2.3(ii)
for termination of the Concession Agreement. It is reproduced
hereinbelow:
"Please refer to the correspondence resting with your letter
No.LTCD/DPDEU/L&TTL/DPDEU/01, dated February 24, 2006
intimating the amount of termination claim as Rs.273.05 crores in
the event of termination of existing Concession Agreement of
Coimbatore bypass. In this context Ministry's letter of event
number, dated 28th July, 2006 may be referred wherein the
compensation payable as Rs.122.02 crore as per clause 16.6.3(e)
of the Concession Agreement was conveyed. This amount then
intimated will further get reduced now as balance period has got
reduced.
Subsequent to the above, several discussions have been held
in the Ministry with your representatives. However, these
discussions have not resolved the issue till date and the work of
four-laning of NH 47 from km 100 to km 182 including
Coimbatore bypass is getting delayed.
In view of the above and under the circumstances, the
appropriate option available with the Ministry to achieve the
objective of four-laning from km 100 to km 182 of NH 47, is to
terminate this Concession Agreement. Accordingly, this letter
should be treated as a notice for termination under clause
16.2.3(ii) of the Concession Agreement."
O.M.P. No.289/2015 Page 20
35. The termination notice dated 19.11.2009 further reads as under:
"Please refer to the notice of termination of the concession for the
project of Coimbatore bypass issued vide this Ministry's letter
No.RW/NH-12014/528/2000-TN/NH-8(pt) dated 11th May, 2009.
Reference is also invited to your letter No.Nill dated 30 th June,
2009 wherein it has been accepted that the copy of termination
notice from the Ministry has been received by you on 30th June,
2009.
2. Your comments/observations have been considered and it is
decided that the proposal of the concessionaire to undertake the 4-
laning of bypass in the form of annuity structure is not acceptable
as this is not based on competition bidding. Your earlier proposal
of combining the bypass along with widening 11/km stretch upto
Kerala border was already examined by the Ministry and rejected
as the same is beyond the scope of the concession.
3. In view of the foregoing, you are once again notified to Act
in accordance with the Clause 16.6.3(f) considering the
termination notice issued by the Ministry vide letter No.RW/NH-
12014/528/2000-TN/NH-8(pt) dated 11th May, 2009 as final. The
clause 16.6.3(f) is reproduced as follows:
16.6.3(f)-(i) execution of transfer deeds and other writings
in favour of GOI, transferring and assigning the Project
Assets to GOI; and
16.6.3(f)-(ii) delivery of possession of the Project and
Project Assets to GOI, whichever is later, free from all
encumbrances, charges and liens whatsoever.
It may further be noted that this is without prejudice to any other
remedies available to the Ministry under the concession
agreement."
36. A reading of the above termination notices would clearly show that
the petitioner did not invoke Clause 17 of the Concession Agreement
O.M.P. No.289/2015 Page 21
which provides for termination of the Concession Agreement for default
of the Concessionaire/respondent no.1. The petitioner, on the other hand,
invoked Clause 16.2.3 (ii) which provides for termination of the
Concession Agreement for 'GOI Political event' in form of
'Expropriation or compulsory acquisition by any Indian governmental
agency or any State Government agency of any material assets or rights
of the company.'
37. The Arbitral Tribunal has rightly held that in the facts of the
present case, there was no expropriation or compulsory acquisition and
therefore, there was no Force Majeure event justifying the termination of
the Agreement.
38. As noticed by the Arbitral Tribunal, the Government of India on
25.07.2003, issued a certificate that it has engaged M/s Sanrachna
Multipurpose Consultancy Services Pvt. Ltd., Bhopal as Detailed Project
Report (DPR) Consultant for preparing DPR from KM 100 to KM 182
(Kerala Border). This included stretch of the Coimbatore bypass as well.
The petitioner protested against the same by its letters dated 19.02.2004
and 18.11.2004. The respondent no.1, in the meeting of the SG held on
18.12.2006, even offered to construct the four laning for the entire stretch
of KM 100 to KM 182. This was declined as being beyond the terms of
the Concession Agreement. In the meeting held on 29.03.2007, the
respondent no.1 was called upon to give a proposal for four laning of
Coimbatore bypass. A suggestion was also given to do away with the
Athupalam Bridge and instead the respondent no.1 will be allowed to
extend the four laning up to Kerala border (KM 182) and collect user fee
from the users of this facility. Respondent no.1 submitted the proposal
O.M.P. No.289/2015 Page 22
and the petitioner by a letter dated 06.07.2007 called upon the respondent
no.1 for a meeting to discuss the same. Therefore, clearly the respondent
no.1 never refused to construct the additional lanes in the Coimbatore
bypass, in fact, it was insisting that the said contract be allotted to the
respondent no.1 alone. The respondent no.1, therefore, cannot be said to
be in breach of its contractual obligations. Its suggestion of carrying out
the four laning work for the entire stretch between KM 100 to KM 182
and/or for the additional area of 11 kilometers up to Walayar (Tamil
Nadu/Karnataka Border) cannot be said to evidence its refusal to carry
out the four laning work. In fact, as submitted by the learned senior
counsel for the respondent no.1, in terms of Clause 6.5 of the Concession
Agreement, the petitioner could have called upon the respondent no.1 to
construct additional lanes only where the traffic on the bypass
substantially increased. No such case of increase of traffic requiring
construction of the additional lanes has been set up by the petitioner from
the correspondence. It is clear that the additional lanes were been
constructed as a part of a larger project of construction of four lane
highway from KM 100 to KM 182 and not because of any increase in
traffic on the Coimbatore bypass.
39. In view of the above, the finding of the Arbitral Tribunal that the
termination of the Agreement was unsustainable cannot be said to be
perverse or warranting any interference from this Court.
40. The last challenge of the petitioner is to the direction of the
Arbitral Tribunal to award the four laning project for the Coimbatore
bypass to the respondent no.1. The learned senior counsel for the
petitioner submits that such a direction would amount to grant of specific
O.M.P. No.289/2015 Page 23
performance of the contract for construction, which cannot be sustained.
He submits that in fact, the Arbitral Tribunal itself has directed both the
parties to work out the new toll rates which would be required as a
consequence of the above direction.
41. This issue need not detain me as the learned senior counsel for the
respondent no.1 has no objection if this direction is set aside by this
Court, leaving it open to the parties to work out the issue of four laning of
the Coimbatore bypass in accordance with the Concession Agreement,
meaning thereby, that incase the petitioner seeks to have the lanes
increased on the bypass, it would call upon the respondent no.1 to do the
same in accordance with the terms of the Concession Agreement.
42. In view of the above concession by the respondent no.1, the
direction of the Arbitral Tribunal as contained in paragraph 104 of the
Impugned Award is set aside.
43. In view of the above discussion, the challenge to the Impugned
Award, except to the direction contained in paragraph 104 thereof, is
dismissed. The parties shall bear their own costs.
NAVIN CHAWLA, J
OCTOBER 11, 2019
RN
O.M.P. No.289/2015 Page 24
