Delhi High Court
National Highway Authority Of ... vs M/S Irb. Ahmedabad Vadodra Super ... on 4 July, 2022
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Reserved on: May 30, 2022
Pronounced on: July 04, 2022
+ O.M.P. (COMM) 70/2022 & IA Nos. 1403/2022 & 3918/2022
NATIONAL HIGHWAY AUTHORITY OF INDIA ..... Petitioner
Through: Mr. Prag Tripathi, Senior Advocate
with Mr. Ankur Mittal & Mr.Abhay
Gupta, Advocates
Versus
M/s IRB. AHMEDABAD VADODRA SUPER EXPRESS
TOLLWAYS PVT. LTD. ..... Respondent
Through: Mr. Atul Nanda, Senior Advocate
with Mrs. Rameeza Hakim,
Mr. Ravindra, Mr. S. Sachdev,
Mr. Apporv Aggarwal, Ms.Teressa R.
Dawat, Mr. Mohnish Pathak &
Mr. M. Singh, Advocates
CORAM:
HON'BLE MR. JUSTICE SURESH KUMAR KAIT
JUDGMENT
1. In the present petition filed under the provisions of Section 34 of the
Arbitration and Conciliation Act, 1996, petitioner has challenged the interim
arbitral award dated 14.10.2021 passed by the learned Arbitral Tribunal in
favour of the respondent on the ground that it interprets certain contractual
terms, which are subject to evidence which is yet to be led, and without
finally concluding the rights of the parties.
2. According to petitioner-NHAI, a Concession Agreement dated
25.07.2011 was entered into with respondent for augment of the National
Highway from 6.400 km to 108.700 km by six laning the same as well as for
improving the Ahmedabad Vadodra Expressway from 0.00 km to 93.302
km. in the state of Gujrat. According to petitioner, in terms of the aforesaid
Concession Agreement, respondent had acquired exclusive right, license and
authority to operate and maintain the project for 25 years from the appointed
date i.e. 01.01.2013 and also to demand and collect the appropriate toll from
the vehicles plying on the said Highways. Further, in terms of Clause 26.2.1
thereof, the respondent-concessionaire was required to pay fixed premium to
petitioner-NHAI till the subsistence of the Concession Agreement with an
annual increase @5%. Also, in terms of the aforesaid Clause, if payment of
such premium is due and payable only for part of such financial year, then
concessionaire had to pay the premium on pro-rata basis i.e. payments
@1/12th of such premium shall be payable for each month of such financial
year for which premium is due and payable. Petitioner/NHAI further claims
that concessionaire had also agreed to pay premium in the form of additional
concessional fee equal to Rs.309.60 crores in every financial year.
3. According to petitioner, in the year 2014, Government of India
sanctioned "Premium Deferment Scheme" outside the contractual
obligations undertaken by the parties under the Concession Agreement.
According to the said scheme, the premium payment obligation under the
Concession Agreement was relaxed and some portion of the annually
payable premium, as per the original clause in the Concession Agreement,
was deferred from 2014-15 till 2024-25 with interest @2% above the bank
rate payable after the deferment period from 2025-26, whereas during the
deferment period, only the revised premium was payable. However, the
benefit of the scheme was subject to review of actual revenue deficit with
project deficit at the end of every year and in case any surplus is available,
that would be utilized towards outstanding deferred premium including
interest of all previous years.
4. The respondent/claimant is said to have applied for the aforesaid
scheme vide application/ letter dated 25.03.2014, which was approved by
sanction letter dated 06.06.2014 by the petitioner. In sanction letter dated
06.06.2014 by the petitioner-NHAI, it was stipulated that in case the
revenue deficit at the end of the year is lesser than 5% of the figures
projected, the respondent-claimant shall be liable to pay a penalty of 2.5%
additional interest over and above the normal rate of interest. Thereafter, a
Supplementary Agreement dated 06.06.2014 was executed between the
parties, wherein deferment scheme of Government of India, application filed
by the concessionaire and sanction letter, was made part thereof.
5. Thereafter, on 24.02.2015 petitioner claims to have asked the
respondent to review for the financial year in terms of aforesaid Clause -3(o)
and submit report by 30.04.2015. In response, respondent/claimant informed
petitioner-NHAI that as against the projected deficit of Rs.236.71 crores, the
actual revenue deficit is lower by Rs.21.70 crores, which was thus Rs.9.86
crores in excess of 5% of the projected revenue deficit. Petitioner-NHAI
claims that the concessionary illegally retained surplus of Rs.29.73 crores
beyond its entitlement under the scheme, which it was obligated to pay the
petitioner in terms of Clause 3(o) of the sanction letter dated 06.06.2014.
6. Petitioner-NHAI further claims that on 06.12.2015, the provisional
commercial operation of the NH-8 commenced and as such, the toll
collection also began. Thereafter, vide letter dated 24.05.2017, respondent
raised the issue of Savli Road being the competing road and suggested to
consider the Hathijan Circle as the common end point on NH-8 and Savli
Road, so as to meet the conditions of Competing Road qua Savli Road.
7. During the course of hearing, learned senior counsel appearing on
behalf of petitioner submitted that the road shall be considered as a
competing road only if its length exceeds the length of project highway by
20%, whereas the Savli Road and Project Highway have different end
points. Attention of this Court was drawn to Para-22 of the petition to show
that if the end point of Savli Road has to be seen along side the project
highway to constitute whether it‟s a competing road or not, its length has to
be increased by 9 km to take it to the Narol Circile, Ahmedabad point and if
it has to end Vadodra end point, then length has to be increased by 500-700
meter. Thereby, the total length of alternative route becomes 128 Kms.,
which constitutes more than 20% of the length of project highway, which is
102.3 km approximately. Thereafter, petitioner -NHAI sent letter dated
04.09.2017 to the respondent demanding sum of Rs. 29.73 crores along with
interest and penal interest of 2.5 % over and above normal interest of bank
rate +2%. In reply thereto, respondent vide its letter dated 27.12.2017 stated
that it can retain 5% of surplus i.e. 11.84 crore (FY 14-15) by paying penal
interest on Rs.0.70 crores i.e. surplus over 5% and requested petitioner/
NHAI to retain Rs. 29. 73 crores as reserve to utilize it against subsequent
years shortfall. Again vide letter dated 08.10.2018, the respondent alleged
that NHAI has agreed two end points as Dhumad Chowkdi in Vadodra and
Hathijan Circle as Ahmedabad in conciliation meetings, which was denied
by petitioner-NHAI vide its reply dated 13.11.2018.
8. The aforesaid two disputes continued and various correspondence
were exchanged between the parties and respondent/claimant filed a writ
petition before the Bombay High Court challenging Section 8(A) of the
NHAI Act and the issue of existence of competing road, wherein the
Bombay High Court vide order dated 16.04.2019 relegated the parties to the
dispute resolution mechanism without expressing any opinion on merits and
permitted to invoke arbitration, however, Bombay High Court protected the
respondent/claimant from action of termination in case of default of
premium for the period of 3 months subject to petitioner‟s undertaking to
the court that in the event petitioner is unsuccessful in arbitration, the
premium for above period shall be payable as per deferment scheme. The
aforesaid order of the Bombay High Court was challenged by both the sides
before the Hon‟ble Supreme Court, though the Special Leave Petition filed
by the respondent/claimant was withdrawn.
9. In the meanwhile, respondent/claimant also invoked arbitration vide
its letter dated 06.04.2019 and filed a petition under Section 9 of the
Arbitration and Conciliation Act before this Court, whereunder constitution
of arbitral tribunal was denied vide order dated 16.04.2019 in view of
pendency of proceedings before the Bombay High Court. The Special Leave
Petition filed by the petitioner/ NHAI also stood dismissed vide order dated
11.09.2019 in view of the fact that both parties had resorted to arbitration
proceedings. However, thereafter, the parties appointed their respective
arbitrators and the arbitral tribunal was constituted. Further, vide orders
dated 30.06.2020 and 23.10.2020, the petitioner/ NHAI was restrained from
taking any coercive action against the respondent. In the meanwhile, the
arbitration proceedings continued.
10. Vide order dated 02.08.2021, the learned arbitral tribunal framed the
following preliminary issues:-
"A. Whether in context of determining the claim of the
Claimant that the Salvi Road is a "Competing Road" as
defined under Article 48.1 of the Concession Agreement, the
'end points' of Salvi Road are required to coincide with the
„end points‟ of the project highway for the Salvi Road to
qualify as a „Competing Road‟, subject to further conditions
laid under the said definition.
B. Whether the demand of INR 29. 73 crores for payment
of additional premium for the Financial Year 2014-15 as
also additional penal interest thereon made by the
Respondent/ Counter-Claimant against the Claimant is
legal in terms of Para 3(o) of the Sanction Letter dated
06.06.2014."
11. Vide order dated 14.10.2021, the learned arbitral tribunal decided
both the issues in favour of respondent/claimant, which are under challenge
before this Court.
12. The primary ground raised by the petitioner / NHAI is that the
impugned interim award is non-speaking and unreasoned and mere technical
reproduction of the written submissions of the parties and provisions of Rule
10 B of the Industrial Disputes Act, however, has failed to deal with the
contentions raised by the petitioner.
13. During the course of hearing, it was submitted on behalf of petitioner
that the learned arbitral tribunal has not dealt with dictionary meaning of
„end point‟ and „connected point‟ and if „Ahmedabad‟ and „Vadodra‟ are
taken as „end points‟ , then parameters for governing meaning of „competing
road‟ such like length of the road, shall fail. Also, the learned tribunal has
failed to consider that as per Schedule-A, Ahmedabad and Vadodra cannot
be considered as end points.
14. It is also urged that the respondent/claimant prior to the arbitral
proceedings had claimed that „Hathijan Circle‟ is the common end point and
the learned arbitral tribunal has failed to appreciate that the issue of
„competing road‟ is an afterthought to set the disputes. Learned counsel also
submitted that the interim award has been passed without strict
interpretation of the contractual provisions, ignoring the definition of
competing road, which mentions „two end points of the project highway in
context of the Concession Agreement‟.
15. It was next submitted that Ahmedabad and Vadodra do not have any
specific end points and there would be uncountable number of competing
roads, including NE-1. Learned counsel further submitted that Savli Road is
not a single road running from Ahmedabad to Vadodra but it is a
combination of roads which reach from A Ahmedabad to Vadodra and vice
versa and therefore, the assumption of learned arbitral tribunal that there
would seldom be road which would connect the project highway, is baseless
and perverse.
16. Further petitioner claims that the learned arbitral tribunal has
erroneously made distinction between „competing road‟ and „Clause-30.1.1‟
and further between „Clause- 30.1.1.‟ and „Clause-6.3‟ and failed to
appreciate that Clause- 30.1.1. has to read in aid of Clause-6.3, which is
similar to Clause-35.4, whereunder compensation for breach of contract is
mentioned. Learned counsel submitted that merely because chainage 6.400
km and 108.7 km is not mentioned within the definition of competing road,
Ahmedabad and Vadodra cannot be treated as end points. Also submitted
that project highway bears a linear character, having two definite end points
and therefore, the finding of arbitral tribunal that project highway is not of
linear character, is without any basis, as the toll of the project highway is
also determined on the basis of its length. It was empathically submitted that
in the Concessionaire Agreement, the term „end point‟ has not been
mentioned and the finding returned by the arbitral tribunal that the end
points should construe two cities i.e. Ahmadabad and Vadodra, is
misconceived.
17. It was submitted that road user ply on a road not only because it is toll
free but also another factors like traffic on the road, width of the road and
time taken on a particular journey, whereas the learned arbitral has ignored
all these aspects and only took into consideration that some of the roads are
toll free. It was urged that the arbitral award is based upon no evidence,
wherein the learned arbitral tribunal has aided the contractual terms, which
is impermissible. Thereby, the arbitral tribunal has erroneously considered
the „broad end points‟ of the project highway to bring Savli Road within the
definition of „competing road‟.
18. Further it was submitted that the surplus amount available with the
respondent under the deferment scheme is required to be submitted with the
petitioner, otherwise as per the Supplementary Agreement, the respondent
shall be liable to pay penalty. Though, it was fairly admitted that there is no
mention of the penalty amount but however, learned counsel emphasized
that it nowhere also mentions that the penalty has to be paid „at the end of
the deferment period‟ and thereby, the petitioner is entitled to recover it as
and when it becomes due and payable. On this aspect, learned counsel
submitted that the benefit of the scheme is to defer the payment of premium
if respondent is not able to pay, however, if respondent is permitted to retain
the excess money collected beyond the subsistence allowance, the entire
scheme would collapse. Whereas, the arbitral tribunal has ignored the
Premium Deferment Scheme which categorically holds that the surplus
amount of an year has to be adjusted towards the outstanding deferred
premium of all previous years, including the interest component and
respondent/ claimant cannot retain any surplus whatsoever. Next submitted
that if respondent is allowed to retain the excess amount, then it would result
into respondent-claimant retaining the excess of funds available with it,
whereas the petitioner/NHAI shall have to wait for the contractual premium
which respondent/claimant is liable to be pay every year.
19. To submit that that the opinion of the arbitral tribunal that Saavli road
is a competing road for all intent and purpose as being an alternative choice
to any traveller, being allegedly more commercially attractive, without there
being any issue framed in this regard, is liable to be set aside; reliance was
placed upon decision of Hon‟ble Supreme Court in Vijay Karia and Others
Vs. Prysman cavie sistemi SRL and Others (2020) 11 SCC 1.
20. Reliance is placed upon decision in GMR Pochanapalli Vs. NHAI
2022 SCC OnLine Del 980 to submit that while passing the impugned
interim award, the learned arbitral tribunal has ignored the vital evidence
and without consideration of relevant Clause-C of the deferment scheme
dated 04.03.2014. On this very aspect, reliance was also placed upon
decision in Ssangyong Engineering Vs. NHAI (2019) 15 SCC 131 and
Associate Builders Vs. DOA, (2015) 3 SCC 49: (2015) 2 SCC (Civ) 204 to
submit that finding based upon no evidence or ignoring vital evidence, is
perverse and is liable to be set aside.
21. To submit that by passing the impugned interim award, the learned
arbitral tribunal has aided the contractual terms, which is impermissible in
law, reliance is placed upon decisions in Rajasthan State Industrial
Development Vs. Diamond & Gem Development (2013) 5 SCC 470; Adani
Power Vs. GERC (2019) 19 SCC 9; J.P. Bansal Vs. State of Rajasthan
(2003) 5 SCC 134; Transmission Corporation of AP Vs. GMR Vemagiril
(2018) 3 SCC 716; Eagle Infra India Vs. NHAI FAO (OS) Comm No.
115/2018 and Industrial Promotion & Investment Vs. New India
Assurance (2016) 15 SCC 315. To submit that a Contract must be read as a
whole and not in piecemeal, reliance is placed upon The Hon'ble Supreme
Court‟s decision in the Nabha Power Limited vs. Punjab State Power
Corporation Limited & Another, (2018) 11 SCC 508.
22. Learned counsel for petitioner also contended that the arbitral tribunal
has placed reliance upon various decisions as if it was finally deciding the
matter, though at the interim stage final expression on merits has to be
avoided.
23. Lastly, it was vehemently submitted on behalf of petitioner/NHAI that
the learned arbitral tribunal has failed to appreciate that dispute resolution
Clause- 44, limits its applicability to disputes, differences or controversy
arising out of or in relation to the Concession Agreement and any issue
arising out of Supplementary Agreement has to be adjudicated in terms of
and that the Concession Agreement did not contemplate premium deferment
and so, the grant or withdrawal of premium deferment scheme neither arises
under or out of or in relation to the Concession Agreement and thereby, the
disputes between the parties are not arbitrable.
24. On the other hand, learned senior counsel appearing on behalf of
respondent/claimant submitted that the present petition challenging the
interim arbitral award deserves to be rejected as petitioner/NHAI has
unfairly submitted that the disputes inter se parties are not arbitrable.
Learned senior counsel submitted that the order dated 02.08.2021; framing
the preliminary issues, is a consent order, which did not require leading
evidence and the said order clearly mentions that irrespective of the issues
be determined in favour of petitioner or respondent, the learned Arbitral
Tribunal would have to determine further aspects of dispute, after leading
the evidence. It was submitted that petitioner/NHAI has also participated in
the framing of issues and had even sought modification of some issues,
which stand recorded in the order dated 18.12.2021 and 04.01.2022 passed
by the learned arbitral tribunal.
25. Learned senior counsel appearing on behalf of respondent submitted
that the order impugned is a well merited order and does not call for any
interference by this Court. Even otherwise, interpretation of contractual
clauses by the arbitral tribunal is within its domain and if the view expressed
by arbitral tribunal is a possible view, this Court should not interfere. To
submit so, reliance was placed upon decisions in Mcdoermott International
Inc. Vs. Burn Standard Co. Ltd. & Ors. (2006) 11 SCC 181; Associate
Builders Vs. Delhi Development Authority (2015) 3 SCC 49; SSangyong
Engineering & Construction Company Limited Vs. NHAI (2019) 15 SCC;
Project Director National Highways Vs. M. Hakeem and Anr. (2021) 9
SCC 1 and Delhi Airport Metro Express Pvt. Ltd. Vs. Delhi Metro Rail
Corporation Ltd. (2022) 1 SCC 131.
26. Further submitted that for the purpose of determining true meaning of
„competing road‟ the learned arbitral tribunal has also determined meaning
of „end points‟, as the same has not been mentioned in the Concession
Agreement.
27. Next submitted that after rendering elaborative reasons on the claims
putforth by the respondent, the learned arbitral tribunal has accepted the two
out of four claims after due deliberation of mind and then arrived at a
finding; and that it is not mere reproduction of written submissions, as
claimed by the petitioner/NHAI. Learned senior counsel submitted that by
raising the objection of copy-paste of written submission, the
petitioner/NHAI is pressing this Court to interfere with the reasoning of the
arbitral tribunal, which is not permissible under Section 34 of the Act.
28. It was submitted on behalf of respondent that contention of petitioner
that if Ahmedabad and Vadodra are taken as end points, then it would be
difficult to apply test for the other parameters, deserves rejection as the
learned arbitral tribunal in Paras- 1, 106, 113 and 126 itself has observed
that the other parameters of the competing road shall be determined after
leading the evidence.
29. Learned senior counsel representing respondent next submitted that
the relevant clause in the agreement provides that no additional toll way
shall be constructed between specific chainges of the project highway,
which meant that no parallel road shall run alongside project highway and as
contended by petitioner, the term „connecting the endpoints of project
highway‟ is nowhere used in the agreement. Further submitted that the
purport therefor is to ensure that no parallel toll way exists alongside project
highway.
30. It was contended on behalf of respondent that the impugned arbitral
award notes that Savli Road is an alternative choice for any passenger and
the learned tribunal has nowhere held that Savli Road is an alternative route
and for determination hereto, Issue No.2 has been framed.
31. Learned senior counsel submitted that in the impugned arbitral award,
learned arbitral tribunal has interpreted the Clause-3(o) of the
Supplementary Agreement on the aspect whether the respondent is liable to
pay the premium forthwith or is liable to pay later with interest, for which
detailed reasons have been given and it is beyond the scope of this Court to
interference as is provided under Section 34 of the Act. Also submitted that
the Supplementary Agreement dated 06.06.2014 is not a standalone
document and it is infact „Supplementary Agreement to the Concession
Agreement‟ and the premium payable under the Supplementary Agreement
has to be paid in terms of Concession Agreement, as is required under
Article 47.10 of the Concession Agreement. With regard to Clause 3(o) it
was also submitted that the intent of Concession Agreement is also that the
surplus funds are first utilized for operation and maintenance cost and to the
extent of shortfall and debit servicing; and the balance be paid as premium.
32. On behalf of respondent, it was further submitted by learned senior
counsel that the amount of premium payable as per Supplementary
Agreement is fixed and the revised premium payable under the deferment
scheme shall be paid with higher interest i.e. 2% above bank rate. Thereby,
the petitioner/NHAI shall be compensated for the time it has to wait for the
deferred premium. Moreover, Clause-3(o) provides for levy of additional
interest 2.5% above 2% plus bank rate and respondent/claimant had to
waive off all its claims for damages on account of delay by NHAI in
complying with the conditions precedent. Also, the application of the
claimant/respondent made for the deferment scheme, which is part of
Supplementary Agreement, records the date for payment of deferred
premium along with interest, which was accepted by petitioner/NHAI.
Therefore, the arbitral tribunal has rightly held that the additional interest
under Clause 3(o) is payable when the deferred premium with normal rate of
interest is paid. Learned senior counsel submitted in view of Clause-3(o),
reliance placed by petitioner /NHAI upon Clause-C of the scheme to submit
that the repayment of deferred premium and interest shall be as per the
repayment procedure of revenue shortfall Loan at Article-28, deserves to be
rejected as the Clause-C itself states that the deferred premium shall be paid
from the surplus cash after payment of debt and operation and maintenance
costs.
33. Learned senior counsel drew attention of this Court to Clause-3 of the
sanction letter to submit that Clause-C of the scheme has been noted as
Clause- 3 (h), according to which till the deferred premium amounts with
interest and penal interest are not paid, the concessionaire shall not claim
any return on equity.
34. Lastly, it was submitted on behalf of respondents that the impugned
arbitral award has been passed only on preliminary issues and without
expressing any final opinion on merits and, therefore, the present petition
deserves to be dismissed.
35. The learned senior counsel representing both the sides were heard at
length and the impugned interim arbitral award as well as decisions cited
have been considered by this Court.
36. The Hon‟ble Supreme Court in National Highways No. 45E and 220
National Highways Authority of India Vs. M. Hakeem, 2021 SCC OnLine
SC 473 has held that under Section 34 of the Arbitration and Conciliation
Act, 1996, Courts cannot modify or vary an arbitral award. It has been
further held that "given the very limited judicial interference on extremely
limited grounds not dealing with the merits of the award, the "limited
remedy" under Section 34 is coterminous with the "limited right" namely,
either to set aside an award or remand the matter under the circumstances
mentioned in Section 34 of the Arbitration Act, 1996."
37. The Supreme Court in Delhi Airport Metro Express Pvt. Ltd. Vs.
Delhi Metro Rail Corporation Ltd. 2021 SCC OnLine SC 695 has
observed as under:-
"25. This Court has in several other judgments
interpreted Section 34 of the 1996 Act to stress on
the restraint to be shown by courts while examining
the validity of the arbitral awards. The limited
grounds available to courts for annulment of
arbitral awards are well known to legally trained
minds. However, the difficulty arises in applying
the well-established principles for interference to
the facts of each case that come up before the
courts. There is a disturbing tendency of courts
setting aside arbitral awards, after dissecting and
reassessing factual aspects of the cases to come to
a conclusion that the award needs intervention and
thereafter, dubbing the award to be vitiated by
either perversity or patent illegality, apart from the
other grounds available for annulment of the
award. This approach would lead to corrosion of
the object of the 1996 Act and the endeavours
made to preserve this object, which is minimal
judicial interference with arbitral awards. That
apart, several judicial pronouncements of this
Court would become a dead letter if arbitral
awards are set aside by categorising them as
perverse or patently illegal without appreciating
the contours of the said expressions.
26. Patent illegality should be illegality which goes
to the root of the matter. In other words, every
error of law committed by the Arbitral Tribunal
would not fall within the expression „patent
illegality‟. Likewise, erroneous application of law
cannot be categorised as patent illegality. In
addition, contravention of law not linked to public
policy or public interest is beyond the scope of the
expression „patent illegality‟. What is prohibited is
for courts to re-appreciate evidence to conclude
that the award suffers from patent illegality
appearing on the face of the award, as courts do
not sit in appeal against the arbitral award. The
permissible grounds for interference with a
domestic award under Section 34(2-A) on the
ground of patent illegality is when the arbitrator
takes a view which is not even a possible one, or
interprets a clause in the contract in such a manner
which no fair-minded or reasonable person would,
or if the arbitrator commits an error of jurisdiction
by wandering outside the contract and dealing with
matters not allotted to them. An arbitral award
stating no reasons for its findings would make itself
susceptible to challenge on this account. The
conclusions of the arbitrator which are based on
no evidence or have been arrived at by ignoring
vital evidence are perverse and can be set aside on
the ground of patent illegality. Also, consideration
of documents which are not supplied to the other
party is a facet of perversity falling within the
expression „patent illegality‟.
XXXXX
XXXXX
XXXXX
36. The Division Bench referred to various factors
leading to the termination notice, to conclude that
the award shocks the conscience of the court. The
discussion in paragraph 97 of the impugned
judgment amounts to appreciation or re-
appreciation of the facts which is not permissible
under Section 34 of the 1996 Act. The Division
Bench further held that the fact of the AMEL being
operated without any adverse event for a period of
more than four years since the date of issuance of
the CMRS certificate, was not given due
importance by the Arbitral Tribunal. As the
arbitrator is the sole judge of the quality as well as
the quantity of the evidence, the task of being a
judge on the evidence before the Tribunal does not
fall upon the court in exercise of its jurisdiction
under Section 34. On the basis of the issues
submitted by the parties, the Arbitral Tribunal
framed issues for consideration and answered the
said issues. Subsequent events need not be taken
into account."
38. The settled position of law is that Section 34 of the Act does not
empower a Court to deal with the claims already dealt with by the arbitral
tribunal, as the same would amount to the Court acting as an appellate court,
which is impermissible. However, the provisions of Section 34 of the Act do
not fetter the powers of the Court to adjudge if the Award in question suffers
from any patent illegality or not. In the petition in hand, the petitioner/
NHAI has challenged the interim arbitral award dated 14.10.2021 passed by
the learned arbitral tribunal under the provisions of Section 34 of the
Arbitration and Conciliation Act, 1996.
39. Parties to the present petition had entered into a Concession
Agreement dated 25.07.2011 for construction and improvement of
Ahmedabad Vadodra Expressway, according to which respondent had
exclusive right and authority to operate and maintain the project highway for
a period of 25 years from 01.01.2013 and to collect the toll from the
vehicles plying on the said highway. Consequent upon sanction of
"Premium Deferment Scheme" by the Government of India in the year
2014, the premium payment obligation under the aforesaid Concession
Agreement was relaxed; the respondent/claimant applied for the said scheme
vide application/ letter dated 25.03.2014, which was sanctioned by
petitioner/NHAI vide letter dated 06.06.2014. Thereafter, a Supplementary
Agreement dated 06.06.2014 was executed between the parties and the
application of respondent/claimant seeking deferment scheme and sanction
by petitioner/NHAI, was made part thereof and it also incorporated the date
for payment of deferred premium along with interest thereon.
40. The foundation of the present petition rests upon Concession
Agreement dated 25.07.2011; "Premium Deferment Scheme" dated
04.03.2014; sanction letter dated 06.06.2014 issued by petitioner/NHAI and
Supplementary Agreement dated 06.06.2014.
41. The relevant partition of Supplementary Agreement dated 06.06.2014
reads as under:-
"D. The Concessionaire having found themselves
eligible to avail of the benefit of deferment of
premium under the Scheme in accordance with
terms and conditions setforth therein, has submitted
their application dated 10thMarch, 2014 requesting
the Authority to permit them to avail, of the benefits
under the Scheme.
E. The authority in their meeting held on
considered the application of the Concessionaire
and had approved the request of the
Concessionaire for deferment of Premium in
accordance with the Scheme on terms and
conditions conveyed vide NHAI letter reference
No.------------------ dated 06.06.2014."
42. The relevant portion of Sanction Letter dated 06.06.2014, which has
been made part of the afore-noted Supplementary Agreement of even date,
reads as under:-
"1. After due consideration to the application
for deferment for premium payable, the
Authority/NHAI hereby grants its approval in
principle for the deferment of premium payable by
the concessionaire for the following specified years
to the extent and as detailed below for the
respective years only.
year Premium Deferment of Revised
payment as premium premium
originally granted payable
contracted under the
scheme
2014-15 341.33 236.71 104.62
2015-16 358.40 248.98 109.42
2016-17 376.32 266.28 110.04
2017-18 395.14 234.75 160.39
2018-19 414.89 205.56 209.33
2019-20 435.64 279.69 155.95
2020-21 457.42 114.93 342.49
2021-22 480.29 53.00 427.29
2022-23 504.31 25.73 478.58
2023-24 529.52 0 529.52
2024-25 556.00 73.74 482.26
2. No Deferment of premium shall be permitted in
excess of the amounts mentioned above during the
respective years.
3. All conditions contained vide MORTH letter
reference no NH37012/ 22/2011-H(Pt.III) dated
04/03/2014 (attached herewith) shall be applicable
to the deferment of premium now granted,
including those conditions modified as restated
hereunder and other conditions as follows,
a. The financial stress as per Art.
28 of the Concession Agreement shall
be limited to the premium payment and
not linked to any cash shortfall on
account of O&M expenses, debt
servicing etc.
b. Till the amounts of deferred
premium are repaid or recovered,
from the date such amounts are
deferred, they shall at all times carry
an interest rate equal to 2% above the
Bank Rate per annum as specified in
Article 28 of the MCA. As and when
the Bank Rate of RBI changes, the
interest rate applicable also would
undergo a corresponding change.
Interest will be compounded annually
and calculated on the daily
outstanding balance of deferred
premium. In the event of any tax being
imposed on the interest so paid/
payable, such amounts will be
recovered separately over and above
the applicable interest liability.
c. There shall be no change in
the waterfall prescribed for
withdrawal from the Escrow Account
as provided in Article 31 of the MCA.
d. In the event of Termination,
the outstanding premium and deferred
premium, including interest thereon,
shall be recovered in full along with
other recoveries as prescribed in
Article 31.4 of the MCA.
e. In case the project revenues
are more than projected, NHAI will
have the right to advance the
payments. Wherever considered
necessary by NHAI this shall be in
consultation with the senior lenders.
f. Traffic variation: In the event of any
reduction in the concession period
owing to Article 29 of the Concession
Agreement, the premium flows shall be
suitably adjusted to keep the NPV
unchanged.
g. To adequately protect the
interest of NHA/Government, the
concessionaire is required to submit a
Bank Guarantee as an additional
comfort favoring NHAI for a value of
RS.315.,70 Crores. [Rs.Three hundred
and fifteen Crores and seventy lacs
only). This shall be returned to you
when the project is completed.
h. The concessionaire will not be
permitted to make any claim on return
on equity till the outstanding deferred
premium obligations along with
interest thereon are fully met and till
the premium equals or exceeds the
originally quoted premium for that
particular year, provided that the
Concessionaire shall repay the entire
Revenue Shortfall Loan and interest
thereon no later than interest thereon
no later than one year prior to the
expiry of the Concession Period and in
the event that any sum remains due or
outstanding at any time during such
period of one year, the Authority shall
be entitled to terminate this Agreement
forthwith.
Notwithstanding anything contained
herein, the Authority will have the
right to terminate the Concession at
any point of time if in the sole opinion
of the Authority the deferred premium
(with interest thereon outstanding)
alongwith Debt Due is more than the
"potential fee flows" available from
the project for the balance period of
concession, deeming the same to be a
Concessionaire Event of Def a ult. For
this purpose, the "potential fee flows"
would be the value arrived at by
multiplying the average monthly fee
collection reported for the previous 12
months with the balance number of
months of concession period.
XXXXXX
XXXXXX
XXXXXX
o. If revenue deficit as actually
seen on review at the end of the year is
lesser by more than 5% of the figures
given under the projections now being
considered, the concessionaire will be
liable to pay a penalty of 2.5%
additional interest over and above the
normal interest of Bank Rate + 2%, on
the said excess. However if the
Concessionaires effects the required
correction and increases the premium
payment so as to have no excess by the
end of the relevant year, no such
penalty would be imposed."
43. It is not disputed that when the petitioner/NHAI vide letter dated
24.02.2015 urged the respondent to review the actual revenue deficit in
terms of Para-3(o) of the Sanction Letter dated 06.06.2014 and asked that
the payments for the financial year 2014-15 are required to be made before
31.03.2015, the respondent/ claimant informed that as against the projected
deficit of Rs.236.71 crores, the actual revenue deficit is lower by Rs.21.70
crores, however, in terms of the Premium Deferment Scheme" dated
04.03.2014, the respondent/claimant was not bound to make the payment of
deferred premium. Over and above, issues with regard to Savli Road being a
competing road and also about consideration of Hathijan Circle as common
end point of NH-8 and Savli Road, also arose between the parties. After
exchange of series of communications and raising these issues from
Bombay High Court till the Hon‟ble Supreme Court, the parties invoked
arbitration.
44. The learned arbitral tribunal vide order dated 02.08.2021, framed the
two preliminary issues with the consent of both the sides, which have been
noted in Para-10 above. Vide impugned order dated 14.10.2021, the
preliminary issues were answered in favour of the claimant/respondent. The
learned arbitral tribunal in Para-1 of the impugned order has observed as
under:-
"Before adverting to the detailed facts, submissions
of counsel and findings in the matter, it is restricted
to only two preliminary issues and in fact (as
emanated from submissions of counsel), further
restricted to only certain aspects of even such
preliminary issues. During the course of hearings,
it became evident that the final adjudication and
determination of certain elements, even pertaining
to such preliminary issues, would ultimately rest
upon and be dependent on evidence to be lead by
parties, should the said issues be decided in favour
of the claimant. This interim award may hence be
read and construed in this light."
45. In the aforesaid background, the learned arbitral tribunal held as
under:-
121. The Claimant has sought to contend that
there was an excess of Rs. 9.86 crores above the
5% threshold for the Financial Year 2014-15,
however the said excess was merely notional as
forex losses to the tune of Rs. 7.39 crores were
incurred towards repayment of the principal
component of the ECB. The Respondent has
contested such deductions claimed on account of
forex losses incurred in subsequent years but
sought to be adjusted by the Claimant in previous
years. Given that for the present the Tribunal is not
entering into the issue of quantum of excess over
the 5% threshold at this stage, no findings are
being rendered on this aspect for the present.
122. However, on an interpretation of Clause
3(o), the Claimant is correct in its submission that
it is entitled to pay the additional penal interest on
the portion which exceeds 5% as opposed to
additional premium and the same would also be
payable later. It is amply clear from a reading of
Clause 3(o) that even if it was determined that
there was an excess (above the 5% threshold) then
the Clause only provides for levy of an additional
interest of 2.5% as penalty, on such excess over
and above the normal interest of 2% + Bank rate
already being charged for the deferred portion of
premium. NHAI is not entitled to additional
premium as well as penal interest over and above
normal interest. In fact, Clause 3(o) clearly states
that if IRB effects required correction by paying
additional premium so as not to have such excess
by the end of the year, then no penalty would be
imposed.
123. Therefore, the Respondent‟s claim and
consequently demand that the Claimant ought to
pay the additional premium amount of INR 29.73
Crores, being the purported excess, as well as
penalty of additional interest of 2.5% over and
above normal interest, is unsustainable being in
contravention of the terms of the „Sanction Letter‟/
„Supplementary Agreement‟ dated 06.06.2014. In
no event can the Respondent be entitled at this
stage to the penalty of additional interest over and
above the normal interest as well as the additional
premium amount. The interpretation sought to be
canvassed by the Respondent is not borne out by or
is not in sync with the language of Clause 3(o) of
the „Sanction Letter‟.
124.There is also merit in the Claimant‟s
submission that the penalty of additional interest
would be payable at the end of the deferment
period. a reading of the deferment scheme shows
that the parties agreed that payment of deferred
premium amount shall commence form FY 2025-
2026 and the interest of 2% above bank rate would
also be paid at the time of such deferred payment.
Further Clause 3(b) which provides for levy of the
normal interest of 2% above bank rate simply
states that till the amounts of deferred premium are
repaid they shall at all times carry the interest rate
equal to 2% above bank rate. When this amount in
to be repaid is provided in the Claimant‟s
application for premium deferment. Similarly,
Clause 3(o) provides that in the event of any
difference between the projections vis-à-vis the
actual shortfall, then a penalty in the form of
additional interest would be charged on the amount
exceeding the 5% threshold. Therefore, clearly the
penalty of additional interest @2.5% over and
above normal interest of 2% above bank rate is
also payable at the end of the deferment period,
when the deferred premium amount and the normal
interest becomes payable.
125. Issue No.(B) is decided in these terms.
126. It is clarified that presently the Tribunal has
only examined one aspect of the definition of
„Competing Road‟ i.e. connecting the end points of
the Project Highway and serving as an alternative.
We have not examined the complete foray of issues
in connection with „Competing Road‟ and/or its
impact on the payment of the premium. Further, at
this stage, the Tribunal has not ventured to tender
findings on the plea of limitation raised by the
Claimant qua Counter Claim 1 set-up by the
Respondent. The said objection though taken by the
Claimant in its Statement of Defence to the
Counter-Claim has not been argued and the
Respondent/ Counter-Claimant intends to lead
evidence on the said issue. The aspect of quantum
of excess above the threshold of 5% as envisaged
under Clause 3(o) of the „Sanction Letter‟ has also
not been determined by the Tribunal awaiting
evidence being led by the parties."
46. Upon conjoint reading of the afore-noted paragraphs of the impugned
order, this Court finds that while passing the impugned order, the learned
tribunal was conscious that the final outcome of the award shall depend
upon the evidence to be led by the parties and has only therefore, adverted to
the material placed on record for the purpose of deciding the two
preliminary issues. In this light, the objection of petitioner/NHAI that the
learned arbitral tribunal has passed the impugned order as if it is finally
deciding the matter, does not sustain and therefore, reliance placed upon
various decisions is of no help to the case of petitioner.
47. With regard to the objection of the petitioner/NHAI that the impugned
interim order passed by the arbitral tribunal is nothing but copy-paste of
written submissions on behalf of the parties and it is non-speaking and
unreasoned, this Court finds that the learned tribunal has taken down the
submissions advanced by the parties and given elaborative reasoning on
every aspect. This objection is highly unacceptable to this Court.
48. So far as objection of the petitioner/NHAI that the learned tribunal
has not dealt with meaning of „competing road‟ and „end point‟ in their right
perspective and has wrongly interpreted Clauses-30.1.1; 6.3 and 35.4 of the
Concession Agreement, and therefore, Ahmedabad and Vadodra cannot be
considered as end points, is concerned, this Court is in consonance with the
view expressed by the learned tribunal that if a road is constructed in such a
manner that it starts and ends at the exact points or runs parallel to the
project, then it is a competing road. On the question whether Savli Road is a
competing Road or not, the learned tribunal has observed that it would
depend upon the width and length of the road, which is left open for
determination at a later stage. Hence, this Court also refrains from passing
any observation on this aspect.
49. As far as the claim of the petitioner/NHAI that the learned arbitral
tribunal has not considered that the surplus amount available with the
respondent under the deferment scheme, is required to be submitted with the
petitioner and that the petitioner/NHAI is entitled to recover it as and when
it becomes due and payable, is concerned, this Court finds that Clause-3(o)
of the Sanction Letter mandates that if the revenue deficit at the end of the
year is lesser by more than 5% of the figures given under the projections,
the concessionaire will be liable to pay a penalty of 2.5% additional interest
over and above the normal interest of Bank Rate + 2%, on the said excess.
However, it is nowhere mentioned that the amounts due are required to be
paid forthwith. Moreover, the respondent/ claimant has not disputed
payment of premium as per Clause-3(o) and further Clause-3(h) of the has
already bounded the concessionaire to make any claim on return on equity
till the outstanding deferred premium obligations along with interest thereon
are fully met.
50. In view of the above, finding no perversity in the interim arbitral
order dated 14.10.2021, the present petition is dismissed, while refraining to
express any opinion on the merits of the case. Pending applications are
disposed of as infructuous.
(SURESH KUMAR KAIT)
JUDGE
JULY 04, 2022
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