Delhi High Court
National Highway Authority Of ... vs Shree Jagannath Expressways Pvt. ... on 7 March, 2022
IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 07.03.2022
+ O.M.P. (COMM.) No.51/2018
NATIONAL HIGHWAY AUTHORITY
OF INDIA .... Petitioner
versus
SHREE JAGANNATH EXPRESSWAYS
PVT. LTD. .... Respondent
Advocates who appeared in this case:
For the Petitioner : Ms Pinky Anand, Senior Advocate with Mr
Alok Kumar Jain, Mr Sumit Teterwal, Ms
Saudamini Sharma and Ms Kirti Dua,
Advocates.
For the Respondent : Mr Jaideep Gupta, Senior Advocate with
Ms Priya Kumar, Ms Aanchal Mullick and
Mr. Anirudh Bhatia, Advocates.
CORAM
HON'BLE MR JUSTICE VIBHU BAKHRU
JUDGMENT
VIBHU BAKHRU, J
1. National Highway Authority of India (hereinafter the 'NHAI')
has filed the present petition under Section 34 of the Arbitration and
Conciliation Act, 1996 (hereinafter the 'A&C Act') impugning an
arbitral award dated 29.09.2017 (hereinafter the 'impugned award')
delivered by the Arbitral Tribunal consisting of Justice (Retired) V.K.
Gupta, Justice (Retired) G.T. Nanavati and Justice (Retired) Deepak
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Verma as the Presiding Arbitrator (hereafter the 'Arbitral Tribunal').
The impugned award was delivered by majority, with Justice (Retired)
G.T. Nanavati entering a separate dissenting opinion with regard to the
claims awarded.
2. The impugned award was rendered in the context of disputes that
have arisen between the parties in connection with the Concession
Agreement dated 06.08.2010 (hereafter the 'Concession Agreement').
Factual Background
3. In March 2008, NHAI through publication invited Request for
Qualification (RFQ) for the work of "Six laning of Chadikhole-
Jagatpur-Bhubaneswar section of NH-5 from Km 413.00 to 418.00 and
from Km 0.00 to Km 62.00 in the State of Odisha" (hereinafter the
'Project') on design, build, finance, operate and transfer (DBFOT)
basis. The concerned section of the National Highway is hereafter,
referred to as the 'Project Highway'. After short listing the eligible
bidders, NHAI issued a Request for Proposal (RFP).
4. Pursuant to the said RFP, the respondent (hereinafter 'SJE')
submitted its bid and after evaluation of the bids, a Letter of Award
(hereinafter the 'LoA') was issued in favour of SJE by NHAI on
29.04.2010.
5. Thereafter, on 06.08.2010, the Concession Agreement was
signed between the parties.
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6. In terms of the Concession Agreement, SJE was granted the
exclusive right, license and authority to construct, operate and maintain
the Project Highway for a period of 26 years (including a construction
period of 910 days) commencing from the appointed date. Further, SJE
was also given the right to collect toll at the rate prescribed under the
Fee Notification (hereinafter the 'Fee Notification').
7. In terms of Clause 4.1.2(b) of the Concession Agreement, one of
the conditions precedent to be fulfilled by NHAI was the issuance of
the Fee Notification, which enabled SJE to collect toll at the prescribed
rate.
8. On 02.11.2010, NHAI forwarded a draft of the Fee Notification
and sought SJE's consent regarding the same. SJE, responded by a letter
dated 15.11.2010, pointing out certain inconsistencies with the draft of
the Fee Notification. Thereafter, on 19.01.2011, SJE sent a letter
referring to Schedule R of the Concession Agreement and requested
NHAI to modify the Fee Notification in conformity with the said
schedule.
9. It is material to note that the Project Highway existed and in terms
of the Concession Agreement, SJE was entitled to collect toll from the
Appointed Date - the date on which the Project entered commercial
service in terms of Clause 15.1.1 of the Concession Agreement. Clause
15.1.1 of the Concession Agreement specified that SJE would be
entitled to demand and collect user fee, in accordance with Clause 27
of the Concession Agreement, with effect from the Commercial
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Operation Date ('COD'). It also stipulated that the COD would be the
date on which the Conditions Precedent as specified in Clause 4 of the
Concession Agreement were complied with or waived. Thus, SJE could
commence tolling in respect of the Project Highway of a length of 67
kms from the Appointed Date, that is, even prior to completion of six-
laning of the Project Highway. The Project Highway also included a
bridge over river Mahanadi (hereinafter the 'Mahanadi Bridge') of a
length of 2.25 kms. Additionally, three lanes were required to be added
to the Mahanadi Bridge. The disputes between the parties centered
around the question whether SJE could collect additional toll in respect
of the Mahanadi Bridge prior to completing six-laning of the Project
Highway.
10. On 29.04.2011, NHAI, once again, forwarded the Draft Fee
Notification, without incorporating the suggestions of SJE, and called
upon SJE to give its consent to the same. The Draft Fee Notification
provided for tolling of the Mahanadi Bridge, on completion of the six-
laning. In response to this, by a letter dated 04.05.2011, SJE conveyed
its consent to the Draft Fee Notification subject to its right to seek
"suitable contractual remedies".
11. On 10.06.2011, NHAI sent another letter seeking unconditional
consent from SJE that it would not raise any litigation with respect to
the Draft Fee Notification. SJE responded by a letter dated 16.06.2011
complying with the said request.
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12. The Fee Notification was finally published in the Official Gazette
by the Ministry of Road, Transport and Highways (MORTH) on
19.10.2011.
13. On 28.02.2014, SJE informed NHAI that the construction of
Mahanadi Bridge (additional three lanes) had been completed and thus,
it was entitled to collect additional toll under the provisions of the
Concession Agreement.
14. Thereafter, on 08.04.2014, after completion of all tests, the
Mahanadi Bridge was opened to traffic.
15. On 30.04.2014, SJE through its letter, proposed to NHAI to
revise the User Fee Rates, which were to be effective from 01.04.2014.
However, NHAI, by a letter dated 28.05.2014, denied SJE's request to
permit collection of additional toll for the Mahanadi Bridge. According
to NHAI, SJE could collect additional toll in respect of the Mahanadi
Bridge only after competition of the six-laning of the Project Highway.
16. The Completion Certificate for the Mahanadi Bridge was issued
on 02.05.2014 after completing all the requisite formalities as stipulated
in the Concession Agreement.
17. On 08.07.2014, SJE lodged a claim for loss of toll for the period
of 08.04.2014 to 31.05.2014 amounting to ₹6,54,72,105/-. SJE
continued to update its claim periodically. However, NHAI did not
accept SJE's demand for revising the User Fee Rates to include
additional toll for the Mahanadi Bridge.
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18. SJE being aggrieved by NHAI declining to revise the User Fee
Rates to include additional toll in respect of the Mahanadi Bridge,
issued a notice dated 04.11.2015 initiating the dispute resolution
mechanism. A committee of 3 CGMs was constituted to assist the
parties in resolution of the disputes. However, the Conciliation attempts
failed.
19. On 29.12.2015, SJE invoked Clause 44.3 of the Concession
Agreement (the Arbitration Clause) and sought reference of the disputes
to arbitration.
20. The following claims were made by SJE in the Statement of
Claims:
Claim Particulars
Claim no.1 Loss of Revenue due to non-
collection of enhanced toll after the
completion of construction of
Mahanadi Bridge from 08.04.2014
till the date tolling is allowed to be
started thereupon (claim raised till
June 2016 was ₹104,05,69,939/-
which included a principal amount of
₹90,33,30,660/- and interest of
₹13,72,39, 279/-)
Claim no.2 claim for interest @ 5% over the bank
rate on claim 1 from the due date of
payment i.e. 08.04.2014 till the actual
date of payment
Claim no.3 Costs as accrued
21. NHAI filed its Statement of Defence, however, it did not raise
any counter-claims.
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22. In the meantime, during the course of the arbitral proceedings,
the Provisional Completion Certificate for the Project Highway was
granted on 06.01.2017 and SJE was permitted to collect the revised User
Fee from 25.02.2017.
23. The impugned award was rendered by the Arbitral Tribunal on
29.09.2017.
24. The impugned award was delivered by majority. Justice
(Retired) G.T. Nanavati penned a dissenting opinion rejecting the
claims made by SJE. The Arbitral Tribunal (by majority) awarded a sum
of ₹104,05,69,939/-, in favour of SJE. In addition, it also awarded pre-
award interest at the rate of 5% above the bank rate; future interest at a
rate of 2% above the bank rate; and costs amounting to ₹45 lacs.
25. Aggrieved by the impugned award, NHAI has filed the present
petition.
Submissions
26. Ms Pinky Anand, learned senior counsel appearing for NHAI,
contended that the arbitral award was vitiated by patent illegality as it
was beyond the terms of the Concession Agreement and was, ex facie,
contrary to the plain language of the Fee Notification. She contended
that the Arbitral Tribunal (majority) had in fact re-written the terms of
the Fee Notification, which is impermissible. She submitted that the
Fee Notification expressly provided that the words and expressions,
which were not defined in the Fee Notification but were defined in the
Concession Agreement, would have the same meaning as assigned to
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them in the Concession Agreement. She stated that the expression 'Six-
Laning' and 'Construction Period' were defined under the Concession
Agreement and the conclusion of the Arbitral Tribunal that SJE was
entitled to collect additional toll in respect of the Mahanadi Bridge prior
to completion of the Project (Six-Laning of the Project Highway) and
during the Construction Period, was contrary to the plain language of
the Fee Notification.
27. She submitted that the Arbitral Tribunal had embarked on an
exercise to interpret the Fee Notification contrary to its plain language
on the premise that it was not in conformity with Schedule R of the
Concession Agreement and therefore, was required to be interpreted on
a conjoint reading with Schedule R. She submitted that neither the Fee
Notification, read on its plain terms, nor the draft of the Fee
Notification, as set out in Schedule R, permitted additional tolling in
respect of the Mahanadi Bridge from the date of its completion. She
contended that the findings of the Arbitral Tribunal were thus, patently
erroneous.
28. She also pointed out that one of the prayers sought by SJE before
the Arbitral Tribunal was that NHAI be directed to publish a gazetted
notification for increase in toll. She submitted that the said prayer
clearly indicated that the Fee Notification did not contemplate levy of
additional toll in respect of the Mahanadi Bridge. However, the
impugned award proceeds on the basis that collection of additional toll
in respect of the Mahanadi Bridge was permissible and therefore, runs
contrary to SJE's understanding.
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29. Ms Anand also contended that the Fee Notification was issued by
the Central Government in exercise of delegated legislative powers.
Thus, the Arbitral Tribunal had no jurisdiction to read down the Fee
Notification or interpret it in a manner contrary to its plain language.
30. Next, she submitted that the award of compensation to SJE in
respect of loss allegedly suffered by it was prohibited under Clause 35
of the Concession Agreement and therefore, the impugned award was
liable to be set aside.
31. Lastly, she submitted that the impugned award was vitiated by
patent illegality as the Arbitral Tribunal had awarded a sum of
₹104,05,69,939/- on account of loss in revenue from collection of Fees,
without any evidence as to the quantification of the said amount. She
contended that SJE had not established the amount of loss allegedly
suffered by it and the award of the said amount in its favour, was
patently illegal.
32. Mr Jaideep Gupta, learned senior counsel appearing for SJE,
countered the aforesaid submissions. He submitted that the contentions
advanced on behalf of NHAI were in the nature of challenging the
impugned award on merits, which is impermissible. He submitted that
the grounds urged by NHAI for assailing the impugned award were
beyond the scope of Section 34 of the A&C Act and therefore, the
petition was liable to be dismissed at the threshold. He referred to the
decisions of the Supreme Court in Associate Builders v. Delhi
Development Authority: (2015) 3 SCC 49; National Highways
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Authority of India v. JSC Centrodorstroy: (2016) 12 SCC 592; and
Maharashtra State Electricity Distribution Company Limited v. Datar
Switchgear Limited and Ors.: (2018) 3 SCC 133, in support of his
contention.
33. He submitted that the approach of the Arbitral Tribunal to
interpret the Fee Notification by a conjoint reading with the Concession
Agreement cannot be faulted. He referred to the decisions of this Court
in National Highways Authority of India v. IRB Ahmedabad
Vadodara Super Express Tollways Private Limited: (2017) SCC
OnLine Del 6891 and IRB Ahmedabad Vadodara Super Express Toll
Ways Pvt. Ltd. v. National Highways Authority of India: (2018) SCC
OnLine Del 8946 and contended that in the said cases, the arbitral
award was set aside on the ground that the arbitral tribunal had ignored
the provisions of the concession agreement. He contended that this
clearly implies that the terms of the Concession Agreement are required
to be considered, while construing the Fee Notification regarding levy
of toll.
34. He submitted that the Arbitral Tribunal is the final adjudicator as
to the interpretation of the contract as well as the evidentiary value of
the material placed before it. In this case, the Arbitral Tribunal had
interpreted Clause 35.2 of the Concession Agreement and concluded
that it did not bar a claim for User Fees as SJE was prevented by NHAI
from collecting the same. The Arbitral Tribunal also found that NHAI
had not disputed the quantification of the claims and the
contemporaneous correspondence between the parties established the
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same. Thus, the impugned award is not amenable to challenge on the
ground of patent illegality or as being in conflict with the public policy
of India.
Reasons and Conclusion
35. At the outset, it is necessary to note that it is SJE's stated case
that it is bound by the Fee Notification and is not challenging the same.
NHAI had raised certain preliminary objections regarding
maintainability of the claims filed by SJE before the Arbitral Tribunal.
These included objections to the effect that (i) the challenge to the Fee
Notification was barred by limitation; (ii) SJE was estopped from
challenging the Fee Notification; and (iii) the Arbitral Tribunal had no
jurisdiction to entertain a challenge to the validity of the Fee
Notification.
36. All the three members of the Arbitral Tribunal had unanimously
accepted that a challenge to the Fee Notification was barred on the
aforesaid grounds. The Fee Notification was issued on 19.10.2011 and
the arbitral proceedings commenced on receipt of the notice dated
29.12.2015. Therefore, a challenge to the Fee Notification was barred
by limitation being beyond the period of three years from the date of its
publication. SJE was also estopped from challenging the Fee
Notification as it had given its unconditional consent to the Draft Fee
Notification prior to its publication on 19.10.2011. It is also not disputed
that the Arbitral Tribunal being a private tribunal did not have the
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jurisdiction to consider any challenge to the Fee Notification as it was
issued by the Central Government in exercise of its statutory powers.
37. SJE had successfully defended the preliminary objections raised
by NHAI by stating, in unambiguous terms, that it was not challenging
the Fee Notification but disputing the manner in which it was construed
by NHAI.
38. In view of the above, the dispute is, essentially, centered around
the question whether the Fee Notification contemplated levy of
additional toll in respect of the Mahanadi Bridge on completion of its
construction.
39. The Project Highway was already in existence and so was a
bridge over the river Mahanadi. The Concession Agreement between
the parties required SJE to widen the said Project Highway including
the Mahanadi Bridge. Admittedly, SJE was entitled to collect toll in
respect of the Project Highway of a length of 67 kms., even during the
'Construction Period' [the six-laning of the Project Highway]. The
length of 67 kms of the Project Highway included the length of the
extant bridge over the river Mahanadi.
40. Whilst, SJE claims that it is entitled to collect toll at a higher
rate on completion of the works relating to the Mahanadi Bridge (after
construction of three lanes over a length of 2.25 KM in addition to the
extant four lanes of the Mahanadi Bridge) even prior to completion of
the six-laning of the Project Highway, NHAI contends to the contrary.
According to NHAI, SJE is entitled to collect a higher toll including on
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account of construction of the Mahanadi Bridge after completion of the
works of the Project Highway and not prior to it.
41. The Provisional Completion Certificate in respect of the Project
Highway was issued on 06.01.2017 and therefore, there is no dispute
that SJE could collect additional toll in respect of the Mahanadi Bridge
thereafter - toll for 64.75 KM of Project Highway plus toll calculated
for a structure (Mahanadi Bridge) costing ₹102.3 crores.
42. The principal question before the Arbitral Tribunal was whether
SJE was entitled to additional toll in respect of the Mahanadi Bridge
from the date of completion of the construction of the additional three
lanes of the Mahanadi Bridge, and prior to issuance of the Provisional
Completion Certificate/Completion Certificate under Clause 14 of the
Concession Agreement.
43. The Arbitral tribunal (by majority) found in favour of SJE. It did
not accept NHAI's contention that the claim of compensation on
account of loss in collection of toll was barred under Clause 35 of the
Concession Agreement. The Tribunal further held that the Concession
Agreement permitted collection of toll for the Project Highway and in
addition, for the permanent bridge or bypass or tunnel, costing over ₹50
crores. Since the cost of constructing the Mahanadi Bridge was in
excess of the said amount, the Concession Agreement contemplated
collection of additional toll in respect of the Mahanadi Bridge. The
Arbitral Tribunal (by majority) held that the Fee Notification was
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intended to effectuate the Concession Agreement and is, therefore,
required to be construed accordingly.
44. In arriving at the conclusion, the majority examined the conduct
of the parties before and after issuance of the Fee Notification. It found
that the officials of NHAI had in their internal communications/notings
accepted that SJE would be entitled to collect additional toll in respect
of the Mahanadi Bridge on its completion (completion of the additional
three lanes). Further, by a letter dated 23.02.2017, NHAI had permitted
SJE to collect additional toll in respect of the Mahanadi Bridge with
effect from 25.02.2017, even though the work regarding widening of
the Project Highway was not completed as on that date.
45. Bearing the conduct of the parties, the Arbitral Tribunal (by
majority) held that the clear import of the Fee Notification read with
Schedule R of the Concession Agreement, is to allow additional tolling
for the Mahanadi Bridge on its construction.
46. In view of the aforesaid finding, the Arbitral Tribunal awarded
compensation for loss of toll revenue quantified at a sum of
₹90,33,30,660/- for the period up to June, 2016. In addition, the Arbitral
Tribunal also awarded interest on the said sum quantified at
₹13,72,39,279/- (an aggregate amount of ₹104,05,69,939/-). The
Arbitral Tribunal also held that SJE would be entitled to further
compensation from June, 2016 to 25.02.2017. SJE had quantified the
aggregate amount of compensation at ₹141,67,15,770/- (principal
amount of ₹118,58,08,265/- and interest of ₹23,09,07,505/-). However,
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NHAI had no occasion to examine the enhanced claim and therefore,
the Arbitral Tribunal directed that subject to verification of the amount,
NHAI would pay the balance amount for the period June 2016 to
25.02.2017.
47. In addition to the above, the Arbitral Tribunal also awarded pre-
award interest at the prevailing bank rate plus 5% up to the date of the
award and further, future interest at the prevailing bank rate plus 2%,
till the date of payment. The Arbitral Tribunal also awarded costs of the
arbitral proceedings in favour of SJE quantified at ₹45 lacs, which were
directed to be included in the awarded sum for the purpose of computing
future interest.
48. There is no cavil with the proposition that the scope of
interference in an arbitral award is restricted to the grounds as set out in
Section 34(2) of the A&C Act. In the context of the present petition, the
question to be examined is whether the impugned award is in conflict
with the public policy of India or is vitiated by patent illegality on the
face of the award. It is well settled that if the arbitral award is contrary
to the terms of the agreement, it would be amenable to challenge on the
ground of patent illegality.
49. In the present case, one of the principal issues to be examined is
whether the impugned award is contrary to the terms of the Fee
Notification or the Concession Agreement.
50. Before proceeding further, it would be relevant to note certain
clauses of the Concession Agreement.
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51. Clause 27 of the Concession Agreement contains provisions
regarding 'User Fee'. In terms of Clause 27.1 of the Concession
Agreement, SJE was vested with the sole and exclusive right to demand,
collect and appropriate fee from users in accordance with the National
Highway Fee (Determination of Rates and Collection) Rules, 2008. SJE
and NHAI also acknowledged that a notification for levy and collection
of fee would be issued by the Government under Section 8A of the
National Highway Act, 1956. Clauses 27.1.1 and 27.1.2 of the
Concession Agreement are relevant and set out below:
"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 at it may, by public notice
to the Users, specify in respect of all or any
category of Users or vehicles.
27.1.2 The Parties acknowledge that a notification for
levy and collection of Fee shall be issued by the
Government under Section 8A of the Act read
with Rule 3 of the National Highways Fee
(Determination of Rates and Collection) Rules,
2008 (the "Fee Notification") within 180 (One
Hundred and eighty) days hereof, substantially
in the form set forth in Schedule-R."
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52. The relevant extract of Schedule R to the Concession Agreement
is set out below:
"SCHEDULE-R
(See Clause 27.1.1)
FEE NOTIFICATION
MINISTRY OF SHIPPING, ROAD TRANSPORT AND HIGHWAYS
(Department of Road Transport and Highways)
NOTIFICATION
New Delhi, the.........20............
S.O. .........................
And whereas,......................
Now, therefore, in exercise of the powers conferred by section 8A of the
National Highways Act, 1956 (48 of 1956), read with Rule 3 of the of the
National Highways Fee (Determination of Rates and Collection) Rules,
2008, the Central Government, having regard to the expenditure involved
in building, maintenance, management and operation of the said section of
the said national highway, interest on the capital invested, reasonable
return, the volume of traffic and the period of said agreement between the
Authority and the Concessionaire, hereby notifies that there shall be levied
and collected fees on mechanical vehicles for the use of the section from
Km 413.000 to km 418.000 and from km 0.000 to km 62,000 (Chandikhole
- Jagatpur - Bhubaneshwar) of National Highway No. 5 in the State of
Orissa at the rate specified in the aforesaid Rules and authorises the said
Concessionaire to collect and retain the said fees on and from the date of
commercial operation of the said section of national highway, subject to
and in accordance with the said Rules and the provisions of the aforesaid
agreement. The fee levied and collected hereunder shall be due and payable
at the following Toll Plazas for the distance for each such Toll Plaza:
S.No. Location of Toll Plaza Length (in km) for
(Chainage) which Fee is payable
1 At km 40.50 of NH-5 67.000
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In addition to the above, the fee levied and collected hereunder for the
permanent bridges, bypass and tunnel, as the case may be, costing more
than Rs.50 Cr. (Rupees fifty crore) or more as specified below shall be due
and payable at the following Toll Plazas:
S. Location of Toll Plaza Nature of Cost (Rs.
chainage) structure Crore)
1 At km 40.50 of NH-5 Mahanadi Rs. 102.53
Bridge Crore
F.NO. RW/NH-.......................]
(Name)
Deputy Secretary
Government of India"
53. After SJE's bid was accepted and the parties had entered into the
Concession Agreement, NHAI forwarded the draft of the Fee
Notification dated 02.11.2010 proposed to be issued by the Central
Government, to SJE. The relevant extract of the said Draft Fee
Notification is set out below:
"[To be published in Part II, Section 3, Sub-section (ii) of the Gazette of
India, Extraordinary]
Government of India
Ministry of Road Transport and Highways
New Delhi, the,.................. , 2010
S.O. .........................
And whereas,...........
Now, therefore, in exercise of the powers conferred by section 8 A of
the National Highways Act, 1956 (48 of 1956), read with the National
Highways Fee (Determination of Rates and Collection) Rules, 2008,
and in supersession of the notifications of the Government of India in
the erstwhile Ministry of Shipping, Road Transport and Highways
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(Department of Road Transport and Highways) number SO 1527 (E)
dated the 18th September, 2006, SO 1774 (E) dated the 16th October,
2006 and SO 1392 (E) dated the 2nd June, 2008 except as respects
things done or omitted to be done before such suppression, the Central
Government, hereby notifies that there shall be levied and collected fees
on category of mechanical vehicles specified in the following Tables,
for the use of said section at the base rate specified thereof, and
authorizes the said Concessionaire to collect and retain the fee subject
to and in accordance with the said rules and the provisions of the said
Concession Agreement on and form the date of commercial operation
or publication of this notification in the Official Gazette, whichever is
later, till the termination date, namely:-
Table I
xxxx xxxx xxxx
Table II
xxxx xxxx xxxx
Notes:-
1. For the purpose of this notification,-
(i) "actual fee" means the fees actually charged from the road
users of the said section on the basis of-
(a) length of the project highway assigned to each fee
plaza;
(b) base fee rates provided in the above Table duly
indexed, and shall be rounded off to nearest Five
rupee;
(ii) "date of commercial operation" means the date on which
commercial operation of the said section begins after
satisfying all Conditions Precedent in accordance with the
said agreement;
(iii) "termination date" means the date on which the agreement
entered into between the Authority and the Concessionaire
expires pursuant to the provisions of the said agreement or
is terminated by termination notice;
(iv) words and expressions used in this notification and not
defined but defined in the agreement entered into between
the Authority and the Concessionaire in respect of the said
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section shall have the same meaning as assigned to them
respectively in the said agreement.
2. The fee shall be collected at the following location of the Toll
Plaza for the distance specified against the Toll Plaza:
A. During construction period.
S. No. Location of Toll Length (in km) for which Fee
Plaza. payable.
1 Km 34.624 of NH-5 67.00
B. After completing of six laning. (This needs to be
confirmed by the Tech Div)
S. No. Location of Toll Length (in km) for which Fee
Plaza. payable.
1 Km 40.50 of NH-5 Length of section shall be
confirmed by Tech Div and
for the bridge at Mahandi
River the estimated cost of
which is Rs 102.53 crores.
3. Exemption from payment of fee, rates of fee for overload vehicles,
discounts in rates etc. shall be in accordance with the said Rules.
4. Upon request form any person for issue of 50 (fifty) or more one way
tickets, the concessionaire shall issue such tickets valid for a period
of one month, at a discounted rate equivalent to two-third of the fee
payable for that category of vehicles.
5. The revision of fee shall not effected until a period of 6 (six)
months has elapsed from the Commercial Operation Date.
(S S Gulia)
Director to the Govt. of India
[ F. No. NHAI/13013/571/10-11/CO/GC Bhubaneshwar (0.0-
62.0) BOT"
Signature Not Verified
Digitally Signed
Signing Date:08.03.2022
54. SJE responded by a letter dated 15.11.2010, requesting for certain
amendments to the Draft Fee Notification. It, inter alia, sought deletion
of the notes in the Draft Fee Notification and also sought replacement
of the tables at point no.2 of the notes. The relevant extract of the
amendments as sought by the SJE are set out below:
"The fee collected and levied hereunder shall be due and payable at the
following Toll Plaza for the distance specified for the Toll Plaza:
SI Location of Toll Plaza (Chainage) Length ( in Km) for
No which fee is payable
1 At Km 40.50 of NH-5 (However exact 67.000
chainage will finalized in consultation with
the IE & NHAI)
In addition to the above, the fee levied and collected hereunder for the
permanent bridges, bypass and tunnel , as the case may be, costing more
than ₹50 Cr ( Rupees Fifty crore) or more as specified below shall be due
and payable at the following Toll Plaza:
SI Location of Toll Plaza Nature of Cost
No (Chainage) Structure (₹Crores)
1 At km 40.50 of NH-5 Mahanadi ₹102.53
(However exact chainage will Bridge Crores
finalized in consultation with
the IE& NHAI)
Instead of
1. The fee shall be collected at the following location of Toll Plaza
for the distance specified against the Toll Plaza
A. During construction period.
SI Location of Toll Plaza. Length (in km) for which fee payable.
No
1 Km 34.624 of NH-5 67.00
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SI Location of Toll Plaza. Length (in km) for which Fee payable.
No
1 At Km 40.50 of NH-5 Length of section shall be confirmed by
Tech Div and for the bridge at
Mahanadi River the estimated cost of
which is Rs 102.53 Crores"
55. Thereafter, SJE sent another letter dated 19.01.2011, inter alia,
claiming that Schedule R of the Concession Agreement specified that
the Concessionaire would be entitled to collect and retain fees from the
COD and also permitted levy and collection of fees for permanent
bridges, bypass and tunnels and therefore, the Fee Notification should
have included the toll at Mahanadi Bridge from the date of COD, as the
cost of the Mahanadi Bridge was more than ₹50 crores and Schedule R
of the Concession Agreement specified so.
56. Admittedly, the suggestions made by SJE were not accepted by
NHAI. NHAI once again forwarded a draft of the Fee Notification
under the cover of the letter dated 29.04.2011, and sought consent of
SJE. The draft of the Fee Notification annexed with the letter did not
include any amendments as requested by SJE. SJE, by its letter dated
04.05.2011, protested against the proposed Fee Notification as it did not
incorporate the suggested changes communicated by its letter dated
15.11.2010. SJE also reiterated its stand that the proposed Fee
Notification was not in conformity with Schedule R of the Concession
Agreement. The relevant extract of the said letter is reproduced below:
"The draft Fee Notification issued by yourself is not in conjunction with
the "Concession Agreement" entered into with the Authority the
reference of which needs to be included in para 2 of the Notification.
Signature Not Verified
Digitally Signed
Signing Date:08.03.2022
Further, we once again bring to your notice that as per the Schedule R of
the Concession Agreement executed with NHAI on August 6, 2010, the
fee shall be collected by the Concessionaire as follows:
"The fee levied and collected hereunder shall be due and payable at the
following Toll Plazas for the distance specified for each such Toll Plaza:
S. Location of Toll Plaza Length (in Km) for which fee is
No. (Chainage) payble
1 At Km 34.800 of NH-S 67.000
In addition to the above, the fee levied and collected hereunder for the
permanent bridges, bypass and tunnel, as the case may be, costing more
than Rs. 50 Cr (Rupees Fifty crore) or more as specified below shall be
due and payable at the following Toll Plazas:
S. Location of Toll Plaza Nature of Cost (Rs.
No. chainage) structure Crores)
1 At Km 34.800 of NH-5 Mahanadi Rs. 102.53
Bridge Crores"
There was no specific exclusion of totalling in either of these two
locations during the construction phase as per Concession Agreement.
Thus, it was imperative that the toll can be collected in both the locations
during the construction phase.
However, in view of the delay in getting the COD pending the resolution
of the above matter which is having adverse financial impact on us, we
agree for issuance of this Fee Notification in the present form proposed
by yourself (draft Fee Notification) reserving our right to seek suitable
contractual remedies under the Concession Agreement, Applicable Laws
and otherwise in respect of matters expressed above."
57. It is clear from the above that the issue regarding exclusion of
tolling during the construction phase was raised by SJE at the material
time. It sought to reserve its right to take 'suitable contractual remedies'.
However, the same was not acceptable to NHAI; NHAI/MORTH
required an unconditional consent from SJE that no litigation would be
raised by it with respect to the Draft Fee Notification. NHAI
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Digitally Signed
Signing Date:08.03.2022
communicated this to SJE by its letter dated 10.06.2011 and called upon
SJE to furnish its unconditional consent to the Draft Fee Notification.
Thereafter, by a letter dated 16.06.2011, SJE communicated its
unconditional consent to the Draft Fee Notification as enclosed. It also
furnished an undertaking in the following terms:
"We hereby give an undertaking that we shall not
raise any litigation in any court in regard to the
Draft Fee Notification."
58. In view of the above, the Fee Notification was issued on
19.10.2011. The relevant extract of the Fee Notification is set out
below:
"1. For the purpose of this notification
(i) "actual fee" means the fees actually charged from the road users
of the said section on the basis of-
(a) length of the project highway assigned to each fee plaza;
(b) base fee rates provided in the above Table duly indexed;
and shall be rounded off to nearest Five rupee;
(ii) "date of commercial operation" means the date on which
commercial operation of the said section begins after satisfying
all Conditions Precedent in accordance with the said agreement.
(iii) "termination date" means the date on which the agreement
entered into between the Authority and the Concessionaire
expires pursuant to the provisions of the said agreement or is
terminated by termination notice;
(iv) words and expression used in this notification and not defined but
defined in the agreement entered into between the Authority and
the Concessionaire in respect of the said section shall have the
same meaning as assigned to them respectively in the said
agreement.
2. The fee shall be collected at the following location of the toll plaza
for the distance specified against the toll plaza:
A. During construction period
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Signing Date:08.03.2022
S Location of Toll Plaza. Length (in Km) for
No. which Fee payable.
1 Km 34.26 till the construction of fee 67.00
plaza at Km 40.50 of NH 5 or at a new
location to be finalised in consultation
with Independent Engineer and the
Authority.
B. After competing of six laning.
S. Location of Toll Plaza Lenth (in Km) for which Fee
No. payable.
1 Km 34.624 till the construction of 64.75 Kilometeres and for the
fee plaza at Km 40.50 of NH 5 or at bridge at Mahanadi River of
a new location to be finalised in 225 Kms length, the estimated
consultation with Independent cost of which is Rs. 102.53
Engineer and the Authority. crores."
59. Although SJE had unconditionally accepted the Fee Notification,
it claims that it is entitled to collect toll in respect of the Mahanadi
Bridge on completion of the new Mahanadi Bridge notwithstanding that
six-laning of the Project Highway was incomplete.
60. The definitions of the expressions 'Appointed Date';
'Construction Period'; 'Project Completion Date' and 'Six-Laning' are
relevant as the said expressions are used in the Fee Notification. The
said expressions are not defined under the Fee Notification but they
have been expressly defined under Clause 48 of the Concession
Agreement as under:
"Appointed Date" means the date on which the Project
enters into commercial service under Clause 15.1.1, and
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shall be deemed to be the date of commencement of the
Concession Period"
** ** ** ** **
"Construction Period" means the period beginning from
the Appointed Date and ending on the Project Completion
Date.
** ** ** ** **
"Project Completion Date" means the date on which the
Completion Certificate or the Provisional Certificate, as the
case may be, is issued under the provisions of Article 14.
** ** ** ** **
"Six-Laning" or "Six-Lane" means the construction and
completion of all works included in or constituting a Six-
lane Project Highway, as specified in Article 2 read with
Schedule-B and Schedule-C.""
61. The definition of the expression 'Construction Period' is
unambiguous. The said period commences from the 'Appointed Date'
and ends with the 'Project Completion Date'. The term 'Appointed
Date' is defined to mean the date on which the Project enters into
commercial service under Clause 15.1.1 of the Concession Agreement
- the COD. In terms of Clause 15.1.1 of the Concession Agreement,
COD is the date on which the Conditions Precedent, as specified in
Clause 4 of the Concession Agreement, are complied with or waived.
62. The Project Completion Date is defined to mean the date on
which the Completion Certificate or the Provisional Completion
Certificate is issued under Clause 14 of the Concession Agreement. In
the present case, the Provisional Completion Certificate of the Project
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Highway was issued on 06.01.2017 and there is no dispute that SJE is
entitled to collect additional toll thereafter. The definition of six-laning
is also free from any ambiguity.
63. By virtue of Note 1(iv) of the Fee Notification, the expressions
used in the Concession Agreement have been incorporated by reference
to the Fee Notification.
64. Indisputably, on a literal reading of the Fee Notification, SJE was
not entitled to charge any additional toll in respect of the Mahanadi
Bridge till the completion of the 'Construction Period' as was expressly
stated in Note 2 of the Fee Notification.
65. However, the Arbitral Tribunal was of the view that the Fee
Notification was required to be read conjointly with Schedule R to the
Concession Agreement. The Arbitral tribunal reasoned the Fee
Notification differed from Schedule R and in terms of Clause 27.1.2 of
the Concession Agreement, it was agreed that the Fee Notification
would be "substantially in the form set forth in Schedule R."
66. As noticed above, Schedule R to the Concession Agreement
includes two tables. The first table indicates that the user fee would be
payable for 67.000 km at a toll plaza located at km 40.50 of NH-5. It
further provides that in addition, fee levied and collected in respect of
permanent bridges, bypass and tunnels as the case may be, costing ₹50
crores or more, would be due and payable on the toll plaza located at
km 40.50 of NH-5 for the structure of Mahanadi Bridge with a cost of
₹102.53 crores.
Signature Not Verified
Digitally Signed
Signing Date:08.03.2022
67. According to SJE, it was entitled to collect base toll for the entire
stretch of 67 kms (including the Mahanadi Bridge) during the
construction phase, but after completing the widening of the Mahanadi
Bridge by adding three lanes. It would also be entitled to charge extra
toll for the entire length of the bridge of 2.25 kms in addition to toll in
respect of the balance stretch of 64.75 kms of the Project Highway.
68. NHAI contends to the contrary. According to NHAI, the
expression "after completion of six-laning" is required to be construed
as six-laning of the entire Project Highway. It claimed before the
Arbitral Tribunal that after completion of six-laning of the Project
Highway, the claimant (SJE) would be entitled to collect additional toll
in respect of the new Mahanadi Bridge (the extant four lanes and three
newly constructed lanes).
69. The Arbitral Tribunal (by majority) found in favor of SJE and
held that in terms of Schedule R to the Concession Agreement, SJE was
entitled to collect additional toll for the Mahanadi Bridge on its
completion. This decision of the Arbitral Tribunal is founded,
principally, on three findings. First, in terms of Schedule R to the
Concession Agreement, SJE is entitled to collect additional toll for the
Mahanadi Bridge. Since the Fee Notification was issued to give effect
to the Concession Agreement, it is required to be construed keeping in
mind the said object.
70. Second, the conduct of the parties indicated that that there was
consensus between them that toll would be collected in respect of the
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Mahanadi Bridge after its completion. The internal noting of the
Chairman, NHAI indicated that a reference note had been placed before
him at the material time. The possibility of SJE claiming that it was
entitled to collect toll in respect of the Mahanadi Bridge even prior to it
constructing the additional three lanes was considered. The Mahanadi
Bridge was existing at the time the parties had entered into the
Concession Agreement and a Fee Notification in the form of Schedule
R construed literally could possibly be read as enabling the
Concessionaire to collect additional toll in respect of the Mahanadi
Bridge immediately from the Appointed Date (from the beginning of
the Construction Period). It appears that in this context, the Chairman,
NHAI had communicated his view that the additional tolling in respect
of the Mahanadi Bridge could commence only after the completion
(construction of the additional three lanes). The communication (letter
dated 24.04.2014) sent by the Project Director to the Regional Officer,
NHAI, which was marked to SJE as well, also indicates that a decision
to that effect was taken by the Competent Authority at the material time.
71. Third, that SJE was permitted to toll the Mahanadi Bridge prior
to completion of the Project, that is, prior to completion of the six-laning
of the Project Highway. By a letter dated 23.02.2017, NHAI had
approved the revised User Fee Rates, which included User Fee in
respect of the Mahanadi Bridge (length of 2.25. Kms. costing ₹102.53
crores).
Signature Not Verified
Digitally Signed
Signing Date:08.03.2022
72. The said findings, which persuaded the Arbitral Tribunal to hold
that SJE was entitled to collect toll in respect of the Mahanadi Bridge
with effect from 08.04.2014, raises contentious issues.
73. SJE had, by its letter dated 16.06.2011, waived its objections to
the Fee Notification. Admittedly, the Fee Notification was not in
conformity with Schedule R to the Concession Agreement. SJE was
aware of the same and had objected to it but, subsequently
communicated its unconditional consent. Therefore, there is substance
in the contention that the Fee Notification was not required to be read
conjointly with Schedule R to the Concession Agreement.
74. The reasoning of the Arbitral Tribunal that the conduct of NHAI
in permitting tolling of the Mahanadi Bridge with effect from
25.02.2017 indicates that the parties had understood that the toll in
respect of the Project could be collected prior to completion of the six-
laning of the Project Highway is, ex facie, erroneous. It was NHAI's
case that collection of additional toll with respect to the Mahanadi
Bridge was not permissible during the Construction Period. The said
period commenced from the Appointed Date and ended on the Project
Completion Date. The Project Completion Date is defined under the
Concession Agreement to mean the date on which the Completion
Certificate or Provisional Certificate is issued under the provisions of
Clause 14 of the Concession Agreement. In this case, a Provisional
Completion Certificate in terms of Clause 14 of the Concession
Agreement was issued on 06.01.2017, while keeping the incomplete
works in the Punch List. The conclusion of the Arbitral Tribunal that
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the conduct of NHAI, to permit tolling of the Mahanadi Bridge after
issuing Provisional Completion Certificate, is inconsistent with its stand
that the tolling of the Mahanadi Bridge was not permissible during the
construction period (that is period from the Appointed Date to Project
Completion Date). On the contrary, NHAI's stand that additional toll
in respect of the Mahanadi Bridge was permissible after the
Construction Period is consistent with its conduct to permit collection
of additional toll after issuance of the Completion Certificate in terms
of Clause 14 of the Concession Agreement.
75. Having stated the above, this Court must necessarily bear in mind
the narrow scope of examination under Section 34(2)(b)(ii) and Section
34(2A) of the A&C Act. The Arbitral Tribunal had construed the Fee
Notification by applying the rule of purposive interpretation.
Undeniably, there is material on record, which would support the view
that the parties had understood that collection of additional toll in
respect of Mahanadi Bridge was permissible after its completion. It is
not impossible to read the expression 'six-laning' as used in the Fee
Notification as referring particularly to Mahanadi Bridge (although the
Mahanadi Bridge would be on seven lanes- four extent plus three
construed by SJE) . If read in this manner, SJE would be entitled to
collect toll for the length of 2.25 Kms. of the Mahanadi Bridge in
addition to toll in respect of 64.75 Kms. road length (being the
remaining Project Highway).
76. Given the limited scope of interference with an arbitral award,
this Court is unable to accept that interference with the conclusion of
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the Arbitral Tribunal (by majority) in regard to the interpretation of the
Fee Notification, is permissible on the touchstone of Section
34(2)(b)(ii) and Section 34(2A) of the A&C Act.
77. The next question to be examined is whether the conclusion of
the Arbitral Tribunal that NHAI is liable to compensation for the loss
occasioned on account of non-collection of fees is contrary to Clause
35 of the Concession Agreement.
78. Clause 35.2 of the Concession Agreement, which is relied upon
by NHAI, reads as under:
"35.2 Compensation for default by the
Authority
Subject to the provisions of Clause 35.6, in the
event of the Authority being in material default
or breach of this Agreement at any time after the
Appointed Date, it shall pay to the
Concessionaire by way of compensation, all
direct costs suffered or incurred by the
Concessionaire as a consequence of such
material default within 30 (thirty) days of receipt
of the demand supported by necessary
particulars thereof; provided that no such
compensation shall be payable for any breach or
default in respect of which Damages have been
expressly specified in this Agreement. For the
avoidance of doubt, compensation payable may
include interest payments on debt, O&M
Expenses, any increase in capital costs on
account of inflation and all other costs directly
attributable to such material default but shall not
include loss of Fee revenues, debt repayment
obligations or other consequential losses, and for
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Digitally Signed
Signing Date:08.03.2022
determining such compensation, information
contained in the Financial Package and the
Financial Model may be relied upon to the extent
it is relevant."
79. The said Clause expressly provides that in the event of NHAI
being in breach of the Concession Agreement, it would be liable to pay
compensation for all direct costs suffered or incurred by the
concessionaire as a consequence of such material default. However,
such compensation would not include "loss of Fee revenues, debt
repayment obligations or other consequential losses".
80. The Arbitral Tribunal had concluded that Clause 35.2 of the
Concession Agreement would only apply where there is a material
breach leading to delay. Clause 35.2 of the Concession Agreement
begins with the words "Subject to the provisions of Clause 35.6," which
enjoins the affected party to take steps to mitigate costs. The Arbitral
Tribunal reasoned that since there is no possibility of mitigation of loss
in the present case, Clause 35.2 of the Concession Agreement is
inapplicable.
81. Clause 35.6 of the Concession Agreement reads as under:
"35.6 Mitigation of costs and damage
The Affected Party shall make all reasonable
efforts to mitigate or limit the costs and damage
arising out of or as a result of breach of Agreement
by the other Party."
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Signing Date:08.03.2022
82. There is merit in NHAI's contention that the aforesaid reasoning
is manifestly erroneous. Clearly, if it is not possible for the affected
party to mitigate the loss then its right to seek compensation under
Clause 35.2 of the Concession Agreement, is not affected. The right of
the affected party to claim compensation would be debilitated only if it
was possible for the affected party to mitigate the loss but it had failed
to do so as required under Clause 35.6 of the Concession Agreement.
Justice (Retd.) Nanavati had expressly rejected the contention that
Clause 35.2 of the Concession Agreement was restricted to breach of
the Concession Agreement that led to delay in the construction activity.
The language of Clause 35.2 of the Concession Agreement does not
indicate any such restriction. It expressly provides that NHAI would be
liable to pay compensation for all direct costs incurred resulting from
the breach of the Concession Agreement on the part of NHAI.
83. Clause 35.2 of the Concession Agreement proscribes certain
consequential losses including loss of Fee revenues. The Arbitral
Tribunal has also indicated - although not in express words - that the
loss claimed is not an indirect or inconsequential loss but a direct one.
This view is a plausible one and therefore, the conclusion that Clause
35.2 of the Concession Agreement did not prohibit a claim for Fee for
direct costs would not warrant any interference in these proceedings.
84. The last contention to be examined is whether the impugned
award to the extent it accepts SJE's quantification of the claim is
vitiated by patent illegality. NHAI claims that the claim as quantified
was accepted without any material or evidence to prove the same.
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Signing Date:08.03.2022
85. In its Statement of Claims, SJE had stated that it had lodged its
claim for the first time on 08.07.2014 and had thereafter, updated and
revised its claim at periodical intervals through various letters that were
annexed as Annexure C-44 to Annexure C-61 to the Statement of
Claims. SJE stated that the total amount reflected in the said letters till
the month of June, 2016 was ₹104,05,69,939/- (Principal Amount-
₹90,33,30,660/- and interest amount-₹13,72,39,279/-). It further stated
that since the breach was continuing, the amount claimed would
continue to increase till the conclusion of the arbitral proceedings and
therefore, it sought permission to amend the claim.
86. SJE claimed that it had calculated the amount as mentioned in the
letters on the basis of the rates recommended by the Project Director,
NHAI in its letter dated 24.04.2014. These rates were effective for the
year 2014-15 and had been increased for the subsequent years according
to the formula as provided in Schedule R of the Concession Agreement.
87. It is clear from the Statement of Claims that the only material
relied upon by SJE for establishing the quantum of compensation was
the letter dated 24.04.2014 sent by the Project Director, NHAI and the
letters sent by SJE to NHAI raising its claims.
88. The letter dated 24.04.2014 was sent by the Project Director,
NHAI to the Regional Officer, NHAI in reference to a letter dated
08.03.2014 sent by SJE, setting out tabular statement specifying the
User Fee for various categories of vehicles for varying use (one way
journey, return journey and for monthly pass for a maximum of fifty
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one-way journeys). SJE had sought approval of the said fees and for
further initiation of revision of the notified User Fee. The Project
Director, NHAI had recommended the rates as specified in the letter.
SJE had also appended a statement setting out the computation of the
User Fees.
89. In view of the above, there is material on record to establish the
enhanced User Fee that was payable in respect of different categories
of vehicles and for different journeys.
90. SJE claimed that it had, on the basis of the said recommended
rates, raised a claim by its letter dated 08.07.2014, which was updated
periodically (Annexure C-44 to Annexure C-61). A reading of the said
letters indicates that they contain a tabular statement of four columns:
the first indicating the date; second the "Toll fees collectable on
inclusion of fees for Mahanadi bridge completion"; the third the "Toll
fees collectable on exclusion of fees for Mahanadi bridge completion";
and the fourth, stating difference of two figures under the preceding
columns. The figures in the last column are claimed as the loss suffered
by SJE for non-collection of fees for the Mahanadi Bridge. An extract
of the said table set out in the letter dated 08.07.2014, indicating the
structure of the tabular statement, is set out below:
Date(08.04.1 Toll fees Toll fees Loss to SJEPL
4-31.05.14) collectable on collectable on for non
inclusion of fees exclusion of fees for collection of
for Mahanadi Mahanadi bridge fees for
bridge completion completion Mahanadi
bridge(Rs)
8-Apr-14 3363300 2211830 1151470
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Signing Date:08.03.2022
91. There is no material on record to establish the basis for
computation of the said figures mentioned in the table. As an
illustration, a sum of ₹33,63,300/- is reflected as the toll fees collectible
on 08.04.2014 by inclusion of fees for the Mahanadi Bridge and the sum
of ₹22,11,830/- is reflected as the toll fees collectible on 08.04.2014 by
exclusion of fees for the Mahanadi Bridge completion. According to
SJE, the loss incurred on 08.04.2014 would thus be ₹11,51,470/-. As
stated above, there is no evidence or material on record to indicate how
these figures were computed. There is no material to establish that
₹33,63,300 would be collected on 08.04.2014 if collection of additional
user fee for the Mahanadi Bridge was allowed on 08.04.2014. Similar
tabular statements were claimed to have been forwarded by SJE on a
monthly basis (C-44 to C-61).
92. NHAI, in its Statement of Defence, had denied the said claim. It
had stated that the said claim is "false, frivolous, baseless, contrary to
the terms and conditions of the Concession Agreement and is contrary
to the said Fee Notification dated 19.10.2011".
93. Notwithstanding the fact that there was no material to
substantiate the aforesaid calculation, the Arbitral Tribunal (by
majority) accepted SJE's claims by referring to Section 19(1) of the
A&C Act, which expressly provides that the Arbitral Tribunal would
not be bound by the Code of Civil Procedure,1908 or the Indian
Evidence Act,1872.
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94. The Arbitral Tribunal further reasoned that the claims made by
SJE in its letters (Annexure C-44 to Annexure C-61) were not denied at
the material time and NHAI's defence to the Statement of Claims was
a bare denial.
95. According to SJE, NHAI had neither responded to any of its
letters raising the claims (Annexure C-44 to Annexure C-61) nor denied
the said claims and therefore, there was no dispute as to quantification
of the amounts due. However, NHAI has specifically denied the claims
made by SJE including quantification in its Statement of Defence. It
was thus necessary for SJE to produce some material to establish the
same. The burden to prove quantification of loss rested entirely on SJE.
However, SJE did not produce any evidence to substantiate the quantum
of its claim except the letters sent by it raising its claims on a periodical
basis. Plainly, a letter raising a claim is not a proof thereof. It does not
establish anything more than the fact that a claim was made.
96. The Arbitral Tribunal held that the claims made were on the basis
of Schedule R of the Concession Agreement and the Wholesale Price
Index. The Arbitral Tribunal had further observed that "A perusal of
the detailed working contained in each claim document shows that the
Claimant had taken the figures pertaining to volume of traffic from the
daily records maintained at the tolling booth" and had sought
additional toll calculated as per Schedule R and the wholesale price
index for the said volume of traffic." This finding is, ex facie, contrary
to the record. Annexure C-44 to Annexure C-61 neither reflects the
volume of traffic nor any computation reflecting the enhanced toll
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payable in respect of vehicles of a particular category included in the
traffic. 'Traffic' is the movement of number of vehicles (of various
categories) using the Project Highway. The toll collected in respect of
the said traffic is a function of a number of vehicles of different
categories for different categories of journey and the applicable User
Fees. However, the claims made by SJE do not reflect the number of
vehicles; their categories; or the kind of journey. The claims also did
not reflect the actual toll collected but it mentioned the fee, which,
according to SJE, was 'collectable' both by inclusion of additional toll
for the Mahanadi Bridge and without including the same.
97. The Statement of Claims do not indicate any computation except
the computation of the difference in two figures for each day, which
according to SJE was the loss suffered by it. The Arbitral Tribunal thus
had no material to verify or satisfy itself that the quantification of the
claim made was a true estimate of the additional toll that would have
been collected by SJE.
98. The Arbitral Tribunal proceeded on the assumption that NHAI
had not disputed the quantification as it had made the following
averments in its Statement of Defence: "When the claimant is not
entitled to the alleged claim for additional toll, therefore the question
of going in to quantification or its correctness thereof does not arise."
This, according to SJE, reflected that NHAI did not dispute the
quantification of the claims made. The said statement is required to be
read in the context of the Statement of Claims. NHAI in its Statement
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of Defence had denied the averments made in paragraphs 35 and 36 of
the Statement of Claims as under:
35-36. Para No.35 and 36 of the Statement of
Claim are not admitted and are denied. The
Claimant wrongly raised the false and frivolous
claim vide its letter dated 8.7.2014. All the
alleged claims raised by the Claimant vide its
letters dated 8.7.2014, 16.8.2014, 22.10.2014,
3.12.14, 1.1.2015, 14.2.2015, 31.3.2015,
24.4.2015, 30.5.2014, 1.8.2015, 7.9.15,
29.10.2015, 24.11.2015, 11.2.2016, 16.3.2016,
6.4.2016, 1.7.2016 and 19.7.2016 are not
admitted and are denied. Annexure C-44 to C-
61 are not admitted and are denied. The total
alleged claim raised by the Claimant till June
2016 for Rs.104,05,69,939/- is not admitted and
is denied. The claimant is not entitled to the
alleged amount, it is denied that the alleged
breach is continuing. There is no breach. The
claimant is not entitled for any alleged
amendment. All the above alleged clams filed
by the Claimant are false, frivolous, baseless,
contrary to terms and conditions of the
Concessionaire Agreement and are contrary to
the said Fee Notification dated 19.10.2011 and
the same are liable to be dismissed. The
Claimant is not entitled to any amount. The
Claimant is not entitled to any interest as such
the alleged claim no.1 is liable to be dismissed.
The procedure adopted by the claimant for
quantification of the alleged claim is not
admitted and is denied. When the claimant is not
entitled to the alleged claim for additional toll
therefore the question of going in to
quantification or its correctness thereof does not
arise. The Claimant is not entitled to any
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amount. All the allegations to the contrary are
not admitted and are denied."
99. NHAI's statement that SJE was not entitled to claim for
additional toll and therefore, there was no question of going into
quantification or correctness thereof, was in response to SJE's statement
that NHAI had not disputed the quantification of loss in its letters.
NHAI stated that it had denied SJE's entitlement to claim additional toll
in terms of the Fee Notification, and therefore, there was no question of
it examining the quantification. NHAI does not dispute that it had not
examined the quantification of the claims as raised in the letters at the
material time. However, it had denied the same in the arbitration.
Indisputably, NHAI has disputed the claim as quantified by SJE, in its
Statement of Defence.
100. It is well settled that this Court cannot re-appreciate / re-examine
the evidence in proceedings under Section 34 of the A&C Act.
However, in cases where it is found that there is no evidence to
substantiate the claim, as in the present case, interference with the
Arbitral Award is warranted.
101. The decision of the Arbitral Tribunal to accept SJE's claims of
quantification clearly amounts to accepting the claim without any
evidence to establish the amount of loss as claimed.
102. In view of the above, this Court is of the view that the impugned
award is vitiated by patent illegality. The same is, accordingly, set
aside.
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103. The parties are left to bear their own costs.
104. The petition is accordingly disposed of.
VIBHU BAKHRU, J
MARCH 07, 2022
gsr, RK, pkv/v
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