Delhi High Court
Gmr Hyderabad Vijayawada ... vs National Highways Authority Of ... on 4 August, 2020
$~1 to 3
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 13th May, 2020
Pronounced on: 4th August, 2020
+ I.A. 3714/2020 in O.M.P.(COMM) 425/2020
GMR HYDERABAD VIJAYAWADA
EXPRESSWAYS PVT LTD .... Petitioner
Through: Dr. Abhishek Manu Singhvi
and Mr. Ciccu
Mukhopadhyaya, Sr. Advocates
with Mr. Mahesh Agarwal, Ms.
Megha Mehta, Mr. Nishant Rao
and Mr. Ankit Banati, Advs.
versus
NATIONAL HIGHWAYS AUTHORITY OF INDIA
..... Respondents
Through: Mr. Tushar Mehta, Solicitor
General with Dr. Maurya Vijay
Chandra, Mr. Manish K.
Bishnoi and Mr. Karan Grover,
Advs.
+ O.M.P.(I) (COMM) 92/2020
GMR HYDERABAD VIJAYAWADA
EXPRESSWAYS PVT LTD .... Petitioner
Through: Dr. Abhishek Manu Singhvi
and Mr. Ciccu
Mukhopadhyaya, Sr. Advocates
with Mr. Mahesh Agarwal, Ms.
Megha Mehta, Mr. Nishant Rao
and Mr. Ankit Banati, Advs.
versus
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NATIONAL HIGHWAYS AUTHORITY OF INDIA
..... Respondents
Through: Mr. Tushar Mehta, Solicitor
General with Dr. Maurya Vijay
Chandra, Mr. Manish K.
Bishnoi and Mr. Karan Grover,
Advs.
+ O.M.P. (COMM) 426/2020 & I.As.3759-63/2020
NATIONAL HIGHWAYS AUTHORITY OF INDIA
... Petitioner
Through: Mr. Tushar Mehta, Solicitor
General with Dr. Maurya Vijay
Chandra, Mr. Manish K.
Bishnoi and Mr. Karan Grover,
Advs.
versus
GMR HYDERABAD VIJAYAWADA
EXPRESSWAYS PVT LTD ..... Respondents
Through: Dr. Abhishek Manu Singhvi
and Mr. Ciccu
Mukhopadhyaya, Sr. Advocates
with Mr. Mahesh Agarwal, Ms.
Megha Mehta, Mr. Nishant Rao
and Mr. Ankit Banati, Advs.
CORAM
HON'BLE MR. JUSTICE C. HARI SHANKAR
% JUDGMENT
1. All these petitions relate, one way or the other, to the Award,
dated 31st March, 2020, passed by a 3-member Arbitral Tribunal
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(hereinafter referred to as "the learned Arbitral Tribunal") comprising
Hon‟ble Dr. Justice Arijit Pasayat (Retd.), Hon‟ble Mr. Justice C.M.
Nayar (Retd.) and Lt. Gen. Y. P. Khurana. The majority Award was
delivered by Hon‟ble Dr. Justice Arijit Pasayat (Retd.) and Lt. Gen. Y.
P. Khurana, with Hon‟ble Mr. Justice C.M. Nayar (Retd.) penning a
partly dissenting award.
2. Before the learned Arbitral Tribunal, GMR Hyderabad
Vijayawada Expressways Pvt. Ltd. (hereinafter referred to as "GMR")
was the claimant and the National Highways Authority of India
(NHAI) was the respondent.
The issue, in a nutshell
3. O.M.P. (COMM.) 426/2020, by the NHAI, and O.M.P.
(COMM.) 425/2020, by GMR, have been preferred under Section 34
of the Arbitration and Conciliation Act, 1996 (hereinafter referred to
as "the 1996 Act"), and assail the aforesaid Award, dated 31st March,
2020 (hereinafter referred to as "the Award"), albeit on different
aspects, and to different extents. O.M.P. (COMM) 426/2020, by the
NHAI, seeks setting aside of the Award, in toto. O.M.P. (COMM)
425/2020, by GMR, is directed against paras 288 (in part), 292 (in
part), 293 to 297 and 299 (in part) of the Award, and seeks setting
aside of the Award, to the extent of the said paras.
4. The issue decided by the learned Arbitral Tribunal - and,
consequently, the scope of controversy in the petitions, preferred by
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NHAI and GMR, under Section 34 of the 1996 Act - is extremely
limited. On the ground that there had been a "change in law", during
the currency of the agreement between GMR and NHAI, GMR
claimed that it was entitled to compensation, under Clauses 41.1 and
41.3 of the Concession Agreement, dated 9th October, 2009, between
GMR and NHAI. NHAI contested the claim. All the learned
Members of the Arbitral Tribunal have held, ad idem, that the
rejection, of the claim for compensation, by NHAI, was unsustainable.
The majority Award (by Hon‟ble Dr. Justice Pasayat and Lt Gen. Y.
P. Khurana) proceeds, however, to permit NHAI to take a fresh
decision, on the claims of GMR, and assess the compensation to
which it would be entitled. Nayar, J., however, held, per dissent, that
the task of examining the claim of GMR, on merits, ought not to have
been delegated to NHAI, but ought to have been assigned to experts,
such as an eminent body of auditors.
5. NHAI claims to be aggrieved by the decision, of the learned
Arbitral Tribunal, holding GMR to be entitled to compensation, and
contends, in its petition [O.M.P. (COMM.) 426/2020] that GMR was
not entitled to any compensation on the ground of "change in law".
GMR, for its part, challenges [in O.M.P. (COMM.) 425/2020] the
majority Award, to the extent it delegates the decision-making power,
qua the claim, of GMR, to compensation, to NHAI. In other words,
GMR seeks to contend that the minority Award of Nayar, J., ought to
be accepted.
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6. O.M.P. (I) (COMM.) 92/2020 has been preferred, by GMR,
under Section 9 of the 1996 Act, essentially for the interim stay of
operation of a letter, dated 16th April, 2020, issued by the NHAI to
GMR, demanding premium and, further, restraining GMR from taking
any coercive steps, under the Concession Agreement, dated 9 th
October, 2009 (hereinafter referred to as "the Concession
Agreement"), against GMR, pending quantification of compensation
payable to GMR. It is also prayed, in the said application, that an
independent firm of Chartered Accountants of repute be appointed for
confirming the quantification of the compensation payable.
The impugned Award
7. The facts of the case, as they emerge from the impugned
Award, dated 31st March, 2020, deserve to be paraphrased, at the very
outset, thus:
(i) Vide the National Highways (Amendment) Act, 1995,
Section 8A was incorporated in the National Highways Act,
1956. This newly introduced provision empowered NHAI to
enter into agreements, for development and maintenance of the
whole, or part of national highways. It further provided that any
person, with whom such agreement had been entered into, could
collect and retain fees, for the services or benefits rendered by
him, as provided by the notification issued by the Central
Government, having regard to the expenditure involved in
building, maintenance, management and operation of the
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National Highway, interest on capital invested, reasonable
return, the volume of traffic and the period of the agreement.
These collaborations were, therefore, characteristically on a
Public Private Partnership (PPP) basis, under the "Build,
Operate and Transfer" (BOT) framework. The BOT framework
envisaged the developer obtaining support from a consortium of
financiers, contractors and consultants, and offering to construct
the project at its own cost, thereby saving public money. The
developer was allowed to recover the cost, along with
reasonable profit, over the concession period, during which the
developer operated the project, by collecting and retailing toll
revenues from the public, who made use of the facility (i.e. the
highway) developed by the developer. On conclusion of the
concession period, the highway was transferred to the NHAI.
In such contracts, therefore, the entrepreneur-developer, as the
concessionaire, arranged the finances. The concessionaire
entered into one, or more, contracts for design, procurement of
material and equipment, completion, maintenance and operation
of the highway, in accordance with the agreement with the
NHAI.
(ii) The high traffic section of the National Highways were
generally bid out either on Premium basis, or on Grant basis,
under the BOT framework. Under the Premium system, the
concessionaire offered premium to NHAI, in lieu of the right to
build and operate the highway, during the concession period. In
such a framework, the concessionaire was entitled to collect and
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retain the toll collected from the public, who were using the
highway, from which amount the concessionaire would (i)
recover the cost of construction, maintenance and operation of
the highway during the concession period, (ii) repay loans to
lenders, (iii) pay premium to NHAI and (iv) recover the
investment made by the concessionaire in the project, along
with reasonable returns thereon.
(iii) Sand mining, in the state of Andhra Pradesh was, on the
date of the Concession Agreement, between GMR and NHAI,
governed by the Sand Mining Policy, contained in GOMs No.
24 Inds & Com (MIA) Dept. dated 12th February, 2007, issued
by the Government of Andhra Pradesh, whereunder sand
mining areas/leases of less than 5 Hectares (Ha) did not require
environmental clearance.
(iv) A Request for Qualification (RFQ), inviting applications
from bidders for 4/6 laning of NH-9 (now known as NH-65)
was issued, by NHAI, in December, 2007. A consortium of
GMR and Punj Lloyd Ltd. submitted its bid in January, 2008.
Vide letter dated 26th August, 2008, NHAI disqualified the
consortium, and qualified certain other bidders, for award of the
tender. In September, 2008, the Request For Proposal (RFP) /
tender documents were issued by NHAI.
(v) The consortium challenged its disqualification, by NHAI,
before this Court, by way of CWP 6792/2008. Vide judgment
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dated 16th December, 2008, the disqualification of the
consortium, by NHAI, was quashed by this Court. The matter
was carried, by the successful bidder, to the Supreme Court, but
the Supreme Court allowed the consortium, inter alia, to bid for
the project.
(vi) Pursuant thereto, on 16th December, 2008, the consortium
furnished its bid and obtained a copy of the RFP/Tender
Documents. Along with the Tender Documents, NHAI
provided a Detailed Project Report (DPR). Clause 2.1.3 of the
RFP stipulated that the DPR was provided only as a preliminary
reference, for assistance to bidders, who were expected to carry
out their own survey before submitting their bid.
(vii) Accordingly, the consortium had a detailed traffic study,
of the Highway, conducted by M/s Halcrow Consulting India
Private Limited (hereinafter referred to as "Halcrow"), to
estimate the tollable traffic, and toll revenue, for NH 65, till the
end of the 25-year concession period. Clause 1.2 (g) of the
agreement noted that the purpose of the study was "Estimation
of projected toll revenue as per categories of traffic streams".
(viii) On 9th October, 2009, as already noted hereinabove,
GMR and NHAI entered into the Concession Agreement.
Clause 25.4 of the Concession Agreement contemplated
payment of premium, by the concessionaire (GMR) to NHAI,
and read thus:
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"25.4 Premium
The Concessionaire acknowledges and agrees
that as set forth in the Bid, it shall pay to the
Authority for each year of the Concession
Period, but commencing from the day falling
after 0 (zero) days from the COD, a premium
(the "Premium") in the form of an additional
Concession Fee, as set forth in Clause 26.2.1,
and in the manner set forth in Clause 26.4."
As per the Concession Agreement, the premium, payable by
GMR to NHAI, was 32.6% of the total Realisable Fee during
the year, and was to be increased by 1%, every year.
(ix) Fee, from users of the highway, could be collected, by the
concessionaire, i.e. GMR, from the date of completion, till the
date of transfer of the highway to NHAI, in accordance with
Clause 27.1 of the Concession Agreement, which read thus:
"27.1 Collection and appropriation of Fee
27.1.1 On and from the COD till the Transfer Date, the
Concessionaire shall have the sole and exclusive right
to demand, collect and appropriate Fee from the Users
subject to and in accordance with this Agreement and
the National Highways Fee (Determination of Rates
and Collection) Rules, 2008 (the "Fee Rules");
provided that for ease of payment and collection, such
Fee shall be rounded off to the nearest 5 (five) rupees
in accordance with the Fee Rules; provided further that
the Concessionaire may determine and collect Fee at
such lower rates as it may, by public notice to the
Users, specify in respect of all or any category of Users
of vehicles."
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(x) Clause 4.1.3, which set out the conditions precedent, to
be satisfied by the concessionaire, i.e. GMR, prior to the
appointed date, read thus:
"4.1.3 The Conditions Precedent required to be
satisfied by the Concessionaire prior to the Appointed
Date shall be deemed to have been fulfilled when the
Concessionaire shall have:
(a) provided Performance Security to the
Authority;
(b) executed and procured execution of the
Escrow Agreement;
(c) executed and procured execution of the
Substitution Agreement;
(d) procured all the Applicable Permits
specified in Schedule-E unconditionally or is
subject to conditions than all such conditions
shall have been satisfied in full and such
Applicable Permits are in full force and effect;
(e) executed the Financing Agreements and
delivered by the Authority 3 (three) true copies
thereof, duly attested by a Director of the
Concessionaire;
(f) delivered to the Authority 3 (three) true
copies of the Financial Package and the
Financial Model, duly attested by a Director of
the Concessionaire, along with 3 (three) soft
copies of the Financial Model in MS Excel
version or any substitute thereof, which is
acceptable to the Senior Lenders;
(g) delivered to the Authority from the
Consortium Members, their respective
confirmation, in original, of the correctness of
the representations and warranties set forth in
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Subclauses (k), (l) and (m) of clause 7.1 of this
Agreement; and
(h) delivered to the Authority a legal opinion
from the legal counsel of the Concessionaire
with respect to the authority of the
Concessionaire to enter into this Agreement and
the enforceability of the provisions thereof:
Provided that upon request in writing by the
Concessionaire, the Authority may, in its discretion,
waive any of the Conditions Precedent set forth in this
Clause 4.1.3."
(xi) As required by the afore-extracted Clause 4.1.3 of the
Concession Agreement, GMR submitted its Financial Model to
NHAI, along with the Financing Documents, on 6th April, 2010.
Clause 48.1 defined the "Financial Model", thus:
"Financial Model‟ means the financial model adopted
by Senior Lenders, setting forth the capital and
operating costs of the Project and revenues therefrom
on the basis of which financial viability of the Project
has been determined by the Senior Lenders, and
includes a description of the assumptions and
parameters used for making calculations and
projections therein."
(xii) Prior to the Date of Completion fixed by the Concession
Agreement between GMR and NHAI, the Supreme Court, vide
an order dated 27th February, 2012, passed in Deepak Kumar v.
State of Haryana1, ruled that sand mines, over areas
admeasuring less than 5 Ha, were also required to obtain
environment clearance. Additionally, the Central Government
was directed to take steps to bring, into force, the Minor
1
(2012) 4 SCC 629
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Minerals Conservation and Development Rules, 2010.
Governments of States and Union Territories were also directed
to take immediate steps to frame necessary rules under Section
15 of the Mines and Minerals (Development and Regulation)
Act, 1957.
(xiii) This was followed by order, dated 21st March, 2012, of
the High Court of Andhra Pradesh in WP (C) 18822 of 2011,
whereby the Government was restrained from granting any sand
mining/sand quarrying lease to any person, w.e.f. 1st April,
2012, without the permission of the High Court. The order was
made applicable throughout the state of Andhra Pradesh. This
interim order was, subsequently, made absolute, while
disposing of the aforesaid writ petition, on 26th April, 2012.
(xiv) Further, vide order dated 7th May, 2012 in SLP (C)
15301-15305/2012 (Government of Andhra Pradesh v. Annam
Sivaiah), the Supreme Court directed the government of the
State of Andhra Pradesh to mandatorily require obtaining of an
environment clearance, even for mines in areas admeasuring
less than 5 Ha.
(xv) The consequence of these developments, according to
GMR, was that mining activities, in the state of Andhra
Pradesh, came to a standstill.
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(xvi) Consequent on the aforesaid judicial orders, the
Government of Andhra Pradesh issued a new sand mining
policy, vide GOM No. 142 dated 13th October, 2012 and GOM
No. 154 dated 15th November, 2012, which resulted in
temporary stoppage of almost all sand mining contracts in force
in the Krishna District.
(xvii) On 6th July, 2013, GMR wrote to NHAI, submitting that
the new sand mining policy, as issued by the Government of
Andhra Pradesh vide GOM No. 142 dated 13th October, 2012
and GOM No. 154 dated 15th November, 2012, constituted
"change in law" for the purposes of Clauses 41.1 and 41.3 of
the Concession Agreement, which read thus:
"41.1 Increase in costs
If as a result of Change in Law, the
Concessionaire suffers an increase in costs or
reduction in net after-tax return or other
financial burden, the aggregate financial effect
of which exceeds the higher of rupees one crore
(rupees one crore) and 0.5% (zero point five
percent) of the Realisable Fee in any
Accounting Year, the Concessionaire may soon
notify the Authority and propose amendments
to this Agreement so as to place the
Concessionaire in the same financial position as
it would have enjoyed had there been no such
Change in Law resulting in the cost increase,
reduction in return or other financial burden as
aforesaid. Upon notice by the Concessionaire,
the Parties shall meet, as soon as reasonably
practicable but no later than 30 (thirty) days
from the date of notice, and either agree on
amendments to this Agreement or on any other
mutually agreed arrangement.
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Provided that if no agreement is reached within
90 (ninety) days of the aforesaid notice, the
Concessionaire may by notice require the
Authority to pay an amount that would place the
Concessionaire in the same financial position
that it would have enjoyed had there been no
such Change in Law, and within 15 (fifteen)
days of receipt of such notice, along with
particulars thereof, the Authority shall pay the
amount specified therein; provided that if the
Authority shall dispute such claim of the
Concessionaire, the same shall be settled in
accordance with the Dispute Resolution
Procedure. For the avoidance of doubt, it is
agreed that this Clause 41.1 shall be restricted
to changes in law directly affecting the
Concessionaire‟s costs of performing its
obligations under this Agreement."
"41.3 Protection of NPV
Pursuant to the provisions of Clauses 41.1 and
41.2 and for the purposes of placing the
Concessionaire in the same financial position as
it would have enjoyed had there been no
Change in Law affecting the costs, returns or
other financial burden or gains, the Party shall
rely on the Financial Model to establish and a
net present value (the "NPV") of the net cash
flow and make necessary adjustments in costs,
revenues, compensation or other relevant
parameters, as the case may be, to procure that
the NPV of the net cash flow is the same as it
would have been if no Change in Law had
offered."
"Change in law" was defined, in Clause 48.1 of the Concession
Agreement, thus:
"Change in Law" means the occurrence of any of the
following after the date of Bid:
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(a) the enactment of any new Indian Law;
(b) the repeal, modification or re-enactment of any
existing Indian Law;
(c) the commencement of any Indian law which has
not entered into effect until the date of Bid;
(d) A change in the interpretation or application of
any Indian law by a judgment of a court of record
which has become final, conclusive and binding, as
compared to such interpretation or application by a
court of record prior to the date of Bid; or
(e) any change in the rates of any of the Taxes that
have a direct effect on the Project".
(xviii) As required by the Concession Agreement, GMR
submitted the draft financing documents to NHAI, for review
and approval, on 7th February, 2010. Consequent to review,
thereof, by NHAI, the draft financing documents were executed
on 5th April 2010 and submitted to NHAI, by GMR, on 6th
April, 2010.
(xix) The Concession Agreement was, as noted hereinabove,
executed, between the parties, on 9th October, 2009.
Admittedly, the construction (4-laning) of the highway was
completed, by GMR, within time, and operation of the highway
was commenced on 20th December, 2012.
(xx) On commencing operations, it was found that the traffic,
on the highway, was drastically low, compared to the traffic
that had been estimated, at the time of entering into the
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Concession Agreement. GMR asserted that this reduction in
traffic was owing to (a) certain notifications/orders issued by
the Government, as well as by various judicial authorities and
Courts, resulting in changes in the sand mining policy
applicable till then and (b) bifurcation of the State of Andhra
Pradesh into the twin states of Andhra Pradesh and Telangana,
in 2014. More specifically, GMR contended that the reduction
in traffic was owing to
(a) court orders and Government notifications,
resulting in an annulment/banning of, inter alia, sand
mining activities, which completely eliminated
commercial traffic carrying sand and related construction
traffic,
(b) frequent disruption of movement of the regular
traffic, on account of statewide agitation/block its, due to
proposed bifurcation of the State of Andhra Pradesh into
Andhra Pradesh and Telangana,
(c) bifurcation of the state of Andhra Pradesh, and
introduction of new sand mining policies, resulting in
complete ban on interstate transportation of minor
minerals, which caused a major adverse impact on traffic
and
(d) imposition of permit tax on inter-State movement
of commercial vehicles to and from the newly created
states of Andhra Pradesh and Telangana.
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(xxi) The above events/developments, contended GMR,
constituted "change in law", which entitled GMR to
compensation, in accordance with Clauses 41.1 and 41.3 of the
Concession Agreement. GMR asserted, in its letter, that, during
the bidding phase, sand contributed 30% of commercial truck
traffic movement, especially between Krishna and
Nalgonda/Hyderabad Districts, with a majority of the trucks of
loading the sand and returning the same day. The GOMs dated
13th October, 2012 and 15th November, 2012, issued by the
Government of Andhra Pradesh, however, annulled almost all
mining contracts in force in the Krishna District, which were
based on the earlier sand mining policy. This reduction in
commercial traffic, it was pointed out, had occurred after the
Commercial Operation Date of 20th December, 2012. GMR
submitted that the Financial Model, furnished by GMR to
NHAI, too, was based on beating assumptions, which did not in
research the change in Sand Mining Policy. GMR submitted,
further, that, on observing the fall in commercial traffic, it had
undertaken a detailed origin-destination study, in order to
ascertain the reasons for the variation, which revealed that the
reduction in movement of sand-carrying vehicles was the cause,
and that this reduction was attributable to the new sand mining
policies of the Government of Andhra Pradesh, promulgated in
2012. These, therefore, it was submitted, constituted "Change
in Law", within the meaning of Clause 41.2 of the Concession
Agreement, which had resulted in reduction of the revenue of
GMR, and consequent financial burden on it. As this financial
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loss was more than ₹ 1 crore, GMR asserted its right to
compensation, under Clause 41.1 of the Concession Agreement,
so that it was restored to the position prior to the change in law.
It was, therefore, proposed, in the said communication, to
amend the provisions relating to Additional Concession Fee, so
that the financial loss, suffered by GMR, could be
adjusted/recovered from the premium payable to NHAI, within
12 months. GMR, therefore, solicited the cooperation of NHAI,
to discuss the issue.
(xxii) NHAI sought the opinion of the independent engineer
appointed by it, M/s. Intercontinental Consultants and
Technocrats Pvt. Ltd. (hereinafter referred to as "ICT"), on the
aforesaid request of GMR. ICT responded to NHAI, vide letter
dated 7th October, 2013. The letter, at the very outset, identifies
the issues, which were referred to a legal expert for its opinion,
thus:
"- Whether the Concessionaire is eligible to the
benefits due to Change in Law
- The quantum of benefits due to the above
change."
Apropos the first issue, it was opined that "since there has been
modification of existing notification and replacement of the
same by a different one, the change in Sand mining policy
would get covered under the definition of Change in Law."
Apropos the second, even while observing that GMR was
entitled to compensation, as it had established the existence of
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substantial movement of sand mining vehicles on NH-9 (later
renumbered NH-65) during the period 2007-2008 to 2012-2013,
the communication, from ICT further went on to opine thus,
towards the conclusion thereof:
"The Concessionaire has claimed that the resultant loss
due to reduction in traffic is a direct consequence of
Change in Law. Therefore, the claim of the
Concessionaire regarding the Change in Law is only
based on the reduction in traffic of the sand mining
vehicles. Be that as it may, whatever data has been
submitted by the Concessionaire in respect of the
number/percentage of the sand mining vehicles in
support of its plaint, the same cannot be said to be final
as the correctness thereof cannot be verified.
However, the quantum of compensation, if any,
required to be paid to the Concessionaire in terms of
the proviso to Clause 41.1, if it is able to establish the
loss is a direct consequence of Change in Law, cannot
be ascertained in view of the reasons explained
hereinabove."
In substance, therefore, ICT opined that, though the new sand
mining policy, introduced by the Government of Andhra
Pradesh vide GOM No. 142 dated 13th October, 2012 and GOM
No. 154 dated 15th November, 2012, constituted "change in
law" within the meaning of Clauses 41.1 and 41.3 of the
Concession Agreement, the quantum of compensation payable
to GMR, as a consequence thereof, in terms of the proviso to
Clause 41.1, could not be ascertained on the basis of the data
provided by GMR.
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(xxiii) On 30th July, 2013, the demand for bifurcation of the
state of Andhra Pradesh into two states, of Andhra Pradesh and
Telangana, was approved, in principle, by the Congress
Working Committee. This resulted in widespread agitation in
the state, to the extent that several government establishments
were shutdown, power supply was disrupted, highway traffic
was affected, and riots took place. This resulted in GMR
addressing a further communication, dated 8th October, 2013, to
NHAI, pointing out that, as a result of the widespread agitation
following the proposal to bifurcate the State of Andhra Pradesh,
commercial and economic activity in the state had been
severely impacted, resulting in civil commotion, political
agitation and industrial actions which continued for more than 7
days, as stipulated in Clause 34.3 of the Concession Agreement.
Article 34 of the Concession Agreement, it may be noted, dealt
with force majeure. GMR suggested, in its communication, that
the agitation, following the announcement of the proposal to
bifurcate the state of Andhra Pradesh, and the resultant impact
on the commercial and economic activity in the state,
constituted an "indirect political event", which had resulted in
"material adverse effect on the performance of obligations" by
GMR. It was informed, therefore, the GMR would seek
appropriate relief from NHAI, in that regard, after
quantification of relevant data.
(xxiv) Vide GOM No. 186, dated 17th December, 2013 and
GOM No. 63 dated 22nd February, 2014, the Government of
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Andhra Pradesh further amended the sand mining policy. This,
GMR alleged, resulted in minimal or almost no allotments of
sand mining, in the Krishna District catchment area during the
year 2013-2014 which, in turn, further adversely impacted
commercial traffic on the Project Highway.
(xxv) The Andhra Pradesh Reorganisation Act, 2014, which
crystallised the bifurcation of the state of Andhra Pradesh into
the two states of Andhra Pradesh and Telangana, came into
effect on 2nd June, 2014. Consequent thereupon, of the total
length of the Project Highway, relating to the Concession
Agreement, a length of 150.6 km fell within Telangana and
30.9 km fell within Andhra Pradesh.
(xxvi) Consequent to the bifurcation, the Government of
Andhra Pradesh announced the Mines and Minerals New Sand
Mining Policy, 2014, vide GOM No. 94, dated 28th August,
2014. Clause (17) of the said Policy (hereinafter referred to as
the "2014 AP Sand Mining Policy") specifically stipulated that
no transportation of sand, from the State of Andhra Pradesh,
would be made across the border to other States. The restricted
movement of sand, across the border between Andhra Pradesh
and Telangana, thereby, metamorphosed into a total cessation
of such movement.
(xxvii) In the circumstances, GMR wrote to NHAI, on 5th
September, 2014, stating that the total prohibition, on
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transportation of sand, across the border from Andhra Pradesh
to other states, majorly impacted the traffic and toll revenue on
the Project Highway, regarding which an appropriate claim
would be made, by GMR, under the provisions of the
Concession Agreement.
(xxviii) On 8th January, 2015, the Government of
Telangana also promulgated a new Mines and Minerals Sand
Mining Policy, 2014, vide GOM No. 3. Clause 12 of the said
policy (hereinafter referred to as "the 2014 Telangana Sand
Mining Policy") was identical, to all intents and purposes, with
Clause (17) of the 2014 AP Sand Mining Policy, and prohibited
transportation of sand, from the State of Telangana, across the
border, to other States.
(xxix) On 13th January, 2015, GMR wrote to NHAI, drawing
the attention of the latter, to the 2014 Telangana Sand Mining
Policy, and pointing out that the ban on transportation of sand,
from Telangana to all other states, had resulted in cessation,
still further, of movement of sand on the Project Highway.
This, it was reiterated, had a major impact on the traffic and toll
revenue which could be generated from movement of traffic on
the Project Highway, regarding which a claim would be made
at the appropriate time, as per the Concession Agreement.
(xxx) On 24th February, 2015, GMR wrote to NHAI,
requesting that, till it was compensated, by NHAI, for the
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financial loss suffered on account of the change in the Sand
Mining Policy from time to time, and the bifurcation of the
state of Andhra Pradesh into the states of Andhra Pradesh and
Telangana, both of which, according to GMR, constituted
"change in law" within the meaning of Clauses 41.1 and 41.3 of
the Concession Agreement, deferment of the requirement of
payment of premium, by GMR to NHAI, be granted, as was
permissible vide a Premium Deferment Scheme floated by the
Government of India on 4th March, 2014, in the case of
"stressed" projects.
(xxxi) As in the case of the new Sand Mining Policies,
twin OMs, being GOM No. 15 dated 30th March, 2015 and
GOM No. 22 dated 24th April, 2015, were issued by the
Governments of Telangana and Andhra Pradesh, under the
Telangana Motor Vehicle Taxation Act, 1963 and the Andhra
Pradesh motor Vehicle Taxation Act, 1963, providing for levy
of Tax on all commercial vehicles entering the concerned State
from any other State. Correspondingly, GMR also wrote, on 6 th
April, 2015 and 1st August, 2015, to NHAI, intimating NHAI of
the issuance of the said GOMs, and informing that, as a result
thereof, traffic and revenue numbers, on the Project Highway
had dropped still further, vis-à-vis the traffic in the previous
Financial Year 2014-2015. The claim, based on the quantum of
revenue loss would, it was intimated, be submitted at the
appropriate time, as per the provisions of the Concession
Agreement.
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(xxxii) Premium was paid, by GMR to NHAI, as per
Clause 25.4 of the Concession Agreement, till March, 2015.
Initially, however, premium was paid only for January, 2015,
whereupon NHAI wrote, to GMR on 7th May, 2015, calling on
GMR to immediately deposit the concession fee/premium,
constituting the revenue share of NHAI, for the months of
February, March and April, 2015, within 7 days. This was
followed by a request, dated 21st May, 2015, to the Escrow
Bank (the IDBI Bank) to remit, to NHAI, the outstanding
Concession Fee for the months February to April 2015, from
the Escrow Account. Vide letter dated 22nd May, 2015, GMR
requested NHAI to withdraw the said communication, to the
Bank, as it had applied for premium deferment, which was
pending consideration with NHAI.
(xxxiii) NHAI appointed M/s. Sheladia Associates Inc.
(hereinafter referred to as "Sheladia") as the new Independent
Engineer, substituting ICT. Sheladia tendered an opinion, dated
20th June, 2015, to the effect that the claim for compensation,
by GMR, under Clause 41 of the Concession Agreement, on the
ground of change in law, was "an educated guess and
conjecture". Following this, on 8th July, 2015, NHAI wrote to
GMR, rejecting its claim for compensation, and advising it to
seek a resolution of the dispute in accordance with Clause 44 of
the Concession Agreement.
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(xxxiv) On 3rd August, 2015, NHAI issued a legal notice to
GMR, demanding payment, by GMR, of the allegedly
outstanding premium of ₹ 36,52,06,983/-. GMR responded,
vide communication dated 13th August, 2015, drawing attention
to the opinion of ICT, dated 20th June, 2015, to the effect that
change in law, resulting in adverse financial consequences on
GMR, had taken place, as well as the fact that it is request, for
premium deferment, was pending with NHAI.
(xxxv) Ultimately, vide communication dated 12th
November, 2015, NHAI sanctioned premium deferment to
GMR but subject to payment, by GMR, of penalty of ₹ 8.7
crores along with arrears of premium of ₹ 10.4 crores with
which condition, according to GMR, it was in no position to
comply. GMR, accordingly, requested NHAI, vide
communication dated 19th November, 2015, to waive the said
conditions.
(xxxvi) Vide communication dated 16th December, 2015,
GMR served a notice of dispute on NHAI, in terms of Clause
41.1 of the Concession Agreement, invoking the conciliation
process, contemplated in Clause 44.2 thereof.
(xxxvii) Vide communications dated 2nd February, 2016 and
22nd February, 2016, NHAI informed GMR that its request for
premium deferment could not be accepted. GMR, in the
circumstances, paid NHAI the premium amounts, for the
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months of February and March, 2015, with interest, under cover
of letter dated 29th February, 2016.
(xxxviii) On the same day, i.e. 29th February, 2016, NHAI
informed GMR that the conciliation process, initiated by GMR
vide letter dated 16th December, 2015 supra, had failed.
(xxxix) On 8th June, 2016, NHAI wrote to GMR,
withdrawing the premium deferment, granted by NHAI vide its
earlier communication dated 12th November, 2015 supra.
(xl) Vide communication dated 9th June, 2016, addressed to
NHAI, GMR claimed compensation of ₹ 87.64 crores, under
Clauses 41.1 and 41.3 of the Concession Agreement, in respect
of the Financial Year ending 31st March, 2016. This claim was
amended, during the arbitral process, to ₹ 231.85 crores.
(xli) This was followed by communication dated 17th June,
2016, whereby GMR responded to the letter, dated 8th June,
2016 supra, from NHAI, and protested against the withdrawal
of premium deferment.
(xlii) Vide communication dated 30th June, 2016, GMR
invoked the arbitration clause in the Concession Agreement.
(xliii) On 29th September, 2016, Sheladia wrote to NHAI,
opining that the bifurcation of the state of Andhra Pradesh into
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Andhra Pradesh and Telangana, on 2nd June, 2014, constituted
"change in law", within the meaning of Clause 41 of the
Concession Agreement, but that GMR had overestimated the
prospective traffic on the Project Highway.
(xliv) Sheladia had, in the meanwhile, solicited a legal opinion,
from M/s S.V.S. Chowdary & Co., Advocates, on the following
specific queries:
"i. Whether the changes made to the Sand Policy
through „Government Orders‟ by State Government of
AP would constitute a „Change in Law‟?
ii. Whether the bifurcation of the State of Andhra
Pradesh into the reorganised states of State of Andhra
Pradesh and the State of Telangana would constitute a
„Change in Law‟?"
(xlv) It was opined, by M/s S.V.S. Chowdary & Co., on 4 th
October, 2016, that
(a) as a minor mineral, any policy, for mining of sand,
fell exclusively within the domain of the State
Government,
(b) such policy was normally issued in the form of
Government Orders,
(c) GOMs No. 24, dated 12th February, 2007, 142
dated 13th October, 2012 and 154 dated 15th November,
2012, modified the existing law in the state of Andhra
Pradesh from time to time, and each such GOM,
consequently, constituted a Change in Law,
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(d) the interim order, dated 21st March, 2012 and final
order dated 26th April, 2012, of the High Court of Andhra
Pradesh in WP 18822/2011, and the consequent order,
dated 7th May, 2012, of the Supreme Court, in SLP (C)
15301-15305/2012, directing the State Government to
obtain environmental clearance even for quarry leases of
less than 5 Ha, resulted in sand quarrying activity coming
to a standstill with effect from April and May 2012,
which adversely affected the construction
activity/industry and other developmental works, during
the working season,
(e) this adverse effect, of the aforesaid judicial orders,
was also noted in the OM No. 142 dated 13th October,
2012 supra, whereby the Sand Mining Policy in the state
of Andhra Pradesh was reviewed,
(f) the said judicial orders, therefore, constituted
"Change in Law",
(g) the contention, of GMR, that the change in sand
mining policy, by the Government, and the judicial
orders passed by the Supreme Court and the High Court
of Andhra Pradesh, constituted "change in law" was,
therefore, correct,
(h) regarding the reorganisation of the State of Andhra
Pradesh into the states of Andhra Pradesh and Telangana,
there could be no two opinions that the said
reorganisation amounted to a "Change in Law", and
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(i) the effect of such "change in law" would, however,
have to be decided on the factual matrix of each case.
(xlvi) On 14th October, 2016, Sheladia wrote to NHAI, in
continuation of its earlier letter dated 8th October, 2016 supra,
computing the compensation, to which GMR would be
entitled, were its claim for compensation, on the basis of
change in law, on account of the new Sand Mining Policy and
the bifurcation of the state of Andhra Pradesh, accepted by
NHAI. The computation, it was stated, was based on the
approved DPR, of NHAI itself, comparing the figures therein
with the actual traffic figures. On the basis thereof, the
communication estimated the compensation payable to GMR,
for the financial years 2012-2013 to 2015-2016, as ₹ 185.54
crores, against ₹ 229.55 crores, claimed by GMR. The balance
premium, required to be paid by GMR to NHAI, for the said
financial years, was also computed, in the said communication,
as ₹ 136.52 crores.
(xlvii) NHAI, in the meanwhile, requisitioned yet another legal
opinion, regarding the claims of GMR, from M/s M. V. Kini, a
well-known law firm. M/s M.V. Kini, too, provided a legal
opinion, vide letter dated 7th November, 2016, opining thus:
"The Concessionaire‟s claim against NHAI for
payment to the storage to the same "Financial
position" as it would have enjoyed had there been no
such "Change in law", resulting in reduction of loss in
revenue. We therefore opined that AP State
Bifurcation and substantial Amendments to AP Minor
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Mineral Concession Rules, 1966 both satisfied the
definition of "Change in law" in terms of Article 48,
however whether the Concessionaire is entitled to
release provided under Article 41.1 or not, can only be
asserted by examining traffic data both prior to and
post "Change in law" situations. Since it is beyond the
scope of our expertise, we suggest that NHAI take a
considered view and proceed with the matter. While
analysing data NHAI must bear in mind Article 8 of
the Concession Agreement as it needs to be strictly
adhered to and no documents of material obtained by
either party‟s prior to Concession Agreement (i.e. 09-
10-2009) be given any credence."
8. As the disputes, between GMR and NHAI, seemed incapable of
resolution by conciliation, or by any other means, they proceeded to
arbitration. C.M. Nayar, J. (retd.) and Lt. Gen. Y. P. Khurana, were
nominated, by GMR and NHAI, as their respective learned arbitrators.
As the said arbitrators were unable to arrive at a consensus regarding
the Presiding Arbitrator, the Indian Council of Alternative Dispute
Resolution (ICADR) was requested to appoint the Presiding
Arbitrator, in accordance with Clause 44.3.3 of the Concession
Agreement. The ICADR appointed Dr. Justice Arijit Pasayat (retd.)
as the learned Presiding Arbitrator. Thus was constituted the learned
Arbitral Tribunal, which came to pass the impugned Award.
9. Statement of claim, Statement of Defence, Rejoinder of the
Claimant, i.e. GMR, and affidavits of admission/denial were filed,
before the learned Arbitral Tribunal, and evidence of witnesses
recorded. No exception has been taken, by either party before me, to
the procedure followed by the learned Arbitral Tribunal.
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10. It is not necessary to dwell, in any detail, to the proceedings
before the learned Arbitral Tribunal, or even to the contentions of the
parties before the learned Tribunal, as they have been advanced, in
exhaustive detail, before me, over several days, and copious written
submissions have also been tendered by both parties. Suffice it to
state that, as NHAI was intent on proceeding, against the Escrow
Account of GMR, for recovering premium, allegedly due to it,
applications, under Section 17 of the 1996 Act were preferred, by
GMR, on 6th July, 2018 and, later, on 30th October, 2018, and that
NHAI agreed not to take any precipitate action against GMR.
Hearing, by the learned Arbitral Tribunal, was concluded on 2 nd
August, 2019, and award was reserved. Subsequently, written
submissions were also filed, by GMR and NHAI, before the learned
Arbitral Tribunal, on 6th September, 2019. Thereafter, on 9th
September, 2019, NHAI directed the IDBI Bank, as the Escrow agent
to remit, forthwith, to NHAI, ₹ 513.35 crores, representing the
allegedly outstanding premium, due from GMR till 31 st July, 2019.
This provoked GMR to file yet another application, under Section 17
of the 1996 Act, whereon the learned Arbitral Tribunal, vide order
dated 22nd September, 2019, restrained NHAI from taking any
coercive steps against GMR. IDBI, vide letter dated 27th September,
2019, clarified that the Escrow Account was for payment of debts, to
be made prior to payment of premium. In view thereof, the learned
Arbitral Tribunal disposed of the application, under Section 17 of the
1996 Act, preferred by GMR, vide order dated 7th November, 2019,
stating that no further orders were required to be passed on the
application, but reserving liberty, to GMR, to reapproach the learned
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Tribunal for interim directions, should occasion so arise. On 18th
November, 2019, NHAI invoked Article 36 of the Concession
Agreement, vide a Notice to GMR, seeking to immediately take over
operation and maintenance of the Project Highway. GMR, thereupon,
moved yet another application, under Section 17 of the 1996 Act,
before the learned Tribunal, which stayed the proposed action of
NHAI, vide order dated 18th November, 2019. This order was carried,
in appeal, by NHAI, to this Court, vide Arb A (COMM.) No. 33 of 2019,
which was dismissed, vide order dated 25th November, 2019. The
application of GMR, under Section 17 of the 1996 Act was, thereafter,
disposed of, by the learned Tribunal, vide order dated 9th December,
2019, directing GMR to pay ₹ 25 crore per month, for the next three
months. This order was challenged, by GMR as well as NHAI, before
this Court which, vide judgment dated 30th January, 2020, declined to
interfere with the order of the learned Arbitral Tribunal. The Supreme
Court was approached, thereagainst, by NHAI, vide SLP(C)
4107/2020, which was disposed of, by the Supreme Court, on 19 th
March, 2020, holding that, as the award of the learned Arbitral
Tribunal was scheduled to be delivered on 31st March, 2020, no
intervention was required.
11. The impugned Award came, thus, to be rendered, by the learned
Arbitral Tribunal, on 31st March, 2020.
12. I do not deem it necessary to advert, in detail, to the rival
contentions, of the parties, before the learned Arbitral Tribunal, as the
said contentions have been advanced, in detail, before me, and would
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be dealt with, at the appropriate stage(s). I proceed, therefore, to deal
with the findings, of the learned Arbitral Tribunal, on the issues in
controversy before it.
Issues, as framed by the learned Arbitral Tribunal
13. The "fundamental questions", arising before it for
consideration, were enumerated, by the learned Tribunal, in para 220
of the impugned Award, thus:
"(a) Whether Court orders and sand mining policies of
2011-12 and 2012-13 including the ban on non-issuance of
sand mining permits in the State of Andhra Pradesh (prior to
bifurcation) constituted a "Change in Law" as defined in the
CA?
(b) Whether the Bifurcation of the State of Andhra
Pradesh into the State of Andhra Pradesh and State of
Telangana constitutes a "Change in Law" (in fact NHAI
accepts that Bifurcation amounts to "Change in Law" and
hence it is the admitted position by the Parties insofar as
Bifurcation is concerned)?
(c) Whether the Change in Law negatively impacted the
commercial traffic on the Project Highway vis-à-vis the
traffic numbers which have been incorporated in the Financial
Model and for the earlier periods basis the Halcrow Report
(as explained above)?
(d) Whether the Financial Model is to be the basis on
which the impact of the "Change in Law" is to be determined
for the purposes of compensation in order to put the
Concessionaire back in the same position it would have been
but for the "Change in Law"?
(e) Whether in view of the plain language of Clauses 41.1
and 41.3 read with the definition of "Financial Model", the
Respondent is estopped from disputing traffic numbers which
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form the basis of the revenue streams in the Financial
Model?"
14. On these issues, the majority Award, passed by the learned
Arbitral Tribunal (per Dr Pasayat, J. and Lt. Gen. Y.P. Narula),
proceeds to observe, reason, and hold, as under:
(i) All other issues being purely legal in nature, the only
limited question of fact, which arose for consideration, was
whether the change in law, in the form of bifurcation of the
State of Andhra Pradesh, resulted in lower actual commercial
traffic, on the Project Highway, vis-à-vis the numbers
incorporated in the Financial Model.
(ii) The toll plaza data relied on, by NHAI, in its Statement
of Defence, to contend that, in fact, after bifurcation, traffic had
increased in most of the toll plazas, demonstrated the following:
(a) The Project Highway fed sand reaches of the
Krishna river proximate to the Project Highway to
Hyderabad, the main consumption Centre for sand, prior
to the bifurcation.
(b) There was substantial reduction in commercial
traffic on the Project Highway, due to bifurcation and
ban on interstate traffic of sand, as well as the imposition
of entry tax on commercial vehicles.
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(c) After bifurcation, even while transportation to
Hyderabad was banned, increased development activities
were taking place within Andhra Pradesh, at places such
as Vijayawada, Visakhapatnam, Guntur and other areas
which developed as a result of the bifurcation. This
resulted in increased traffic, to those areas, from sand
reaches proximate thereto, which did not involve the use
of the Project Highway, being situated in a different
direction.
(d) While refuting the claim of GMR, NHAI had
disputed the applicability of Clause 41 of the Concession
Agreement, to the present case, altogether. NHAI sought
to contend that Clause 41 related to change in costs, etc.,
on account of change in law, and did not cover losses of
toll revenue, on account of reduction of traffic on the
Project Highway. Such an eventuality, according to
NHAI, was covered by Article 29 of the Concession
Agreement, and the various Clauses thereunder. For
ready reference, Article 29 of the Concession Agreement
is reproduced, thus:
"Article 29
EFFECT OF VARIATIONS IN TRAFFIC
GROWTH
29.1 Effect of variations in traffic growth
29.1.l The Authority and the
Concessionaire acknowledge that the
traffic as on December 1, 2019 (the
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"Target Date") is estimated to be 36666
PCUs per day (the "Target Traffic"),
and hereby agree that for determining the
modifications to the Concession Period
under this Article 29, the actual traffic on
the Target Date shall be derived by
computing the average of the traffic as
determined by traffic sampling to be
undertaken, in accordance with Clause
22.3, on the date that falls one year prior
to the Target Date, on the Target Date
and on the first anniversary of the Target
Date (the "Actual Traffic"). For the
avoidance of doubt, it is agreed that
traffic sampling shall be undertaken for a
continuous period of 7 (seven) days
during anytime within 15 (fifteen) days
prior to the date specified herein and the
average thereof shall be deemed to be the
actual traffic.
29.1.2 In the event that the Actual Traffic
shall have fallen short of the Target
Traffic by more than 2.5% (two point
five per cent) thereof or exceeded the
Target Traffic by more than 2.5% (two
point five per cent) thereof, the
Concession Period shall be deemed to be
modified in accordance with Clause 29.2.
For the avoidance of doubt, in the event
of any Dispute relating to Actual Traffic,
the Dispute Resolution Procedure shall
apply.
29.2 Modification in the Concession Period
29.2.1 Subject to the provisions of
Clause 29.l.2, in the event Actual Traffic
shall have fallen short of the Target
Traffic, then for every 1% (one per cent)
shortfall as compared to the Target
Traffic, the Concession Period shall,
subject to payment of Concession Fee in
accordance with this Agreement, be
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increased by 1.5% (one point five per
cent) thereof; provided that such increase
in Concession Period shall not in any
case exceed 20% (twenty per cent) of the
Concession Period. For the avoidance of
doubt, and by way of illustration, it is
agreed that in the event of a shortfall of
10.6% (ten point six per cent) in Target
Traffic, the Concession Period shall be
increased by 15% (fifteen per cent)
thereof. 29.2.2 Subject to the provisions
of Clause 29.1.2, in the event Actual
Traffic shall have exceeded the Target
Traffic, then for every l % (one per cent)
excess as compared to the Target Traffic.
the Concession Period shall be reduced
by 0.75% (zero point seven five per cent)
thereof; provided that such reduction in
Concession Period shall not in any case
exceed l 0% (ten per cent) thereof. For
the avoidance of doubt and by way of
illustration, it is agreed that in the event
of an excess of 8.7% (eight point seven
per cent) in Target Traffic, the
Concession Period shall be reduced by
6% (six per cent) thereof:
Provided further that in lieu of a
reduction in Concession Period under
this Clause 29.2.2, the Concessionaire
may elect to pay, in addition to the
Concession Fee that would be due and
payable if the Concession Period were
not reduced hereunder, a further
premium equal to 25% (twenty five per
cent) of the Realisable Fee, and upon
notice given to this effect by the
Concessionaire no later than two years
prior to the Transfer Date contemplated
by this Clause 29.2.2, the Authority shall
waive the reduction in Concession Period
hereunder forthwith.
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29.2.3.Notwithstanding anything to the
contrary contained in this Agreement, if
the average daily traffic of PCUs in any
Accounting Year shall exceed the
designed capacity of the Project
Highway and shall continue to exceed
the designed capacity for 3 (three)
Accounting Years following thereafter,
an Indirect Political Event shall be
deemed to have occurred and the
Authority may in its discretion terminate
this Agreement by issuing a Termination
Notice and making a Termination
Payment under and in accordance with
the provisions of Clause 34.9.2; provided
that before issuing such Termination
Notice, the Authority shall inform the
Concessionaire of its intention and grant
180 (one hundred and eighty) days time
to make a representation, and may after
the expiry of such 180 (one hundred and
eighty) days period, whether or not it is
in receipt of such representation, in its
so]e discretion issue the Termination
Notice. For the avoidance of doubt, the
Parties agree that an average daily traffic
of 60000 PCUs and 90000 PCUs shall be
deemed to be the designed capacity of
the Four-Lane Project Highway and Six-
Lane Project Highway respectively.
29.2.4 If the Concessionaire shall have,
prior to issue of a Termination Notice
under Clause 29.2.3, completed the
Construction Works necessary for
augmenting the capacity of the Project
Highway such that its capacity shall have
increased sufficiently for carrying the
then current traffic in accordance with
the corresponding provisions of the
Indian Roads Congress Publication No.
IRC-64, 1990 or any substitute thereof,
the Indirect Political Event specified in
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Clause shall be deemed to have been
cured."
(e) This issue was required to be decided in the light
of the definition of "change in law", as contained in
Clause 48.1 of the Concession Agreement, read
conjointly with Clause 1.2.1 (b) which may be
reproduced thus:
"1.2.1 In this Agreement, unless the context
otherwise requires,
(b) references to laws of India or
Indian law or regulation having the force
of law should include the laws, act,
ordinances, rules, regulations, bylaws or
notifications which have the force of law
in the territory of India and as from time
to time may be amended, modified,
supplemented, extended or re-enacted;"
In view of Article 1.2.1 (b), the contention, of NHAI, that
the expression "law" included only primary legislation,
and did not include Rules or Regulations, was not
sustainable. Reliance was also placed, in this regard, on
the judgements of the Supreme Court in Energy
Watchdog v. C.E.R.C.2, and of this Court in N.H.A.I. v.
Hindustan Construction Co Ltd 3, N.H.A.I. v. Oriental
Structure Engineers Ltd4 and N.H.A.I. v. Hindustan
Construction Co Ltd5. Reckoned thus, "the amendment
notification/Government Orders issued by the undivided
2
(2017) 14 SCC 80
3
Judgement dated 20th November 2011 in OMP 455/2010 and OMP 456/2011
4
Judgement dated 7th December 2013 in OMP 357/2011
5
2018 (4) Arb LR 392 (Del)
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State of Andhra Pradesh and the States of Andhra
Pradesh and Telangana (were) covered by clauses (b) and
(d) of the definition of Change in Law".
(f) NHAI sought, further, to contend that the
expression "modification", as employed in clause (b) of
Article 48 of the Concession Agreement, was required to
be interpreted ejusdem generis, and noscitur a sociis,
with the expressions in the company of which it was
found and, thus interpreted, had to be construed as "an
amendment of the existing Indian Law". The changes in
the Sand Mining Policy and other measures taken by the
erstwhile State of Andhra Pradesh, relatable to judicial
orders passed between March and November, 2012 were
not, therefore, "changes in law". This plea was clearly
untenable. "If that was the intention, it is not explained,
as to why the expression „amendment‟ was not used and
the expression „modification‟ was used."
(g) NHAI further sought to contend that statutory
notifications were not covered by clause (b) of Article 48,
as they already stood covered by clause (d) thereof,
relating to changes in rates of taxes. The learned Arbitral
Tribunal rejected this contention, in the following words:
"This stand is untenable because clauses (b) and
(d) envisaged different situations and it cannot
be amalgamated of crystallized into one
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category. Additionally the position regarding
subordinate legislation is an statutory rules as
been highlighted in detail supra."
(h) NHAI sought, further, to contend that the
judgement of the Supreme Court, in Deepak Kumar1 did
not impose any new obligation, but merely clarified the
legal position. This submission, too, was not correct as,
prior to the judgement, there was no obligation for
obtaining environment clearance for the Sand reaches of
less than 5 Ha. The said direction was issued, by the
Supreme Court, in exercise of the powers conferred by
Article 141 of the Constitution of India. The judgement,
therefore, did bring about a "change in law".
(i) The Independent Engineer, on the basis of legal
opinions, notified NHAI that there was a change in law,
but that the quantum of compensation was disputable.
On the position that there was, in fact, a "change in
law", therefore, there was no real dispute.
(j) The attempt, of NHAI, to brush aside the opinions,
of the Independent Engineer and legal experts, as not
binding on it, could not sustain, as there was no
document on record, to show that NHAI had ever
disagreed with the said views. In fact, the opinion, of
the Independent Engineer and legal experts, that a
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"commodity-wise survey" was necessary, itself
predicated the existence of "change in law".
(k) NHAI had itself constituted a „Conciliation
committee‟ of three Chief General Managers, to
examine the claims of GMR, of reduction in commercial
traffic carrying sand. The constitution of this
Committee, too, indicated that NHAI was of the view
that there was a "change in law" situation.
(l) "Force majeure" stood defined in Dhanrajmal
Gobindram v. Shamji Kalidas & Co.6, Md. Serajuddin
v. State of Orissa7 and Continental Grain Export
Corpn. v. S.T.M. Grain 8, as well as in Article 34 of the
Concession Agreement.
(m) Apropos the question of whether Article 29 of the
Concession Agreement would apply, or Article 41
thereof, GMR had correctly pointed out that Article 29
(2) referred to "modification in the concession period".
The only sub-clause, under Article 29, which referred to
financial implications, was Clause 29.2.3 (already
reproduced hereinabove).
6
AIR 1961 SC 1285 : (1961) 3 SCR 1020
7
(1975) 2 SCC 47
8
[1979] 2 Lloyd's Rep 460
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(n) In these facts, the principle of contra proferentem
would also apply.
(o) In order to buttress its stand that there had been
reduction in traffic, post the Commercial Operation Date
(COD), GMR stressed the following:
(a) Though the actual number of passenger
vehicles, during the period 2012-2013 to 2018-
2019, had increased, over the projected numbers as
reckoned in the DPR as well as in the Financial
Model, the number of commercial vehicles, for
2018-2019, vis-à-vis the projected numbers in the
DPR for the said period, had decreased. The DPR
projected the traffic volume, for commercial
vehicles for 2018-2019, was 11635, whereas the
actual flow was 4647. In contradistinction, for the
year 2012-2013, the actual commercial traffic,
4499, was comparable to the projected commercial
traffic, as per the DPR, of 5813.
(b) The actual commercial traffic of 4219, up to
2017-2018, was significantly less than the actual
commercial traffic in 2005.
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(c) NHAI had not sought to assign any reason,
to justify the sharp decrease in commercial traffic,
though, in non-commercial traffic, there was a rise.
(d) The only attributable reason could,
therefore, be the change in law that occurs in the
interregnum.
(e) The significant drop in commercial traffic
was also borne out by the data of NHAI itself, for
35 toll plazas in the state of Andhra Pradesh and
the State of Telangana after bifurcation, of which
32 toll plazas were away from the Project
Highway.
(f) The reduction in commercial traffic, and
consequent reduction in revenue, suffered by GMR
as a result thereof, were borne out by the
certificates, dated 8th January, 2018, of the statutory
auditor/Chartered Accountant, which compared the
category-wise projected vehicles in the Financial
Model, vis-à-vis the actual number, and assessed
the revenue and shortfall in revenue collection as a
result thereof. The witness of GMR was not cross-
examined, resulting in the correctness of the said
computations remaining undisputed. No
alternative calculation was provided by NHAI. As
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such, one of the conditions were relatable to Article
41.1 had been established.
(p) NHAI contended, per contra, that the traffic and
revenue projections, made by GMR, in the Financial
Model, were exaggerated and unrealistic and that,
therefore, the submission that there had been reduction
in traffic and revenue was false. It was submitted that
GMR had subverted the competitive bidding process by
putting a high premium and, after having secured the
bid, was attempting to wriggle out of its obligation
regarding payment, thereof, to NHAI. The veracity and
validity of the Halcrow Report was disputed, pointing
out that the said Report had been prepared prior to
submission of bid, in which process NHAI had no role
to play. As such, it was contended that the Halcrow
Report had no contractual relevance, qua NHAI.
Moreover, the Halcrow Report was not submitted to
NHAI, with the Financial Model, and was tendered,
belatedly, in 2013, to support the claim for
compensation on the ground of change in law. The
Financial Model, it was further submitted, contained
only the category-wise traffic numbers, without any
information regarding the commodity-wise traffic. In
the absence of any information regarding commodity-
wise traffic, no claim for compensation could be
founded solely on the Financial Model. No evidence
had, it was submitted, been produced, by GMR, to
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substantiate its claim that sand carrying commercial
traffic had reduced to zero, on the Project Highway.
Though CW-2 (Mr. Venkat Subbarao Chunduru) had
referred to such a study having been conducted, no
details, thereof, were forthcoming on record.
(q) The claim of GMR, to compensation on the ground
of reduction of vehicular traffic, was founded,
principally, on the Halcrow Report, dated 22nd January,
2009. The report, expressly, related to "Toll Traffic and
Revenue Forecasting Study for Hyderabad to
Vijayawada Section of NH-9 in the State of Andhra
Pradesh". The "Objective and Scope of Work", as set
out in the Halcrow Report, was described as "estimating
the tollable traffic and toll revenue on the Malkapur-
Nandigama section {km 40.000 - km 221.500} of NH-9
the State of Andhra Pradesh". Further, the objective of
the study was stated to be "to formulate projections for
the project road in the end of the concession period of
25 years". The ingredients of this objective were
enumerated thus, in the Halcrow Report:
"(a) Undertake traffic surveys on the highway
section and its competing roads, if any, in the
project influence area.
(b) To identify competing routes and analyse
the networks conditions, traffic characteristics
and level of tolls charged, if any on the
competing corridors.
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(c) A review of past traffic data and other
relevant reports as may be available.
(d) Undertake inventory of project road and
competing/alternative routes, if any.
(e) Preparation of traffic projections based
on above analysis for 20 years concession
period.
(f) Estimation of tollable traffic streams for
different categories of traffic streams paying
normal and concessional toll rates.
(g) Estimation of projected toll revenue as
per categories of traffic streams."
Though NHAI was the custodian of all highways in the
country, and had the largest database of traffic across the
highways, it chose not to lead any evidence to throw any
light and/or contradict the Halcrow Report. The Halcrow
Report referred to actual count of existing traffic during
the financial year 2008-09 including passenger cars,
commercial vehicles and thereafter projected the future
traffic based on normal indices including economic
activities, social economic development in the area for
which purpose it took an average rate of growth for
passenger traffic and commercial traffic 6.1% and 6.2%
respectively for a period of 25 years. Based on the traffic
study for a period of 25 years and a reasonable return of
16% on investment and the concession period of 25
years, the consortium had offered a premium of 32.6% of
Realizable Fee from the Commercial Operation Date
(COD), to be augmented by 1% every year.
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(r) Clause 24.1.2 of the Concession Agreement
mandated, as a condition precedent, submission of the
Financial Model along with the Financing Agreement.
Even prior to execution of the Financing Agreement,
GMR was required to, and in fact did, provide, to NHAI,
the approved Financial Model. The said clause read thus:
"24.1.2 The Concessionaire shall, upon
occurrence of Financial Close, notify the
Authority forthwith, and shall have provided to
the Authority, at least 2 (two) days prior to
Financial Close, 3 (three) true copies of the
Financial Package and the Financial Model,
duly attested by a Director of the
Concessionaire, along with 3 (three) soft copies
of the Financial Model in MS Excel version or
any substitute thereof, which is acceptable to the
Senior Lenders."
(s) It was not, however, sufficient for GMR to
establish that a change in law had occurred; it was
further required to prove that, owing to such change in
law, reduction of revenue had taken place, resulting in
GMR suffering a substantial financial burden, entitling
it to compensation under Article 41.1 and 41.3. For this
purpose, GMR relied on the Halcrow Report, the views
expressed by the independent engineer in its letter dated
14th October, 2016, which quantified the compensation
payable to GMR at ₹ 185.54 crores, and the Financial
Model, which was defined in Article 48 of the
Concession Agreement and which was provided, by
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GMR to NHAI in terms of Clause 4.1.3 (f) thereof -
which was broadly the same has Clause 24.1.2,
reproduced supra. GMR had pointed out that, among
the documents which were required to be filed by it,
with NHAI, as conditions precedent, to be fulfilled prior
to the appointed date, was the Financial Model (as per
Article 4.1.3). Adoption of the Financial Model, which
determined the financial viability of the project, by the
Senior Lenders was, even as contemplated in the
Concession Agreement, one of the prerequisites for
achieving Financial Close and execution of the
Financing Agreements.
(t) NHAI placed reliance on the recommendations of
the Committee of CGMs, constituted by it, to examine
the grievances of GMR, and the rejection, by the said
Committee, of the grievances, as intimated vide letter
dated 8th June, 2017. A perusal of the letter revealed
that it related to GMR‟s application for deferment of
premium. It baldly alleged that GMR had "deliberately"
added induced traffic. It also referred to a traffic survey
conducted during the period 16th to 22nd September,
2015, and to the target traffic, as per Clause 29.1.1 of
the Concession Agreement, on the target date of 1st
December, 2019. The relevance, of these observations,
to the issue of reduction of traffic due to change in law,
consequent on the Sand Mining Policy, was not clear.
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(u) The observation, in the communication, dated 29th
September, 2016, from Sheladia, to the effect that "the
DPR, for the project, did not mention the percentage of
vehicles carrying sand, as it was not the general practice
to mention the number of vehicles commodity-wise",
was cited as a ground to discredit the Halcrow Report.
This was unsustainable. Merely because the
Independent Engineer had stated that it was not the
general practice to mention the number of vehicles
commodity-wise, the Halcrow Report, which did so,
could not be discredited.
(v) Even while relying on the said observation, in the
communication dated 29th September, 2016, from
Sheladia, NHAI discarded the view, expressed by
Sheladia itself, in its letter communication dated 8 th
October, 2016, which computed compensation, in
favour of GMR, by comparing the DPR with actual
traffic.
(w) GMR had never been informed that the approach
of Sheladia was impermissible, vis-à-vis the tender
conditions.
(x) The reliance, by NHAI, on the affidavit of Mr. W.
V. Chandra Shekar, Joint Director, Directorate of Mines
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& Geology, Government of Andhra Pradesh, was also
misplaced. There was no reference, in the Statement of
Defence of NHAI, to any document emanating from Mr.
Chandra Shekar. No such document found reference in
any of the communications addressed by NHAI to
GMR. As such, the statements of Mr. Chandra Shekar,
in his affidavit, were merely his opinions, without any
supporting factual data. The fact that he was not cross-
examined could not lend any additional credibility to the
said opinion.
(y) The Halcrow Report could not be said to be of no
relevance, as it provided the foundation of GMR‟s claim
regarding reduction in traffic. While the evidentiary
value of the said Report was a different matter, it could
not be contended that the report had no contractual
relevance.
(z) Similar was the position with respect to the
Financial Model, tendered by GMR. NHAI ought to
have considered the data provided therein and,
thereafter, drawn conclusions regarding the
acceptability, or otherwise, of the said data. This was
also not done.
(aa) Following on the above discussion, the majority
award, by Dr. Pasayat, J and Lt. Gen. Y.P. Narula, held
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that the existence of change in law, and the entitlement,
of GMR, to compensation, as a consequence thereof,
could not be denied. In rejecting the said claim,
therefore, it was held that NHAI had erred. Even so, the
majority Award held that the extent, to which GMR had
been able to establish its claim, was required to be
factually determined by taking into account all factors
for adjudicating the claim. The following findings and
directions were issued, in paras 292 to 296 of the
majority Award, as a consequence of the above
discussion:
"292. Though the Tribunal is of the view that
the decision of the Respondent in denying the
claim is erroneous, the natural consequence is
not that the Claimant's claims to be allowed. To
what extent the Claimant has been able to
establish its claim has to be factually
determined by the Respondent by taking into
account all factors for and against the claim.
293. Therefore, while holding that the
decision of the Respondent to deny Claimant's
claims on the ground of non-consideration of
relevant material/consideration of the irrelevant
material and attempt to justify the denial on
materials which were not considered while
taking the decision is erroneous and
indefensible, the Tribunal is of the view that the
Respondent has to take a fresh decision.
294. The Claimant when called upon by the
Respondent to produce material in support of its
plaint is shall be required to do so.
295. Keeping in view the nature of the
Contract where the figures are required to be
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considered qua the target date i.e. 01.12.2019
for variation of the contract period, the
Respondent can call for the details and the data
from the Designated Agency who provides
figures in that context. That also would be
relevant data for dealing with the claims of the
Claimant. It would be open for the Respondents
to ask the said Designated Agency for data
relating to the subject period (to which the
claims relate).
296. The Respondent shall constitute the
Committee within three weeks from today and
on being notified about the Constitution of the
Committee shall furnish all data, details,
documents which according to have relevance
and bearing to its claims. If the Respondent
intends to rely on any document, material and/or
data to deny such claims, needless to say it shall
furnish them to the Claimant."
15. C.M. Nayar, J., penned a partly dissenting award. While
agreeing with the majority Award, insofar as the entitlement, in
principle, of GMR, to compensation, on account of change in law that
had taken place, Nayar, J disagreed with the decision to remand the
matter, for a fresh look, to NHAI, observing that the independence and
impartiality of NHAI was unclear. Nayar, J observed that the learned
Arbitral Tribunal ought to have itself adjudicated the compensation
payable to GMR, or appointed an eminent body of Chartered
Accountant/Auditors, or of Engineers, to consider the competing
claims and assess the merits of the claims of GMR, on the basis of the
material on record. Section 26 of the 1996 Act, it was observed,
empowered the learned Arbitral Tribunal to do so.
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16. As noted towards the commencement of this judgement, the
aforesaid Award, dated 31st March, 2020, has been challenged both by
GMR, as well as by NHAI, to the extent and on the aspects already set
out in para 3 supra.
Rival Contentions and Analysis
17. I have heard detailed and elaborate arguments, by Dr. Abhishek
Manu Singhvi, arguing on behalf of GMR, and by the learned
Solicitor General, appearing on behalf of NHAI.
Scope of Interference
18. Before proceeding to identify the issues that arise, and analyse
the comparative merits of submissions of learned Senior Counsel, it
would be appropriate to delineate the scope of interference, by this
Court, in exercise of its powers under Section 34 of the 1996 Act, with
arbitral awards, and findings returned therein.
19. The Division Bench of this Court has, in N.H.A.I. v.
Hindustan Construction Co Ltd.9 and M.T.N.L. v. Finolex Cables
Ltd10, analysed several earlier decisions, of the Supreme Court, on the
scope of interference, under Section 34 of the 1996 Act, as rendered in
D.D.A. v. R.S. Sharma & Co.11, Mc Dermott International Inc. v.
Burn Standard Co. Ltd12, N.H.A.I. v. J.S.C. Centrodorstroy13, M.
9
2017 (5) ARBLR 258 (Delhi)
10
2017 (166) DRJ 1
11
(2008) 13 SCC 80
12
(2006) 11 SCC 81
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Ansuya Devi v. M. Manik Reddy14, N.H.A.I. v. I.T.D. Cementation
India Ltd.15 (which itself digests several earlier decisions), Swan Gold
Mining Ltd v. Hindustan Copper Ltd 16, Navodaya Mass
Entertainment Ltd v. J.M. Combines17 and what may be regarded as
the high watermark of the law relating to Section 34, Associated
Builders v. D.D.A.18, and has, thereafter, culled out the following clear
principles, as emanating therefrom:
"(i) The four reasons motivating the legislation of the Act,
in 1996, were
(a) to provide for a fair and efficient arbitral
procedure,
(b) to provide for the passing of reasoned awards,
(c) to ensure that the arbitrator does not transgress
his jurisdiction, and
(d) to minimize supervision, by courts, in the
arbitral process.
(ii) The merits of the award are required to be examined
only in certain specified circumstances, for examining
whether the award is in conflict with the public policy of
India.
(iii) An award would be regarded as conflicting with the
public policy of India if
(a) it is contrary to the fundamental policy of Indian
law, or
(b) it is contrary to the interests of India,
(c) it is contrary to justice or morality,
(d) it is patently illegal, or
(e) it is so perverse, irrational, unfair or
unreasonable that it shocks the conscience of the court.
13
(2016) 12 SCC 592
14
(2003) 8 SCC 565
15
(2015) 14 SCC 21
16
(2015) 5 SCC 739
17
(2015) 5 SCC 398
18
(2015) 3 SCC 49
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(iv) An award would be liable to be regarded as contrary to
the fundamental policy of Indian law, for example, if
(a) it disregards orders passed by superior courts, or
the binding effect thereof, or
(b) it is patently violative of statutory provisions, or
(c) it is not in public interest, or
(d) the arbitrator has not adopted a "judicial
approach", i.e. has not acted a fair, reasonable and
objective approach, or has acted arbitrarily,
capriciously or whimsically, or
(e) the arbitrator has failed to draw an inference
which, on the face of the facts, ought to have been
drawn, or
(f) the arbitrator has drawn an inference, from the
facts, which, on the face of it, is unreasonable, or
(g) the principles of natural justice have been
violated.
(v) The "patent illegality" had to go to the root of the
matter. Trivial illegalities were inconsequential.
(vi) Additionally, an award could be set aside if
(a) either party was under some incapacity, or
(b) the arbitration agreement is invalid under the
law, or
(c) the applicant was not given proper notice of
appointment of the arbitrator, or of the arbitral
proceedings, or was otherwise unable to present his
case, or
(d) the award deals with a dispute not submitted to
arbitration, or decides issues outside the scope of the
dispute submitted to arbitration, or
(e) the composition of the Arbitral Tribunal was not
in accordance with the agreement of the parties, or in
accordance with Part I of the Act, or
(f) the arbitral procedure was not in accordance
with the agreement of the parties, or in accordance
with Part I of the Act, or
(g) the award contravenes the Act, or
(h) the award is contrary to the contract between the
parties.
(vii) "Perversity", as a ground for setting aside an arbitral
award, has to be examined on the touchstone of the
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Wednesbury principle of reasonableness. It would include a
case in which
(a) the findings, in the award, are based on no
evidence, or
(b) the Arbitral Tribunal takes into account
something irrelevant to the decision arrived at, or
(c) the Arbitral Tribunal ignores vital evidence in
arriving at its decision.
(viii) At the same time,
(a) a decision which is founded on some evidence,
which could be relied upon, howsoever compendious,
cannot be treated as "perverse",
(b) if the view adopted by the arbitrator is a
possible view, it has to pass muster,
(c) neither quantity, nor quality, of evidence is open
to re-assessment in judicial review over the award.
(ix) "Morality" would imply enforceability, of the
agreement, given the prevailing mores of the day.
"Immorality", however, can constitute a ground for
interfering with an arbitral award only if it shocks the judicial
conscience.
(x) For examining the above aspects, the pleadings of the
parties and materials brought on record would be relevant.
(xi) The court cannot sit in appeal over an arbitration
award. Errors of fact cannot be corrected under Section 34.
The arbitrator is the last word on facts."
20. A point which, at times, courts tend to overlook, despite the
afore-quoted decisions of the Supreme Court having reiterated it, time
and again, is that, even on questions of law, the arbitrator, or the
arbitral tribunal, is the final word, absent, in its findings in that regard,
perversity or "patent illegality". Patent illegality may be said to exist,
in the interpretation of the law, by the arbitrator, only where such
interpretation is, ex facie, erroneous as well as unacceptable, and not
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where the Court feels that another, and more appropriate, view, exists.
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The court is concerned with the possibility of the view expressed by
the arbitrator, and not the plausibility thereof. Absent impossibility,
implausibility, ordinarily, is no ground to set aside, or interfere with,
an arbitral award, under Section 34 of the 1996 Act. One of the rare
cases where the rigour of this principle has been relaxed, it may be
noted for the sake of clarity, is to be found in N.H.A.I. v.
Progressive-MVR (JV)19, which advocated exercise of jurisdiction, by
the High Court, under Section 34, even where the view taken by the
arbitrator was possible, in a situation in which different arbitrators,
interpreting like provisions in different contracts entered into, by the
NHAI across the country, were adopting different interpretations.
Needless to say, no such exigency exists, in the present case.
21. The position stands further underscored by the following
passages, from Dyna Technologies Pvt Ltd v. Crompton Greaves
Ltd20 (which were reiterated in South East Asia Marine Engineering
and Constructions Ltd v. Oil India Ltd 21):
"26. There is no dispute that Section 34 of the Arbitration
Act limits a challenge to an award only on the grounds
provided therein or as interpreted by various Courts. We need
to be cognizant of the fact that arbitral awards should not be
interfered with in a casual and cavalier manner, unless the
Court comes to a conclusion that the perversity of the award
goes to the root of the matter without there being a possibility
of alternative interpretation which may sustain the arbitral
award. Section 34 is different in its approach and cannot be
equated with a normal appellate jurisdiction. The mandate
under Section 34 is to respect the finality of the arbitral award
and the party autonomy to get their dispute adjudicated by an
19
(2018) 14 SCC 688
20
2019 SCC OnLine SC 1656
21
2020 SCC OnLine SC 451
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alternative forum as provided under the law. If the Courts
were to interfere with the arbitral award in the usual course on
factual aspects, then the commercial wisdom behind opting
for alternate dispute resolution would stand frustrated.
27. Moreover, umpteen number of judgments of this Court
have categorically held that the Courts should not interfere
with an award merely because an alternative view on facts
and interpretation of contract exists. The Courts need to be
cautious and should defer to the view taken by the Arbitral
Tribunal even if the reasoning provided in the award is
implied unless such award portrays perversity unpardonable
under Section 34 of the Arbitration Act."
22. Paras 11, 12, 14, 15 and 16 of the report in M.M.T.C. Ltd v.
Vedanta Ltd.22 are also relevant, in this context:
"11. As far as Section 34 is concerned, the position is well-
settled by now that the Court does not sit in appeal over the
arbitral award and may interfere on merits on the limited
ground provided under Section 34(2)(b)(ii) i.e. if the award is
against the public policy of India. As per the legal position
clarified through decisions of this Court prior to the
amendments to the 1996 Act in 2015, a violation of Indian
public policy, in turn, includes a violation of the fundamental
policy of Indian law, a violation of the interest of India,
conflict with justice or morality, and the existence of patent
illegality in the arbitral award. Additionally, the concept of
the "fundamental policy of Indian law" would cover
compliance with statutes and judicial precedents, adopting a
judicial approach, compliance with the principles of natural
justice, and Wednesbury [Associated Provincial Picture
Houses v. Wednesbury Corpn., (1948) 1 KB 223 (CA)]
reasonableness. Furthermore, "patent illegality" itself has
been held to mean contravention of the substantive law of
India, contravention of the 1996 Act, and contravention of the
terms of the contract.
12. It is only if one of these conditions is met that the
Court may interfere with an arbitral award in terms of Section
34(2)(b)(ii), but such interference does not entail a review of
22
(2019) 4 SCC 163
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the merits of the dispute, and is limited to situations where the
findings of the arbitrator are arbitrary, capricious or perverse,
or when the conscience of the Court is shocked, or when the
illegality is not trivial but goes to the root of the matter. An
arbitral award may not be interfered with if the view taken by
the arbitrator is a possible view based on facts. (See Associate
Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204.
Also see ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705;
Hindustan Zinc Ltd. v. Friends Coal Carbonisation, (2006)
4 SCC 445; and McDermott International Inc. v. Burn
Standard Co. Ltd., (2006) 11 SCC 181)
*****
14. As far as interference with an order made under
Section 34, as per Section 37, is concerned, it cannot be
disputed that such interference under Section 37 cannot travel
beyond the restrictions laid down under Section 34. In other
words, the court cannot undertake an independent assessment
of the merits of the award, and must only ascertain that the
exercise of power by the court under Section 34 has not
exceeded the scope of the provision. Thus, it is evident that in
case an arbitral award has been confirmed by the court under
Section 34 and by the court in an appeal under Section 37,
this Court must be extremely cautious and slow to disturb
such concurrent findings.
15. Having noted the above grounds for interference with
an arbitral award, it must now be noted that the instant
question pertains to determining whether the arbitral award
deals with a dispute not contemplated by or not falling within
the terms of the submission to arbitration, or contains
decisions on matters beyond the scope of the submission to
arbitration. However, this question has been addressed by the
courts in terms of the construction of the contract between the
parties, and as such it can be safely said that a review of such
a construction cannot be made in terms of reassessment of the
material on record, but only in terms of the principles
governing interference with an award as discussed above.
16. It is equally important to observe at this juncture that
while interpreting the terms of a contract, the conduct of
parties and correspondences exchanged would also be
relevant factors and it is within the arbitrator's jurisdiction to
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consider the same. [See Mc Dermott International Inc. v.
Burn Standard Co. Ltd., (2006) 11 SCC 181; Pure Helium
India (P) Ltd. v. ONGC, (2003) 8 SCC 593 and D.D. Sharma
v. U.O.I., (2004) 5 SCC 325]"
23. The peripheries of Section 34 stand, thereby, well-demarcated.
Issues
24. Fundamentally, the following specific issues may be delineated,
as arising for consideration in the present case, both before the learned
Arbitral Tribunal, as well as before this Court:
(i) The first issue is whether "change in law" had taken
place, within the meaning of the expression as defined in Clause
48 of the Concession Agreement. The learned Arbitral Tribunal
has answered this issue in the affirmative, holding that the
change in the Sand Mining Policy, as introduced vide various
GOMs issued by the states of Andhra Pradesh and Telangana,
as well as the bifurcation of the state of Andhra Pradesh into the
states of Andhra Pradesh and Telangana, were both events
which resulted in "change in law". NHAI has disputed this
finding.
(ii) The second issue is whether Article 28, or Article 41, of
the Concession Agreement, applies in the present case. The
learned Arbitral Tribunal has held that Article 41 applies and
that, by virtue of Clauses 41.1 and 41.3 thereof, GMR is entitled
to compensation. NHAI contends, in its challenge under
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Section 34 of the 1996 Act, that Article 41 has no application at
all, and that, even if it were to be assumed that there had been a
fall in commercial traffic, that exigency stood covered by
Article 28, whereunder no provision for awarding
compensation, to GMR, existed.
(iii) The third issue is the extent, if at all, to which GMR has
suffered financial prejudice, as a consequence of the aforesaid
"change in law". The learned Tribunal has not pronounced on
this issue, holding that the extent to which GMR has been able
to establish its claim would have to be factually determined.
While, on the first and second issues aforesaid, the majority,
and minority, awards, are ad idem, on this third issue, there is a
difference of view, of the learned dissenting arbitrator, vis-à-vis
the view of the majority. While the majority Award directs
GMR to establish, before NHAI, its entitlement to
compensation, under Clause 41.1 and 41.3 of the Concession
Agreement, the dissenting Award opines that, instead of
allowing NHAI to adjudicate thereon, the exercise ought to be
delegated to an independent authority, such as a reputed firm of
Chartered Accountants, or the like. This third issue does not
impact the petition, under Section 34 of the 1996 Act, filed by
NHAI (O.M.P. (COMM.) 426/2020), as NHAI questions the
very entitlement, of GMR, to compensation. The petition of
GMR, under Section 34 (O.M.P. (COMM.) 425/2020),
however, is concerned only with the third issue, with GMR
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contending that the minority Award deserves acceptance, in
preference to the majority Award.
Addressing the issues, seriatim
Was there "change in law"?
25. The definition of the expression "change in law", as contained
in Clause 48 of the Concession Agreement, has already been
reproduced in sub-para (xvii) of para 7 supra.
26. The findings of the learned Arbitral Tribunal, on this aspect, are
to be found in paras 232, 233 and 238 to 242 of the impugned Award,
which are, therefore, reproduced, in extenso, thus:
"232. The said Article defines "Applicable Laws" to mean
all laws, brought into force and effect by GOI or the State
Government including rules, regulations and notifications
made thereunder, and judgments, decrees, injunctions, writs
and orders of any court of record, applicable to this
Agreement and the exercise, performance and discharge of
the respective rights and obligations of the Parties hereunder,
as may be in force and effect during the subsistence of this
Agreement.
233. Article 48 has to be read conjointly with Article 1.2.1
(b) which provides that references to laws of India or Indian
law or regulation having the force of law shall include the
laws, acts, ordinances, rules, regulations, bye laws or
notifications which have the force of law in the territory of
India and as from time to time may be amended, modified,
supplemented, extended or re-enacted.
*****
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238. As noted supra, sub-articles (a), (c) and (d) deal with
enactment of any new Indian law, commencement of any
Indian law which has not entered into effect until the date of
bid and a change in the interpretation of application of any
Indian law by a judgment which has become final, conclusive
and binding as compared to such interpretation or application
prior to the date of the bid, by a court of record. The
amendment notifications / Govt Orders issued by the
undivided State of Andhra Pradesh and the States of Andhra
Pradesh and Telangana are covered by clauses (b) and (d) of
the definition of Change in Law.
239. It is emphasized by the Respondent that the changes in
Sand Mining Policy and other measures taken by the
erstwhile State of Andhra Pradesh on account of court order
etc. from March - April 2012 to November 2012 are not
covered by the definition of Change in Law because no act
either by the State Legislative Assembly or the Parliament
was enacted. The expression "modification" has to be
interpreted by application of the principles of "ejusdem
generis" and the doctrine of "noscitur-a-socis". Modification
of any "existing Indian law" has to be construed as "an
amendment of an existing Indian law". This plea is clearly
untenable. If that was the intention, it is not explained, as to
why the expression "amendment" was not used and the
expression "modification" was used. The further stand that
the subordinate legislations in the form of statutory
notifications are not covered under (b) as that is already
covered by (d) relating to change in rates of taxes. This stand
is untenable because clauses (b) and (d) envisaged different
situations and it cannot be amalgamated or crystallized into
one category. Additionally the position regarding subordinate
legislations and statutory rules has been highlighted in detail
supra.
240. Coming to the stand of the Respondent that the
decision in Deepak Kumar v. State of Haryana, (2012) 4
SCC 629 was only clarifying the position in law and did not
impose new obligations needs to be considered in the
background of what was the effect of the judgment. Prior to
the judgment, there was no obligation for obtaining
environment clearance for sand reaches of less than 5
hectares. This direction was given in exercise of powers under
Article 141 of the Constitution of India, 1950 (in short "the
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Constitution"). Prior to this judgment, sand reaches of less
than 5 hectares did not require any environmental clearance
and, therefore, sand reaches of less than 5 hectares did not
require obtaining of environmental clearance and such
clearances were not being taken. Post Deepak Kumar‟s case
that was required to be taken. Therefore, Deepak Kumar‟s
judgment brought about a situation which is covered under
the definition of Change in Law. The consequential directions
given by the Hon‟ble Andhra Pradesh High Court reiterating
the directions of the Hon‟ble Supreme Court in Deepak
Kumar‟s case amounted to and constituted Change in Law.
241. It has been emphasized by the Claimant that the
Respondent changed its position after initiation of arbitration
proceedings though prior to that, Independent Engineer acting
on its behalf and the Respondent itself accepted the position
that orders of the Hon‟ble Supreme Court and amendments to
the Andhra Pradesh Miner Mineral Concession Rules
constituted a Change in Law under the Concession
Agreement. Referring to a decision of the Hon‟ble Supreme
Court in Godhra Electricity Co. Ltd. v. State of Gujarat,
(1975) 1 SCC 199, it is submitted that such interpretation
which has been consistently applied should be determinative.
Emphasis is made on para 11 of the decision which reads as
follows:
"11. In the process of interpretation of the terms
of a contract, the court can frequently get great
assistance from the interpreting statements
made by the parties themselves or from their
conduct in rendering or in receiving
performance under it. Parties can, by mutual
agreement, make their own contracts; they can
also by mutual agreement remake them. The
process of practical interpretation application,
however, is not regarded by the parties as a
remaking of the contract; nor do the courts so
regard it. Instead, it is merely further expression
by the parties of the meaning that they give and
have given to the terms of their contract
previously made. There is no good reason why
the courts should not give great weight to these
further expressions by the parties, in view of the
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fact that they still have the same freedom of
contract that they had originally. The American
Courts receive subsequent actions as admissible
guides in interpretation. It is true that one party
cannot build up his case by making an
interpretation in his own favour. It is the
concurrence therein that such a party can use
against the other party. This concurrence may
be evidenced by the other party‟s express assent
thereto by his acting in accordance with it, by
his receipt without objection of performances
that indicate it, or by saying nothing when
knows that the first party is acting on reliance
upon the interpretation (see Corbin on contracts,
Vol.III, pp.249 and 254-55)".
242. Another factor which assumes importance is that the
Independent Engineer on the basis of legal opinions clearly
notified the Respondent that there was a Change in Law
situation but the dispute was only relating to quantum of
compensation. As rightly contended by learned counsel for
the Claimant, the first aspect was never disputed and on the
other hand was being accepted all through that there was a
Change in Law situation. "
27. Neither before the learned Arbitral Tribunal, nor before this
Court, has NHAI sought to urge that the bifurcation of the state of
Andhra Pradesh, into the states of Andhra Pradesh and Telangana, and
the enactment of the Andhra Pradesh Reorganisation Act, 2014, did
not constitute "change in law". It was, however, seriously contended,
by NHAI, that the introduction of new Sand Mining Policies, and the
change in the existing Sand Mining Policy, by the various GOMs
issued by the States of Andhra Pradesh and Telangana, from time to
time, as also the judgement of the Supreme Court in Deepak Kumar1
did not constitute "change in law". The manner in which the learned
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Arbitral Tribunal has interpreted the expression "change in law" has,
therefore, been criticised, by NHAI, as perverse.
28. "Change in law", as defined in Article 48 of the Concession
Agreement, it is sought to be contended by NHAI, was intended to
cover only "primary legislation", by way of statute, subordinate
legislation being included within the ambit of the said definition only
to the extent it related to taxation. It is sought to be contended that, if
changes introduced by subordinate legislation were to be included
within the ambit of the definition of "change in law", there would be
no necessity for sub-clause (e) in Clause 48.1 of the Concession
Agreement which would, therefore, be reduced to a redundancy - or,
more appropriately, a superfluity. The expression "existing Indian
Law", as employed in sub-clause (b) of Clause 48.1, it is contended,
refers only to primary legislation. The expression "modification", as
employed in the same sub-clause, equivalently, it is sought to be
contended, is to be read as "amendment". Reference has also been
made, in the written submissions filed by NHAI, to certain judicial
authorities - which, incidentally, found "change in law" to have, in
fact, taken place in those cases - to contend that the said cases related
to primary legislation. NHAI would seek to contend, by relying on
the said decisions, that, where the instrument in question was not
"primary legislation", it could not be said to result in "change in law".
In a somewhat contradictory vein, it is also sought to be contended, by
NHAI, in its written submissions, that the learned Arbitral Tribunal
erred in relying on judicial decisions to understand the expression
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"change in law", as the said expression stands defined in Clause 48.1
of the Concession Agreement.
29. To my mind, no exception, whatsoever, can be taken, to the
findings, of the learned Arbitral Tribunal, as contained in the paras
extracted hereinabove, to the effect that the judgement of the Supreme
Court in Deepak Kumar1, and the change in the Sand mining policy,
as it occurred from time to time by the issuance of various GOMs by
the states of Andhra Pradesh and Telangana, constituted "change in
law". I do not find, in the Concession Agreement, anything to
indicate, either expressly or by necessary implication, that the
expression "existing Indian Law" has necessarily to be limited to
"primary legislation", and would not embrace subordinate legislation,
or executive orders having the force of law. Nor do I find any basis
for the submission, of NHAI, that the expression "modification", as
used in sub-clause (b) of Clause 48.1, has to be read as "amendment".
It is hardly necessary to cite any authority, for the proposition that the
exercise of interpretation of the covenants of a contractual document
cannot, at any time, extend to modification, or rewriting thereof.
30. I agree with the submission, of the learned Solicitor General,
articulated on behalf of NHAI, that, in view of the express definition
of the expression "change in law", as contained in Clause 48.1 of the
Concession Agreement, no recourse is needed, to any judicial
authority, which interprets the said expression. At the same time, the
expression "existing Indian Law", as used in the said sub-clause, does
not find definition in the Concession Agreement. To my mind, it is
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axiomatic that the judgement in Deepak Kumar1 constitutes "law",
and one need look no further, for this, than Article 141 of the
Constitution of India. It cannot be denied that, by the said judgement,
sand mining, over areas of less than 5 Ha, were held to require
environmental clearance. It is also not denied that, prior to the said
decision, this requirement did not exist. That the judgement of the
Supreme Court in Deepak Kumar1 resulted in a "change in law"
cannot, therefore, in my view, be denied.
31. Equally, the resultant interim orders, dated 21st March, 2012, of
the High Court of Andhra Pradesh, and the order, dated 7 th May, 2012,
of the Supreme Court in SLP (C) 15301-15305/2012 in Annam
Sivaiah (supra), which specifically directed the State Government to
require obtaining of environmental clearance even for mining areas of
less than 5 Ha, obviously, constituted "law", and resulted in a change
in the then existing law. The GOMs, dated 13th October, 2012 and
15th November, 2012, having been issued in compliance of the
directives of the Supreme Court, equally, therefore, constituted "law".
If at all it was required, one may refer, in this context, to clause (29) in
Section 3 of the General Clauses Act, 1897, which defines "Indian
Law" to mean any "Act, Ordinance, regulation, rule, order or bye-law
which, before the commencement of the Constitution had the force of
law in any Province of India or part thereof and hereafter has the force
of law in any Part A State Part C State or part thereof, but does not
include any Act of Parliament of the United Kingdom or any Order in
Council, rule or other instrument made under such Act." Referring to
the said provision, it was held, by the High Court of Madhya Pradesh,
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in State of Madhya Pradesh v. Ramcharan 23, that "under our legal
order „law‟ does not include only legislative enactment is but it also
includes rules, orders, notifications etc. made or issued by the
Government or any subordinate authority in the exercise of dedicated
legislative power." At the same time, purely administrative orders,
not issued in exercise of any statutory authority, were held, in
Jayantilal Amratlal v. F. N. Rana24, not to constitute "law". These
decisions stand noted, and approved, by the Supreme Court in Sudhir
Shantilal Mehta v. C.B.I.25. It has not been contended, by NHAI, that
the GOMs, issued by the States of Andhra Pradesh and Telangana,
were devoid of any statutory authority, so as to stand excluded from
the ambit of the expression "Indian Law".
32. The submission, of NHAI, that subordinate legislation, or
executive orders, would tantamount to "Indian Law", for the purposes
of Clause 48.1 of the Concession Agreement, only to the extent they
fall within sub-clause (e) thereof, i.e. they relate to rates of taxes, too,
fails to impress. Indeed, there is no reference, in sub-clause (e), either
to subordinate legislation, or to any executive orders or instructions.
If such subordinate legislation, or executive instructions, to the extent
they change the rates of taxes, applicable to the Project, were to be
included within the expression "change in law", by invocation of sub-
clause (e) of Clause 48.1, I see no reason why such subordinate
legislation, or executive instructions, issued in exercise of statutorily
AIR 1977 MP 68
AIR 1964 SCC 648: 1964 (5) SCR 294
(2009) 8 SCC 1
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conferred powers and authority, would not qualify as "Indian Law",
for the purposes of sub-clause (b) of Clause 48.1.
33. Nor am I convinced with the contention, of NHAI, that
extending the scope of sub-clause (b) of Clause 48.1, to GOMs, issued
by the states of Andhra Pradesh and Telangana, and to the
modification and change of the Sand Mining Policy affected thereby,
would result in sub-clause (e) being rendered superfluous or
redundant. Sub-clause (e) of Clause 48.1 deals with a specific
exigency, i.e. change of taxes, having a direct impact on the project.
The mere fact that Clause 48.1 may have chosen to specify this
exigency by way of a separate category thereunder, i.e. sub-clause (e)
cannot, in my view, detract from the ambit and scope of sub-clause
(b). The principle against tautology, often invoked while interpreting
legislative instruments, does not, necessarily, apply to covenants in
contractual documents, and instances where clauses have been
engrafted, in a contract, ex abundanti cautela, are not unknown.
34. In any event, it is obvious that the reasoning of the learned
Arbitral Tribunal, as contained in the passage as extracted
hereinabove, cannot be said to suffer from any legal infirmity, as
would justify interference by this Court, in exercise of its limited
jurisdiction, under Section 34 of the 1996 Act. The issue is purely one
of law, and of interpretation of Clause 48.1 of the Concession
Agreement. The learned Arbitral Tribunal has interpreted the clause
to hold that the change in the Sand Mining Policy, as effected by the
GOMs issued by the States of Andhra Pradesh and Telangana from
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time to time, and the bifurcation of the state of Andhra Pradesh,
constituted "change in law", within the meaning of the said Clause.
No case, for interference therewith, under Section 34 of the 1996 Act,
can be said to exist.
Re. Clause 41.1
35. The learned Arbitral Tribunal has held the reduction in
commercial traffic, consequent on the restrictions and prohibitions,
imposed on Sand mining, by the aforesaid "change in law" incidents,
to justify invocation, by GMR, of Clause 41.1 and 41.3 of the
Concession Agreement, and the rejection, by NHAI, of the claim of
GMR, under the said heads, to be unjustified. It is also categorically
observed, in para 257 of the impugned Award, that NHAI had "not ...
clarified how increasing cost is the only operated expression", in
Article 41.
36. A plain reading of Clause 41.1 of the Concession Agreement
discloses that it applies, expressly, where "as a result of Change in
Law, the Concessionaire suffers an increase in costs or reduction in
net after-tax return or other financial burden". Though NHAI sought
to contend, before the learned Arbitral Tribunal - as it has sought to
contend, before this Court as well - that this Clause was intended to
apply only where the change in law had resulted in increase in costs,
to the concessionaire. The submission, quite obviously, flies in the
face of the wording of the Clause itself. Acceptance of the said
submission would render the words "or reduction in net after-tax
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return or other financial burden", especially the words "or other
financial burden", otiose. On this aspect, the learned Solicitor General
sought to contend that the words "reduction in net after-tax return"
could not be equated with "reduction in revenue", and dealt, instead,
solely with a situation of increase in cost, or other expenditure, which
the concessionaire, i.e. GMR, had to suffer as a result of the change in
law. Equally, it was submitted, the words "other financial burden"
related to financial liability on account of increase in cost and
expenditure. These words, submits the learned Solicitor General,
were required to be interpreted noscitur a sociis with the words
"increase in cost" and "reduction in net after-tax return". Thus
interpreted, submits the learned Solicitor General, the words "other
financial burden" would also require, for their application, increase in
costs incurred by GMR. Any other interpretation, contends NHAI,
would result in an "over expansionist" construction being extended, to
Clause 41.1, which would, in turn, result in GMR becoming insured
against any kind of financial loss, or hardship, suffered by it,
irrespective of the cause thereof. It is submitted that Clause 41.1
could never have been intended to provide such an omnibus insurance
to GMR, for all financial constraints suffered by it. Reliance was also
placed, by the learned Solicitor General, in this context, on the
heading of Clause 41.1, which reads "increase in costs".
37. Adverting to this last contention first, the learned Tribunal has,
in para 257 of the impugned Award, dwelt, at some length, on the
inadvisability of limiting the construction of Clause 41.1, on the basis
of its heading. Certain judicial authorities have also been cited, in this
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context. In my opinion, the finding of the learned Arbitral Tribunal is
obviously unexceptionable, and no reference, to any judicial authority,
is necessary in this regard. As is apparent from a plain reading, while
the heading of Clause 41.1 read "Increase in costs", the clause itself
refers to "increase in costs or reduction in net after-tax return or other
financial burden". Where the words used in the clause are, on their
face, broader than the heading, it is obviously impermissible to limit
the words in the clause, on the basis of the heading. To reiterate, if the
submission of NHAI, in this regard, is to be accepted, it would result
in rendering, completely redundant, the words "or reduction in net
after-tax return or other financial burden", in Clause 41.1.
38. That apart, the claim of GMR would, in my opinion, sustain,
even on the anvil of "increase in costs", to which NHAI would crave
limitation of Clause 41.1. I would deal with this aspect a little later.
39. For the present, the words "other financial burden", as
employed in Clause 41.1, are, in my view, expansive and
comprehensive in equal measure, and would encompass any kind of
financial burden, to which GMR would be subjected, as a
consequence of the "change in law". I do not deem it necessary to
discuss, at any length, the etymological connotations of the expression
"financial burden", as they are well understood. NHAI has, however,
sought to invoke, as noted above, the noscitur a sociis doctrine, to
limit the ambit of the expression "other financial burden", to
"financial burden" akin to "increase in cost" or "reduction in net after-
tax return". Thus viewed, submits NHAI, mere reduction in revenue
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realisation, consequent to decrease in traffic, would not qualify as
"other financial burden", for the purposes of Clause 41.1.
40. The reliance, by NHAI, on the noscitur a sociis principle is, in
my view, fundamentally unsound. It is axiomatic that the recourse, to
interpretative aids, to understand provisions of the statute, or contract,
is justified - and, indeed, is necessary - only where the provision does
not admit of interpretation, plainly read, or presents ambiguous
choices. There is no ambiguity, in my view, in the expression
"increase in costs or reduction in net after-tax return or other financial
burden". The intention, of the framers of the contract, in using the
expression "other financial burden" is, quite clearly, to encompass all
financial burdens, as would befall the concessionaire, as it would be
impossible to predict, in anticipation, the possible adverse financial
consequences which could befall the concessionaire, consequent to
"change in law", even before the law has changed. The expression
"other financial burden" does not, etymologically, admit of more than
one interpretation. It would be folly to employ the noscitur a sociis
principle to deliberately constrict the scope of an expression of words
of wide import, consciously used. The following words, from State of
Bombay v. Hospital Mazdoor Sabha26 explain the concept thus:
"It is, however, contended that, in construing the definition,
we must adopt the rule of construction noscuntur a sociis.
This rule, according to Maxwell, means that, when two or
more words which are susceptible of analogous meaning are
coupled together they are understood to be used in their
cognate sense. They take as it were their colour from each
other, that is, the more general is restricted to a sense
AIR 1960 SC 610:1960 (2) SCR 866
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analogous to a less general. The same rule is thus interpreted
in Words and Phrases (Vol. XIV, p. 207): "Associated words
take their meaning from one another under the doctrine
of noscuntur a sociis the philosophy of which is that the
meaning of a doubtful word may be ascertained by reference
to the meaning of words associated with it; such doctrine is
broader than the maxim Ejusdem Generis." In fact the latter
maxim "is only an illustration or specific application of the
broader maxim noscuntur a sociis". The argument is that
certain essential features or attributes are invariably
associated with the words "business and trade" as understood
in the popular and conventional sense, and it is the colour of
these attributes which is taken by the other words used in the
definition though their normal import may be much wider.
We are not impressed by this argument. It must be borne in
mind that noscuntur a sociis is merely a rule of construction
and it cannot prevail in cases where it is clear that the wider
words have been deliberately used in order to make the scope
of the defined word correspondingly wider. It is only where
the intention of the legislature in associating wider words
with words of narrower significance is doubtful, or otherwise
not clear that the present rule of construction can be usefully
applied. It can also be applied where the meaning of the
words of wider import is doubtful; but, where the object of the
legislature in using wider words is clear and free of
ambiguity, the rule of construction in question cannot be
pressed into service. As has been observed by Earl of
Halsbury, L.C., in Corporation of Glasgow v. Glasgow
Tramway and Omnibus Co. Ltd. [(1898) AC 631 at p. 634]
in dealing with the wider words used in Section 6 of
Valuation of Lands (Scotland) Act, 1854, "the words „free
from all expenses whatever in connection with the said
tramways‟ appear to me to be so wide in their application that
I should have thought it impossible to qualify or cut them
down by their being associated with other words on the
principle of their being ejusdem generis with the previous
words enumerated"."
(Emphasis supplied)
41. There is some amount of flexibility in the legal position, qua
the applicability of the noscitur a sociis - or ejusdem generis -
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principle, where the general expression uses the word "other". In
Uttar Pradesh S. E. Board v. Hari Shanker 27, while interpreting the
words "other rules or regulations", as used in Section 13B of the
Industrial Employment (Standing Orders) Act, 1946, which read
"Nothing in this Act shall apply to an industrial establishment insofar
the workman employed therein are persons to whom the Fundamental
and Supplementary Rules, Civil Services (Classification Control and
Appeal) Rules, Civil Services (Temporary Service) Rules, Revised
Leave Rules, Civil Service Regulations, Civilians in Defence Service
(Classification, Control and Appeal) Rules or the Indian Railway
Establishment Code or any other rules or regulations that may be
notified in this behalf by the appropriate Government in the Official
Gazette apply", the Supreme Court held that though the rules, to
which reference was made in the preceding portion of the provision,
were all applicable to Government servants, that specification could
not be extended to the broad-based genus "other rules or regulations",
so as to narrow the scope of the said expression. For that reason, the
Supreme Court held that the words "any other rules or regulations"
referred to all statutory rules governing the workman, and not merely
to rules applicable to Government servants.
42. Clause 41.1 in the Concession Agreement is in the nature of an
indemnity clause. It seeks to indemnify the concessionaire, for the
financial burden, suffered by its going through unforeseeable changes
in law. The use of the omnibus expression "other financial burden",
thus viewed, appears, to me, to be intended at covering all financial
AIR 1979 SC 65 : (1978) 4 SCC 16
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burden, that the concessionaire may undergo, owing to change in law.
This also demonstrates the fallacy of the contention, of NHAI, that,
were such an "over-expansionist" interpretation to be accorded to
Clause 41.1, it would operate as an omnibus insurance, covering the
financial hardship that the concessionaire would suffer. The learned
Solicitor General submitted that the clause was never intended to
operate as an insurance, to GMR, covering all its financial risks. The
submission, in my view, misses the wood for the trees. Interpreting
the words "other financial burden", as I have done hereinabove, does
not convert Clause 41.1 into an omnibus insurance clause, covering all
financial burden that the concessionaire would suffer. The clause is,
expressly, limited only to financial burden suffered owing to "change
in law". The intent is, quite obviously, to indemnify the
concessionaire, for the financial burden suffered by it, owing to
change in law, for the simple reason that changes in law are
unpredictable, unforeseeable, and beyond the control both of GMR
and NHAI. Viewed thus, imparting, to the expression "other financial
burden", any restricted interpretation would, in my view, in fact defeat
the very intent of using the said expression. The submission, of the
learned Solicitor General, that the expression "other financial burden",
as employed in Clause 41.1, is required to be interpreted noscitur a
sociis with the preceding expressions "increase in cost" and
"reduction in net after-tax return", therefore, in my view, does not
commend acceptance.
43. The learned Solicitor General also relied, in the aforesaid
context, on the concluding sentence in Clause 41.1 of the Concession
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Agreement, which stated, "for the avoidance of doubt", "that this
Clause 41.1 shall be restricted to changes in law directly affecting the
Concessionaire‟s costs of performing its obligations under this
Agreement." In this context, I am in agreement with the submission,
of NHAI, that the cost, for any concessionaire, comprises of two
fundamental components, viz., of debt and of equity. Diminishing
revenue returns are bound, inescapably, to result in increased costs.
The interlink between costs and revenue is, in my view, completely
obfuscated, in the submissions advanced by the NHAI. It would be
wholly unrealistic, in my view, to interpret Clause 41.1 to mean that,
even where the monies received, by operating the toll, are severely
diminished, owing to an exponential fall in the traffic volume on the
highway, the concessionaire would not be entitled to any recompense,
merely because its "costs" have not increased. Such an interpretation
would amount to viewing "costs" as merely an arithmetical figure,
taking no stock of the financial impact that the costs have on the
concessionaire, consequent on decrease in commercial traffic.
Commercial contracts, as NHAI itself correctly contends, are required
to be advanced a business-like interpretation. So advanced, the
interconnect between costs suffered, and revenue realised, cannot be
overlooked.
44. That apart, in my opinion, it would be fallacious to isolate the
last sentence in the proviso to Clause 41.1 of the Concession
Agreement, and place sole reliance thereon, ignoring the main body of
the said Clause. The manner in which NHAI chooses to rely, in
isolation, on the said sentence, would amount to doing away with the
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reference, in the main body of Clause 41.1, to "reduction in net after-
tax return" and "other financial burden". This, in my view, is
impermissible. As NHAI has itself contended, the Concession
Agreement was required to be read as a whole, and the intent of the
parties thereto, defined therefrom. The caveat entered, at the
conclusion of the proviso to Clause 41.1, "for the avoidance of
doubts" cannot, therefore, be torn away from the main Clause, so as to
constrict the scope thereof.
45. Significantly, Clause 41.1 requires the concessionaire, in the
event of the application of provision, to "propose amendments to this
Agreement so as to place the Concessionaire in the same financial
position as it would have enjoyed had there been no such Change in
Law resulting in the cost increase, reduction in return or other
financial burden as aforesaid". Nothing more, in my view, is
required, to indicate that the Clause was never intended to be limited
to cost increase. The submission of the NHAI, to the said effect has,
therefore, to be regarded as misconceived.
46. The applicability of Clause 41.1, to the facts of the present case
cannot, therefore, in my view, be gainsaid.
Clause 41.3
47. Clause 41.3 of the Concession Agreement is a sequel to Clause
41.1. It states that, pursuant to the provision of, inter alia, Clause
41.1, for the purposes of placing the concessionaire in the same
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financial position at it would have enjoyed had it not suffered
financial burden on account of change in law, the concessionaire
"shall rely on the Financial Model" to establish a net present value
(NPV) of the net cash flow, and make necessary adjustments in", inter
alia, compensation, so as to ensure that the NPV was the same as it
would have been, had there been no change in law. In this context,
NHAI has sought to discredit the Halcrow Report, as well as the
Financial Model, on which GMR placed reliance. The findings, in the
impugned Arbitral Award, in this regard, as contained in para 78
thereof, read thus:
"278. One of the stands taken by the Respondent is that the
Halcrow Report, the so called origin-destination study has not
been shared with it. According to Claimant, IRC SP 19-2001
has so recommended carrying out commodity wise analysis of
traffic. Since Respondent is the custodian of all highways in
the country and has the largest data base of traffic across the
highway it is but natural to assume and believe that the
Respondent would have the largest data base of traffic across
all the highways. But it chose not to aduce any evidence to
throw any light and / or contradict the Halcrow Report. The
Halcrow Report refers to actual count of the existing traffic
during the financial year 2008-09 including passenger cars,
commercial vehicles and thereafter project the future traffic
based on normal indices including economic activities, social
economic development in the area it
took an average rate of growth for passenger traffic and
commercial traffic as 6.1% and 6.2% respectively for a period
of 25 years. In the Financial Model, the growth rate was
reduced. Based on the traffic study for a period of 25 years
and a reasonable return of 16% on investment and the
concession period of 25 years, the consortium had submitted
its offering a premium of 32.6% of Realizable Fee from
Commercial Operation Date (COD) which increases by 1%
every year on every anniversary of the appointed date.
Claimant has highlighted the importance of the Financial
Model. It is pointed out that 24.1.2 of the Concession
Agreement mandates as a condition precedent, the submission
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of Financial Model along with Financing Agreement. Even
prior to the execution of the Financing Agreement, the
Claimant was required to and in fact provided to the
Respondent the approved Financial Model. The relevant
provision 24.1.2 reads as follows:
"24.1.2 The Concessionaire shall, upon occurrence of
Financial Close, notify the Authority forthwith, and
shall have provided to the Authority, at least 2 (two)
days prior to Financial Close, 3 (three) true copies of
the Financial Package and the Financial Model, duly
attested by a Director of the Concessionaire, along
with 3 (three) soft copies of the Financial Model in MS
Excel version or any substitute thereof, which is
acceptable to the Senior Lenders" "
48. In making the necessary adjustments, including payment of
compensation, so as to restore the concessionaire to the financial
position enjoyed by its prior to the happening of the change in law,
Clause 41.3 of the Concession Agreement expressly requires the
parties to rely on the Financial Model. It is not open, therefore, to
NHAI, to discredit the Financial Model. Indeed, as has rightly been
observed by the learned Arbitral Tribunal, Clause 24.1.2 of the
Concession Agreement requires the concessionaire, i.e. GMR, to
provide, upon occurrence of Financial Close, to NHAI, three true
copies of the Financial Model, duly attested by its Director, along
with three soft copies thereof, as acceptable to the senior lenders.
Besides, the Halcrow study, resulting in the Halcrow Report, was
undertaken, by GMR, in accordance with Clause 2.1.3 of the RFP,
which required the bidders to carry out their own survey before
submitting their bids. Clause 1.2 (g) of the Report observed that the
purpose of the study was "estimation of projected toll revenue as per
the categories of traffic streams". As such, the Halcrow Report was a
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category-wise report. Clause 4.1.3 of the Concession Agreement,
particularly sub-clause (f) thereof, required the Concessionaire to
deliver, to the authority, three copies of the Financial Model, as one of
the conditions precedent, to be satisfied by the concessionaire prior to
the appointed date. The authority to waive this condition precedent
vested in the NHAI, by the proviso to the said Clause, but no such
waiver was ever granted. As such, in accordance with the mandate of
the said sub-clause, GMR submitted its Financial Model to NHAI on
6th April, 2010. The ingredients of the Financial Model were also
provided in Clause 48.1 of the Concession Agreement, which clearly
stated that the financial viability of the project was determined, by the
senior lenders, on the basis of the said Financial Model. As is
correctly noted by the learned Arbitral Tribunal in para 278 of the
impugned Award, NHAI, despite being the custodian of all highways
in the country, with the largest database of traffic across all highways,
did not adduce any evidence, on the basis of which the Halcrow
Report, or the Financial Model, could be discredited. In fact, the
premium, offered by GMR and sought to be realised by NHAI, was
also based on the Realisable Fee, based on the traffic study resulting
in the Halcrow Report.
49. Ironically, while seeking to discredit the Halcrow Report in the
Financial Model, which were in existence prior to finalisation of the
Concession Agreement, and the providing of the latter of which was a
condition precedent, NHAI seeks to rely (in its written submissions)
on data, allegedly collected by it, regarding traffic movement on
highways closed to NH-9, and on a Pavement Design Report. The
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learned Arbitral Tribunal has correctly found the reliance, by NHAI,
on this material, to be inexplicable. When actual data, relating to
movement of traffic on the Project Highway, was available, it defeats
comprehension as to how NHAI could choose to discredit that data,
and rely on data relating to the movement on "proximate" highways.
50. Much has been sought to be made, in the written submissions of
NHAI, on the non-availability of any commodity-wise traffic study,
for the period after the change in law. Exception has been taken to the
fact that the plea, of GMR, for the decline in traffic is sought to be
based on a comparison of the total commercial vehicular traffic,
before and after the change in law. Having perused the Concession
Agreement, I can find no basis for this submission. The Concession
Agreement does not require any commodity-wise study to be
undertaken. Any claim to entitlement for compensation, under Clause
41.1 of 41.3, requires, a priori, establishment of the existence of
financial burden, on the concessionaire, i.e. GMR, as a consequence
of the change in law. The reduction in commercial traffic was shown,
by GMR, as evidence of the fact that it had, in fact, suffered financial
burden as a result of the change in law. If this plea, of reduction in
commercial traffic, was found to be correct, in the absence of any
material, adduced by NHAI, to justify such reduction, GMR would
have succeeded in establishing the causal connection between the
change in law, and financial burden, arising from the reduction in
commercial traffic. This exercise has, both by the majority, as well as
by the minority, awards, been directed to be undertaken de novo.
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51. In this context, and given the tenor of the submissions of NHAI,
I deem it appropriate to observe that, unlike a statutory instrument, a
contract is, entered into, between the parties thereto, with open eyes,
and with the wherewithal to include, in the contract, all such
covenants as would manifest their intention. The intent of parties, to a
contract has, therefore, to be discerned from the provisions of the
contract, and cannot be inferred - unlike a statutory instrument, in
which the parties, who are required to interpret the statute, are not
privy to the framing thereof.
Re. Clause 29
52. NHAI has contended that the clause, which would apply in the
case of production of flow of traffic, would be Clause 29.1 of the
Concession Agreement, and not Clause 41.1, or 41.3. It has also been
sought to be pointed out that, unlike Article 41, traffic flow, under
Article 29, is based on the number of Passenger Car Units (PCUs),
and not on the basis of the number of commercial vehicles. Though
Article 29, and the various clauses thereunder, do not refer to Change
in Law, NHAI contends that the said Article caters to all cases of
reduction in traffic, for any reason. In all such cases, Clause 29.1
requires increasing the concession period, so as to result in increase in
revenue. It is contended, by NHAI, that, if Article 41 were to be
treated as catering to the same exigency, GMR would get a double
benefit. It is also sought to be contended that Article 29 is a more
specific provision, which deals with reduction in traffic flow, as
compared to Article 41 and that, therefore, applying Clause 1.4.2 of
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the Concession Agreement, the case of GMR would fall,
appropriately, under Article 29.
53. Dr. Singhvi, meeting the said submissions, pointed out that
Article 29 does not deal, at all, with change in law. That, in my view,
is a complete answer to the submissions of NHAI, relying on Article
29. "Change in law", clearly, had taken place, and the claims, of
GMR, were consequent thereupon. Article 41 specifically dealt with
"change in law", and the consequences thereof. Article 29 did not
make any reference, at all, to "change in law". If, therefore, the
learned Arbitral Tribunal relied on Article 41.1 and 41.3, in
preference to Article 29, that was, in my view, eminently in
accordance with the express terms of the Concession Agreement.
54. In this context, Clause 1.4.2, on which NHAI sought to place
reliance, actually furthers the cause of GMR. Sub-clause (a) of
Clause 1.4.2 specifically states that, "in case of ambiguities or
discrepancies within this Agreement, ... between two or more Clauses
of this Agreement, the provisions of a specific Clause relevant to the
issue under consideration shall prevail over those in other Clauses".
The issue under consideration being the entitlement, of GMR, to
compensation, on account of financial difficulties faced consequent to
change in law, it is obvious that the specific Clauses, engrafted in the
Concession Agreement to deal with such an exigency, is Clause 41.1,
and Clause 41.3, and not Clause 29.1.
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55. Clause 29.1, in fact, does not deal with such a specific exigency
at all. Clause 29.1.1 is, expressly, engrafted "for determining the
modifications to the Concession Period under this Article 29".
Modifications to the Concession Period, under Article 29, is covered
by Clause 29.2. Sub- clause 29.2.1, thereunder, stipulates that, if the
actual traffic is found to have fallen short of the Target Traffic then,
for every 1% shortfall, the Concession Period shall, subject to
payment of Concession Fee in accordance with the Concession
Agreement, be increased by 1.5% thereof, subject to a maximum
increase of 20%. The manner in which it is to be ascertained, as to
whether Actual Traffic has, or has not, fall short of the Target Traffic,
is prescribed in Clause 29.1.1. The Target Traffic is estimated on the
Target Date (1st December, 2019), by the said Clause, as 36666 PCUs
per day. The Clause goes on to require traffic sampling to be
undertaken on the date one year prior to the Target Date, on the Target
Date and one year after the Target Date. On each occasion, the traffic
sampling is to be undertaken for 7 continuous days. The average of
the traffic flow, on the said 7 days, would be deemed to be the actual
traffic. Clause 29.1.2 specifies that, if the actual traffic, thus
reckoned, fall short of the Target Traffic by more than 2.5%, or
exceeds the Target Traffic by more than 2.5%, the Concession Period
would be modified in accordance with Clause 29.2.
56. It is obvious that Clause 29 is not even intended to cater to
financial hardship, resulting to the Concessionaire, much less where
such financial hardship is attributable to change in law. Adverse
financial consequences, resulting from change in law, are specifically
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covered by Clause 41.1 and 41.3. The invocation, by NHAI, of
Clause 29 of the Concession Agreement is, therefore, thoroughly
misconceived.
57. In view thereof, no exception can be taken, to the finding, of the
learned Arbitral Tribunal, that the rejection, by NHAI, of the claim, of
GMR, to compensation, predicated on Clauses 41.1 and 41.3, was not
in accordance with the terms of the contract, and could not sustain in
law. The learned Arbitral Tribunal has correctly held that the adverse
financial consequences, which have been claimed, by GMR, to have
visited it, as a result of the change in law, justify invocation of
Clauses 41.1 and 41.3 of the Concession Agreement. As the said
finding is obviously in accordance with the terms of the Concession
Agreement, and, on its face, Article 29 does not apply to such a
situation, the mere fact that no detailed discussion, regarding
inapplicability of Article 29 of the Concession Agreement, is to be
found in the impugned Award, cannot, in my view, vitiate it to any
extent.
58. As the view, of the learned Arbitral Tribunal, that "change in
law" did exist, and that the claim of GMR, to compensation, was
maintainable under Clauses 41.1 and 41.3 of the Concession
Agreement, merit acceptance, for the reasons stated hereinabove, I do
not deem it necessary to enter, in any detail, into the issue of force
majeure, on which, too, the learned Arbitral Tribunal has founded its
decision, especially in view of sub-clause (a) of Clause 34.4, which
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makes "change in law" a "political event", for the purposes of force
majeure, "only if consequences thereof cannot be dealt with under and
in accordance with the provisions of Article 41 and its effect, in
financial terms, exceeds the sum specified in Clause 41.1". No claim
to compensation has been laid, by NHAI, attributable to "change in
law", beyond the effect of such change, in financial terms, as
contemplated by Clause 41.1.
Resultantly
59. As a result, the findings, of the learned Arbitral Tribunal, that
(i) the amendments in the Sand Mining Policy, as effected, from time
to time, by the States of Andhra Pradesh and Telangana, as also the
judgement of the Supreme Court in Deepak Kumar1, and the
bifurcation of the state of Andhra Pradesh, amounted to "change in
law", within the meaning of Clause 48 of the Concession Agreement
and (ii) the decision of NHAI, to reject the claim, to compensation, by
GMR, by relying on Article 29 of the Concession Agreement, could
not sustain in law, stands affirmed. Clearly, the claim of GMR would
have to be assessed on the basis of Clauses 48.1 and 48.3, and not on
the basis of Clause 29.
60. Having thus held, the learned Arbitral Tribunal has also held,
correctly, that GMR would not, merely by virtue of these findings,
become, ipso facto, entitled to compensation under Clause 48.1 or
48.3. It would be necessary for GMR to establish the "financial
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burden", suffered by its as a consequence of the aforesaid changes in
law, in order to be entitled to compensation under the said Clauses.
This finding, of the learned Arbitral Tribunal, too, is eminently in
order, and does not call for interference.
61. O.M.P. (COMM) 426/2020 stands disposed of, in the aforesaid
terms.
O.M.P. (COMM.) 425/2020 and I.A. 3714/2020
62. On the issue of the authority, to whom the task of determining
the actual entitlement of GMR, to compensation, should be assigned,
the opinions of the learned arbitrators diverge. The majority award
remits this issue to NHAI, for consideration, whereas the minority
Award (per Nayar, J.), disagrees therewith, and opines that the learned
Arbitral Tribunal ought to have itself decided the actual entitlement of
GMR, or assigned the task to an independent expert/body of experts.
63. O.M.P. (COMM.) 425/2020, by GMR, assails the decision, by
the majority Award dated 31st March, 2020, to leave the exercise of
determining and quantifying the entitlement, of GMR, to
compensation, under Clauses 41.1 and 41.3 of the Concession
Agreement, to NHAI.
64. In this regard, a perusal of the reliefs sought by GMR, in its
Statement of Claim, filed before the learned Arbitral Tribunal, reveals
that GMR had specifically claimed ₹ 752.32 crores, under Clauses
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41.1 and 41.3 of the Concession Agreement, as the amount due to it,
consequent to the aforesaid "change in law". Interest, on the said
amount, also stands claimed.
65. The actual amount, payable to GMR on account of the aforesaid
"change in law", therefore, constitutes an inalienable part of the
dispute, which was referred to the learned Arbitral Tribunal. As
Nayar, J., correctly observes, the learned Arbitral Tribunal could itself
have decided the issue. Having said that, there can be no cavil with
the decision, of the learned Arbitral Tribunal, to assign the task of
deciding the actual amount payable to GMR, to another body, as it
could involve disputed facts and figures. Any such body, however,
would be, in effect, an extension of the learned Arbitral Tribunal
itself, as it would be deciding the dispute, which stood referred to the
learned Arbitral Tribunal. GMR and NHAI having been at
loggerheads, throughout, regarding the entitlement of GMR, I find
myself in agreement with Nayar, J., that NHAI itself could not be
assigned the task of adjudicating on the claim of GMR. There is,
prima facie, substance in the submission, of Dr. Singhvi, that any such
delegation would be bound to result in futility. That impression
stands underscored by the emphasis with which NHAI has, before this
Court, contested the entitlement, of GMR, to any compensation and,
in fact, the very existence of "change in law" itself.
66. I may refer, with advantage, in this regard, to Section 12 (5) of
the 1996 Act, which specifically disentitles any person "whose
relationship, with the parties or Council or the subject-matter of the
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dispute, falls under any of the categories specified in the Seventh
Schedule", to be ineligible for appointment as an arbitrator. It is
hardly necessary to refer to the various categories of persons, who
were disentitled, by operation of Section 12 (5), read with the Seventh
Schedule to the 1996 Act, from acting as arbitrators, as, in the present
case, the majority Award as assigned the task of determining the
entitlement of GMR, to NHAI itself. In my view, this is
impermissible.
67. While, therefore, issuing notice on this petition, returnable on
15th March, 2021, I deem it appropriate to appoint D. K. Jain, J. (r/o
C-3/5, Ground floor, Safdurjung Development Area, New Delhi -
1100016 Tel. No. 9999922288), one of the most respected retired
Judges of the Supreme Court, who has also adorned the bench of this
Court, the High Court of Punjab and Haryana (as Chief Justice) and of
the National Consumer Disputes Redressal Commission, as its
Chairperson, to undertake and complete the task which stands
assigned, by the Majority Award the present case, to the NHAI.
Inasmuch as D. K. Jain, J., would be effectively taking off from where
the learned Arbitral Tribunal passed its Award in the present case, and
solely for that reason, he would be referred to, hereinafter, as "the
learned Sole Arbitrator". The learned Sole Arbitrator would undertake
the task in accordance with paras 293 to 297 of the impugned Award.
68. For this purpose, GMR is directed to file, before the learned
Sole Arbitrator, a clear statement of its claim to compensation, under
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Clauses 41.1 and 41.3 of the Concession Agreement, with all
particulars thereof.
69. GMR is directed to contact the learned Sole Arbitrator at the
contact information provided hereinabove within 48 hours, so as to fix
a schedule for the proceedings and furnishing its statement of claim.
70. The discretion, on whether to permit GMR, or NHAI, to
introduce any further documents, beyond those which were already
filed during the arbitral proceedings conducted thus far, would rest
with the learned Sole Arbitrator. Needless to say, the learned Sole
Arbitrator would afford an adequate opportunity of hearing to both
sides, before arriving at his decision.
71. Given the magnitude of the task involved, I deem it appropriate
to enhance the time, available with the learned Sole Arbitrator, to
arrive at his decision, to six months, from the date of presentation, of
its claim, by GMR, to the learned Sole Arbitrator. Should the time
prove insufficient, it would be open to either party to apply to this
Court, for extension of time.
72. The learned Sole Arbitrator would be entitled to conduct the
proceedings at a venue suitable to him, subject to consent by GMR
and NHAI. He shall also be entitled to charge, for the said
proceedings, the fees being paid to the learned Presiding Arbitrator, in
the proceedings conducted thus far. The learned Sole Arbitrator
would also be entitled to requisition the services of an expert, or a
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team of experts, such as a reputed firm of Chartered Accountants,
should he deem it necessary. In such an eventuality, the learned Sole
Arbitrator would be entitled to fix the fees of such expert(s), after
consultation with both sides.
73. The decision, of the Sole Arbitrator, regarding the entitlement,
if at all, of GMR to compensation, would be provided to the parties,
and forwarded, to this Court, by the learned Sole Arbitrator.
74. Notice of this petition is accepted by Mr. Manish Bishnoi,
learned counsel for NHAI. Renotify on 15th March, 2021.
75. In view of the aforesaid direction, I.A. 3714/2020 does not
survive for further consideration, and stands disposed of.
O.M.P. (I) (COMM) 92/2020
76. Issue notice, returnable on 15th March, 2021. Notice is
accepted by Mr. Manish Bishnoi on behalf of the respondent.
77. Counter affidavit, in response to this petition, be filed within a
period of four weeks with advance copy to the petitioner who may file
rejoinder thereto if any, within a period of four weeks thereof.
78. This petition assails a communication, dated 16 th April, 2020,
by NHAI, demanding premium from GMR, in the context of the
Concession Agreement, dated 9th October, 2009 supra. GMR, in turn,
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contends that it was entitled to compensation, from NHAI, under
Clauses 41.1 and 41.3 of the Concession Agreement. Vide my
judgement and order hereinabove, I have upheld the applicability of
the aforesaid Clauses 41.1 and 41.3, to the claim of GMR, and have
appointed a learned Sole Arbitrator to adjudicate on the actual
entitlement of GMR, to compensation under the said clauses.
Inasmuch as the claim to premium, by NHAI, and the claim to
compensation, by GMR, constitute rival monetary claims, emanating
from the same Concession Agreement, the interests of justice, in my
view, would justify staying the recovery, from GMR, by NHAI, of
premium, in terms of the impugned letter dated 16 th April, 2020,
pending the decision of the learned Sole Arbitrator on the entitlement,
of GMR, to compensation. The considerations of balance of
convenience and irreparable loss would also, in my view, justify this
decision, given the amounts involved, and the fact that, were NHAI
ultimately to succeed, it would be open to NHAI to recover the
amount of premium, if recoverable, with or without interest, even at
that stage.
79. Accordingly, till the next date of hearing, the operation of the
impugned letter No. NHAI/PIU-Hyd/NH-65/Hyd-Vij/2020/430, dated
16th April, 2020, issued by NHAI to GMR, would stand stayed.
C. HARI SHANKAR, J.
AUGUST 4, 2020
HJ
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