Delhi High Court
National Highways Authority Of ... vs Irb Pathankot Amritsar Toll Road ... on 8 March, 2022
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Reserved on: February 08, 2022
Pronounced on: March 08, 2022
+ O.M.P. (COMM) 373/2021& I.A. 17100-01/2021 & 663/2022
NATIONAL HIGHWAYS AUTHORITY OF INDIA
..... Petitioner
Through: Mr. Sudhir Nandrajog,
Senior Advocate with
Mr. Nikhil Mehta &
Mr. Varun Sharma,
Advocates
Versus
IRB PATHANKOT AMRITSAR TOLL ROAD LTD.
..... Respondent
Through: Mr. Vikram Nankani &
Mr.Saurabh Kirpal, Senior
Advocates with Mr. Mahesh
Agarwal, Mr. Sameer
Rohatgi, Mr. H.P.
Chaturvedi, Mr. M.V.
Ravindran, Mr. Ashish
Batra,Mr. Sarthak Sachdev,
Mrs. Terresa R Daulat &
Mr. Apoorva Agarwal,
Advocates
CORAM:
HON'BLE MR. JUSTICE SURESH KUMAR KAIT
JUDGMENT
1. The present petition has been filed under the provisions of Section
34 of Arbitration and Conciliation Act, 1996 challenging the arbitral
award dated 13.07.2021 read with order dated 27.07.2021 passed by the
learned arbitral tribunal.
2. In the present petition, it is stated that the Government of India
entrusted the work of development, maintenance and management of
Pathankot to Amritsar Section of National Highways No.15 from km
6.082 to km 108.502 to the petitioner, for which petitioner invited
proposals for design, build, finance, operate and on transfer basis the
above referred Section of NH-15, shortlisted certain bidders including
consortium comprising IRB Infrastructure Ltd. and Modern Road Makers
Pvt. Ltd. with IRB Infrastructure Developers Ltd. as its Lead Member
(henceforth referred to as the "consortium"). After evaluation, petitioner
accepted the bid of the consortium vide its letter of acceptance dated
27.07.2009. Respondent- IRB Pathankot Amritsar Toll Road Ltd., by its
letter dated 21.09.2009 also joined the consortium and thereafter, a
Concession Agreement dated 16.11.2009 was entered between the
parties. In terms of the aforesaid Concession Agreement, the
commencement of the work was to be done on 31.12.2010 and the
completion date was fixed as 910th day from the appointed date i.e.
27.06.2013. However, the work could not be completed within the time
stipulated and time was extended from 05.08.2014 to 25.08.2014 to
15.10.2014 and the parties entered into a further agreement dated
05.11.2014. Though respondent claimed to have completed the work by
18.11.2014, however, vide letter dated 22.11.2014 took the plea that
certain works like boundary pillars, drainage etc. are left, which do not
affect the project work. Therefore, a Provisional Completion Certificate
(PCC) was issued to the respondent on 27.11.2014 to commence
commercial operation and toll collection. After three years of issuance of
Provisional Completion Certificate, vide letter dated 19.06.2017
respondent requested for extension of Concession Period for the period
of 581 days and reiterated the same request on 18.06.2018. On
07.08.2018 respondent invoked arbitration and thereafter, on 19.01.2019,
approached IRC for appointment of Arbitrator. The arbitral tribunal was
constituted comprising of Justice (Retd.) Ajit Prakash Shah as the
Presiding Arbitrator and Shri S.S. Agarwal and Shri Navin Kumar as
Arbitrators.
3. Before the arbitral Tribunal, the respondent/claimant filed the
Statement of Claims and petitioner/respondent filed the Statement of
Defence. Based thereupon, the arbitral tribunal framed the issues and
proceeded for determination thereof. The tribunal proceedings
culminated into Award dated 13.07.2021, wherein the claims raised by
the respondent / claimant were granted with costs. Based upon the
aforesaid averments made in the petition and aggrieved against the said
arbitral award, the present petition under the provisions of Section 34 of
the Arbitration and Conciliation Act, 1996 has been preferred by the
petitioner.
4. Before adverting to the submissions and arguments raised on
behalf of both the sides, it is pertinent to mention the issues which were
subject matter of consideration and decision before the arbitral tribunal.
These issues were framed by the learned arbitral tribunal on 28.01.2020
and have been enumerated in Para-10 of the impugned award and read
as under:-
"1. Whether the Independent Engineer approved
Extension of Time of 518 days in terms of provision of
Article 14 or the Concession Agreement?
2. Whether the Supplementary Agreement dated
05.11.2014 prohibits claims of the Claimant as
consequence of delay damages arising out of the
overrun?
3. Whether the compensation sought by the Claimant
under Clause 35.2 of the Concession Agreement
towards increase in capital cost is attributable to delay
on the part of NHAI in completion of the Project
Highway?
4. Whether the Claims are time barred?
5. Whether the Claimant is estopped from making the
Claims in view of execution of the supplementary
agreement dated 05.11.2014?
6. Interest & Costs?"
5. During the course of hearing, learned senior counsel appearing on
behalf of petitioner submitted that the impugned Award is against the
provisions of the contract, which has been rendered in haste without
appreciating the pleadings and evidence on record. The learned arbitral
tribunal neither considered the objections/ submissions made on behalf
of petitioner nor rejected them and thereby, the impugned Award is
cryptic, non-speaking, patently illegal and in conflict of provisions of law
as well as provisions of Arbitration and Conciliation Act, 1996.
6. With regard to the first issue i.e."whether the Independent
Engineer approved Extension of Time of 518 days in terms of provision
of Article 14 of the Concession Agreement", learned senior counsel for
petitioner submitted that „Extension of Time‟ and „Extension of
Concession Period‟ are all together two different issues. „Extension of
Time‟ means extension of time for construction and „Extension of
Concession Period‟ means extension of toll collection period. It was next
submitted that the learned Tribunal wrongly framed and dealt with the
Issue no. 1, as the claim of the claimant was for the „Extension of
Concession‟ period but the tribunal dealt it as „Extension of Time‟ only
and on this ground alone, the Award in question deserves to be set aside.
Also submitted that the Independent Engineer (IE) vide letter dated
23.09.2015 had recommended extension of time of 518 days without
extension of concession period, however, learned tribunal on the
erroneous assumption recommended the concession period, though in
terms of Article 35 of the Concession Agreement, extension of
concession period can be claimed only if the NHAI is in material default
or breach of the Concession Agreement. Learned senior counsel also
relied upon communication dated 25.10.2012 of the Independent
Engineer to submit that the delays were attributable to respondent only
and so, extension of time to the respondent was refused. It is submitted
by learned senior counsel that the learned arbitral tribunal has
misinterpreted the letters dated 27.05.2013; 12.06.2013; 07.10.2013;
20.12.2013 and 23.03.2015 while assuming that the impediments for
timely completion of the project are attributable to the petitioner-NHAI.
7. With regard to the second issue, "Whether the Supplementary
Agreement dated 05.11.2014 prohibits claims of the Claimant as
consequence of delay damages arising out of time overrun" , learned
senior counsel submitted that the tribunal has erroneously held that the
Supplementary Agreement dated 05.11.2014, was executed by the
respondent/IRB under economic duress and hence, is voidable, whereas
Shri Navin Kumar, learned Arbitrator has taken a different view that the
respondent has failed to establish the existence of any coercion for
issuance of the undertaking dated 13.10.2014 or 05.11.2014. It is also
submitted that the tribunal has wrongly held that the Supplementary
Agreement was not drafted or prepared by the respondent/ IRB but was
by the petitioner/NHAI, whereas the stamp paper for the Supplementary
Agreement has been purchased in the name of respondent and typed
thereon and it cannot be presumed that the stamp paper was in the
possession of the petitioner, who got it prepared. Therefore, this finding
returned by the Tribunal that the Supplementary Agreement is voidable
is patently wrong and is liable to be set aside.
8. Learned senior counsel next submitted that the finding returned by
the tribunal that the Supplementary Agreement was signed under duress
cannot be accepted, as the Shri Navin Kumar, learned Arbitrator has
taken a contrary view and it is established from the fact that safety audit
report was submitted only on 18.10.2014, which is a pre-requisite for
grant of PCOD and thereafter, on 21. 10.2014, the project was inspected
and on the next day i.e. 22.10.2014, petitioner approved the issuance of
PCOD i.e. much prior to the execution of the Supplementary Agreement.
Therefore, the issue of duress is an after-thought portrayed by the
respondent.
9. On the aspect of delay in raising the claim regarding duress,
learned senior counsel for petitioner submitted that the tribunal has erred
in holding that there was no delay on the part of respondent, whereas
Shri Navin Kumar, learned Arbitrator has observed that the
Supplementary Agreement was signed on 05.11.2014 whereas
respondent/ IRB raised the dispute under Article 44 of Concession
Agreement on 18.06.2018 and the Testimony of CW-1, makes it clear
that the respondent did not raise any protest almost for a period of four
years against the alleged duress from the date of the signing of the
Supplementary Agreement .
10. Learned senior counsel for the petitioner submitted that the finding
returned by the arbitral tribunal that the Supplementary Agreement does
not in any way prevent the claimant from making the claims, is patently
wrong as the learned tribunal has misinterpreted construction period
between the appointed date of 31.12.2010 and Schedule date of
completion of 27.06.2013, whereas it should have been calculated from
the appointed date of 31.12.2010 to the commercial operation date i.e.
27.11.2014 and therefore, in view of Supplementary Agreement dated
05.11.2014, the claim of respondent deserves to be rejected.
11. It was also contended by learned senior counsel for the petitioner
that as per the Clause- b of Supplementary Agreement dated 05.11.2014,
it was agreed by respondent that it shall not raise any claim whatsoever
in this Concession Agreement i.e. idling of resources (Manpower and
machinery), increase in cost of material, delay in construction of
highway, etc.
12. On the third issue "Whether the compensation sought by the
Claimant under Clause 35.2 of the Concession Agreement towards
increase in capital cost is attributable to delay on the part of NHAI in
completion of the Project Highways", learned senior counsel submitted
that the learned arbitral tribunal has held that the delay has occurred due
to reasons solely attributable to the petitioner and that the respondent has
claimed Rs.159.54 Crores and Rs.92.71 Crores towards extra expenditure
and increase in capital cost due to time over run / delayed construction
for the period 27.06.2013 to 27.11.2014, however, in the audited
accounts of the respondent, there is no mention of the above said amount
and even otherwise, the learned tribunal has erred in granting damages/
compensation when petitioner had extended the concession period
equivalent to the construction delay, as the respondent was able to earn
the toll for the same period which was originally available to it.
13. Learned senior counsel for petitioner further submitted that the
tribunal erred in holding that the costs shall be solely borne by the
petitioner, which is contrary to the contract entered between the parties,
according to which costs were to be equally borne between the parties.
Also submitted that the learned tribunal erred in granting the interest
from the period starting from 27.11.2014, whereas the claims were
quantified by the respondent only on 18.09.2018 and 15.05.2019.
14. On issue No.5 i.e. "whether the Claimant is estopped from
making the Claims in view of execution of the supplementary agreement
dated 05.11.2014", learned senior counsel for petitioner submitted that
the finding of tribunal that the Supplementary Agreement was signed by
the respondent under duress and so, question of estoppel does not arise,
is patently wrong as respondent had voluntarily entered into
Supplementary Agreement dated 05.11.2014, which was duly acted upon
by the petitioner and in lieu of same, Provisional Completion Certificate
and Final Completion Certificate effective from 27.11.2014 were duly
issued to the respondent. Also submitted that it is after four years of
execution of Supplementary Agreement dated 05.11.2014, the
respondent/ claimant on 24.09.2018 for the first time has alleged that the
"no claim undertaking" was given under duress. It was submitted that at
the time of entering into the Supplementary Agreement, the respondent
had defaulted on timely completion of project, hence it was not economic
duress but it was economic for the respondent to enter into the said
agreement, which is a legally binding Agreement and a valid contract
and in this view, the tribunal ought not have granted claim of respondent.
15. Learned senior counsel for petitioner emphatically submitted had
the Supplementary Agreement not been entered into between the parties,
the petitioner would have terminated the Concession Agreement and
levied damages on the respondent for delays and breaches on its part,
whereas by virtue of Supplementary Agreement, both the sides had given
up their claims against each other. It was submitted that if at this stage
the Supplementary Agreement is rescinded declaring it to be under
duress, the benefits derived there-under by the respondent have to be
returned and petitioner‟s rights have to be restored, which were not
claimed before the learned arbitral tribunal, such like, petitioner‟s right to
terminate the Concession Agreement under Article 32 would have to be
revived retrospectively; the entire toll collected by the respondent would
become unauthorized; the petitioner would become entitled to damages
for non-completion of project within the scheduled time and for several
material breaches etc. from the respondent.
16. On the issue "whether the claims raised by the petitioner were
time barred", learned senior counsel submitted that the arbitral tribunal
has failed to appreciate that the claims of respondent were highly barred
by time, as the respondent itself has claimed before the tribunal that the
limitation period started when the IE determined the Extension of Time
i.e.11.12.2015, whereas the Extension of Time for the first time was
determined on 22.12.2014 and second time on 23.03.2015 and thereby,
cause of action accrued on 22.12.2014, whereas the claims were raised
after lapse of four years on 18.06.2018 and arbitration was invoked vide
letter dated 07.08.2018. It was also submitted that vide letter dated
18.06.2018, the respondent had invoked conciliation on the point of
Extension of Concession Period only and no claim for compensation was
raised and therefore, the finding of tribunal that the claims are not time
barred is patently illegal.
17. To the contrary, learned senior counsel appearing on behalf of the
respondent submitted that the impugned award in question is a detailed
well-reasoned Award and finding of one of the Arbitrators on the issue of
economic duress does not affect the conclusion thereof. It was submitted
that the findings returned in the impugned Award are based on
construction and/or interpretation of the Concession Agreement, duly
supported by material on record including the Statement of Accounts and
the oral evidence of the Chartered Accountant and Auditor and it does
not at all suffers from patent illegality or perversity.
18. Learned senior counsel for respondent submitted that the
Concession Agreement dated 16.11.2009 was executed between
petitioner/NHAI and respondent where-under petitioner was obliged to
provide to Concessionaire a valid license and hindrance free vacant Right
of Way to the entire Site of the Project within 90 days from the appointed
date i.e. 31.12.2010, failing which it was liable to pay damages to
respondent. As per Article 12.4 read with Article10.3 construction of the
Project Highway was to be completed by 910 th day from the appointed
date i.e. the Scheduled Four Lanning Date of 27.06.2013 and if the
respondent failed to complete the project milestones within 90 days from
the date fixed for such milestone, it was liable to pay damages to the
petitioner/NHAI. However, if delay was due to default by petitioner/
NHAI or force majeure, then respondent was entitled to grant of
extension of time determined by the Independent Engineer and
accordingly all timelines would get extended.
19. Learned senior counsel for respondent next submitted that as per
Article 27 read with Article 15 of the Concession Agreement, respondent
was entitled to commence collection of Fee /Toll from the date of
completion certificate issued by the Independent Engineer under Article
14 thereof for the entire Concession Period of 20 years from appointed
date. The concession agreement in Article 35.02 further stipulated that if
petitioner/ NHAI was in material default or breach of the Concession
Agreement, it shall be liable to pay compensation of all direct costs,
including interest payments on Debt O&M Expenses, any increase in
capital costs on account of inflation and all other costs. In addition,
Clause 35.03 stipulated that in the event such material default by NHAI
as in Article 35.2 causes delay in achieving COD, NHAI shall, in
addition to payment of compensation under Article 35.2, extend the
Concession Period to the extent of delay in COD.
20. Learned senior counsel submitted that the arbitral tribunal has
rightly held that due to reasons solely attributable to the petitioner, there
was delay in completion of construction of the Project. It was contended
that despite recommendation of the Independent Engineer for Extension
of Time of 518 days, petitioner unreasonably withheld the approval
contrary to the provisions of Concession Agreement till issuance of
provisional completion certificate and consequently, there was delay in
COD and respondent could not commence collection of fee/ toll.
21. Learned counsel for respondent submitted that on issue No.1, the
learned arbitral tribunal has held that respondent is entitled to "Extension
of Time" of 518 days from the scheduled completion date of 27.06.2013
on account of delays solely attributable to NHAI, which were supported
by detailed, catalogued reasons, particularly letters dated 7.10.2013 &
20.12.2013 of the Independent Engineer, who confirmed the delays and
hindrances due to non-availability of hindrance free work site and also
upon failure of petitioner to execute relevant agreements with Railways;
deposit mandatory planning and estimation charges on time, which
petitioner has not been able to rebut before the learned arbitral tribunal.
22. With regard to issue No.2 & 5, learned senior counsel for
respondent submitted that respondent has been able to prove before the
arbitral tribunal that the supplementary agreement was signed under
economic duress, which is one sided agreement drafted by the NHAI
with the condition to issue the Provisional Completion Certificate.
Respondent has also been able to prove that obtaining of Provisional
Completion Certificate was necessary for respondent to collect the toll/
fee and to pay off the debts of lenders. Learned senior counsel submitted
that the arbitral tribunal has rightly rendered the Supplementary
Agreement void. Learned counsel submitted that cumulative reading of
Article 35.2 &35.3 shows that once default by NHAI is established, it
must extend the Concession Period proportionately to the period of
delay. It was strenuously submitted that the claims of respondent are not
at all barred by limitation. It was also submitted that the scope of review
of arbitral award by this Court under the provisions of Section 34 of the
Act, is very limited. Learned senior counsel placed reliance upon a recent
decision of Hon‟ble Supreme Court in Delhi Airport Metro Express Pvt.
Ltd. Vs. Delhi Metro Rail Corporation Ltd. 2021 SCC OnLine SC 695
in support of above submissions.
23. The rival contentions urged on behalf of both the sides were
extensively heard and material placed on record as well as decisions cited
have been carefully perused.
24. Pertinently, Section 34 of the Act provides for setting aside of the
arbitral award on very limited grounds, which have been enumerated in
sub-Section (2) and (3) of Section 34 of the Act. Further, in catena of
decisions, the Hon‟ble Supreme Court has laid down the parameters to be
followed while considering the petitions under the aforesaid provisions
of law.
25. In a recent decision in National Highways No. 45E and 220
National Highways Authority of India Vs. M. Hakeem, 2021 SCC
OnLine SC 473 the Hon‟ble Supreme Court 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."
26. Applying the afore-noted ratio of law laid down by the Hon‟ble
Supreme Court and keeping in mind that this Court cannot in depth
scrutinize the arbitral award and has only a limited scope to interfere, this
Court has analysed the arbitral award to find out whether the claims
raised in the present petition are valid and liable to be sustained or
dismissed.
27. In the impugned award, the arbitral tribunal has noted that for
executing the Project on a DBFOT basis, a Concession Agreement was
signed between the parties on 16.11.2009 for a Concession Period of 20
years from appointed date i.e. 31.12.2010. The cost of the project was
Rs.705 crores, its length was 102.420 km. and the date scheduled for
completion of the project was 27.06.2013 and the project award
parameter was the grant of Rs. 126.90 crores. The aforesaid Concession
Agreement was amended vide a Supplementary Agreement dated
05.09.2013, whereby the arbitration clause was amended. Subsequently.
another Supplementary Agreement was signed between the parties on
05.11.2014, which according to claimant/ respondent was signed under
duress.
28. The learned tribunal has noted the claim of claimant/ respondent
that the project commenced from the appointed date i.e. 31.12.2010 and
the completion of the project was to be done by 27.06.2013, which was
delayed on account of reasons exclusively attributable to the petitioner
herein. The claimant/respondent had raised claims for Extension of Time
for 518 days, damages and for extension of concession period. Thus,
according to the impugned award, the claims raised by the claimant/
respondent before the arbitral tribunal were:-
i. Claim No.1, Extension of Concession Period: Since the Project
had been delayed due to the Respondent's breach of reciprocal
promises and obligations, the Claimant could not achieve a timely
COD. The overall effect of the delay was 518 days, as certified by
the Independent Engineer, and this greatly distorted and delayed
the Claimant's collection of revenue. Thus, it was not necessary to
prove who caused the breach and to what extent, given that the
Claimant was denied of its rightful period of commercial operation
for collection of revenue. Thus, the Claimant was claiming for the
extension of the Concession Period in order to secure appropriate
and adequate relief.
ii. Claim No. 2, Compensation under Article 35.2 for delay: Article
35.2 obliged the Respondent to reimburse the Claimant for any
extra expenditure incurred by the latter in case of a time overrun,
including expenditure for overheads and other specified, relevant
expenditure. Thus, the Claimant was claiming "an amount of Rs.
159.541 crores" under this clause, by relying on the annexed
detailed certified and audited expenditure as per the authorized
auditors.
iii. Claim No. 3, Compensation under Article 35.2 on account of
inflation: Article 35.2 also provides for compensation for "any
increase in capital costs on account of inflation and all other
costs" to be paid to account for escalation and other costs. The
Claimant calculated the same to be Rs.92.71 crores and submitted
its claim.
iv. Claim No. 4, Cost of Arbitration: The Claimant sought liberty to
submit a cost compilation under Section 31 A of the Arbitration
and Conciliation Act, 1996 towards closure of arbitration
proceedings.
29. The arbitral tribunal has also elaboratively noted the objection of
the petitioner/ respondent that the claimant had signed the Supplementary
Agreement dated 05.11.2014 with eyes wide open, where-under it had
agreed to not raise any claim whatsoever for idling of resources, increase
in cost of material, delay in highway construction etc. and also not to
seek an extension of the Concession Period.
30. The tribunal has also noted that the claimant/respondent had acted
upon the Supplementary Agreement and received the PCC/PCOD and
was also permitted an Extension of Time up to that period without levy
of penalty. Thus, the claimant/respondent had received benefits and
advantages by virtue of the Supplementary Agreement.
31. To determine the claims of claimant/ respondent, the arbitral
tribunal had framed six issues, which have already been noted by this
Court in Para-3 above.
32. (i) With regard to the first and fifth issue, the tribunal has noted
that the claimant/ respondent had commenced the work on 31.12.2010
and the date for completion of the project was scheduled as 27.06.2013.
Under Article 12.4.2 of the Concession Agreement if
claimant/respondent failed to achieve Project Milestone III within 90
days from 10.10.2012, it was liable to pay damages to the authority.
However, claimant/ respondent achieved the Project Milestone III on
31.12.2012 i.e. within the limitation period.
(ii) The tribunal has further noted that thereafter, claimant/ respondent
vide letter dated 27.05.2013, sought Extension of Time of 369 days from
Independent Engineer, detailing various impediments that were
attributable to the respondent, who vide letter dated 07.10.2013 granted
interim extension of 264 days clarifying that such 253 days Extension of
Time overlapped with the Extension of Time of 90 days assessed by it on
account of the hindrances at the site and thereby, shifted the project
completion date to 18.03.2014. The aforesaid proposal of Independent
Engineer vide letter dated 07.10.2013 was returned by the petitioner
herein, in response to which vide letter dated 20.12.2013 the Independent
Engineer once again reiterated its earlier recommendation for grant of
264 days interim Extension of Time. On 18.02.2014 i.e. more than six
months after the scheduled completion date, the Commissioner of
Railway Safety sanction was received and the mandatory planning and
estimation charges in respect thereof were deposited on 19.04.2014 and
the permission for launching girders was granted after clearance was
obtained from the Court on 01.08.2014. Thus, the delay of 400 days from
the scheduled date of completion i.e. 27.06.2013 till 01.08.2014 was
attributable only to the petitioner/NHAI. Thereafter, claimant/respondent
signed an undertaking on 14.10.2014 and the Supplementary Agreement
on 05.11.2014 and the Independent Engineer on 21.11.2014 sought
issuance of PCOD and after necessary approval on 27.11.2014 by the
Independent Engineer as well as petitioner herein, the toll collection at
the Highway began from 28.11.2014.
(iii) The impugned Award notes that the Independent Engineer vide
letter dated 23.03.2015 written to the petitioner/NHAI had clarified that
the claimant/ respondent had achieved Milestone- I before the scheduled
completion date, which was authenticated by the Statutory Auditor; and
had achieved Milestones- II and III within 90 days of the scheduled
completion date, as per Article 12.4.2 and reiterated that the claimant/
respondent was entitled to Extension of Time of 518 days.
(iv) On the first issue, the Tribunal held as under:-
"In view of the above factual narration, the
following three conclusions emerge. First, the IE
was the sole competent authority under the
contract to determine the issue of EOT. Second,
the IE's findings that the Claimant achieved
Project Milestones I, II, and III within 90 days, as
per Article 12.4.2 of the CA has gone unrebutted,
except making references to the previous
observations of the IE. In any event, the
Respondent failed to demonstrate any error or
flaw in this finding of the IE. Third, the IE's
finding that the Claimant is entitled to an EOT of
518 days (400 + 87+ 31 days) from the scheduled
completion date of 27.06.2013 has not been
rebutted by the Respondent or shown to be to
erroneous, even during their cross-examination.
The time taken by the Respondent to receive the
CRS approval for the 5 ROBs had admittedly been
"abnormally delayed", resulting in an EOT of 400
days (till 01.08.2014) which subsumed other
delays. The Respondent had also failed to provide
any explanation on delay of 87 days (after
receiving the Court's order dt. 01.08.2014 for
completing the balance works on the ROB) and 31
days (for the period after 30.10.2014 since
hindrance-free land was still not made available
by NHAI to the Claimant, till the issuance of the
PCC on 27.11.2014. Thus, the Claimant is
entitled to EOT of 518 days with effect from the
scheduled completion date of 27.06.2013 till the
date of issuance of PCCIPCOD, i.e. 27.11.2014.
Hence, the finding on Issue No. 1 stands
concluded and the AT finds in favour of the
Claimant that the IE has approved the EOT for
518 days as per Article 14 of the CA."
33. On the afore-noted first issue, this Court finds that vide letter dated
03.09.2012 the claimant/ respondent had requested the Director/NHAI to
handover the land required to enable it to complete the project on the
scheduled completion date. A perusal of communication dated
23.03.2015 of the Independent Engineer to the Project Director, NHAI
(Page-930 of documents) clearly shows that the reasons for grant of
Extension of Time wherein it is noted that under Event-1, hindrances at
the site had hampered the work of the concessionaire, which could be
removed from the main carriageway in June, 2014 and there was a delay
of 54 days in doing so. It is also noted that under Event-2, there was
delay caused for tree cutting permission and delay of 73 days was
attributable to it. Further, under Event-5, there was delay in shifting of
existing Irrigation Distributary and therefore, concessionaire was entitled
to extension of 90 days‟ time. Under Event- 6, extension of time of 13
days has been recommended for delay in possession of land due to
different court cases. The Independent Engineer under Event-7 has
recommended extension of time of 487 days due to delay in seeking CRS
approval. In all, the Independent Engineer has recommended delay of
518 days. In the opinion of this Court, the arbitral tribunal has rightly
noted that the Independent Engineer was the sole competent authority
under the contract to determine the Extension of Time and since
petitioner has rightly achieved Milestones I, II and III within the time
prescribed as per Article 12.4.2 of the Concession Agreement, the
Extension of Time of 518 days, for the reasons solely attributable to the
petitioner/NHAI, and has rightly recommended Extension of Time of
518 days and thereby holding issue No.1 in favour of the claimant.
34. With regard to second issue as to whether Supplementary
Agreement dated 05.11.2014 prohibits claims of claimants or not, the
learned arbitral tribunal has noted that in terms of Article 14.3.1, the
Independent Engineer was not required to take prior approval of
petitioner-NHAI before issuing PCC/PCOD and, therefore, Independent
Engineer‟s letter dated 13.10.2014 seeking the respondent's approval is
contrary thereto and claimant/respondent signing an undertaking on the
same date waiving its rights under the contract and reliance placed
thereupon by the Project Director of NHAI relying to seek approval from
NHAI on 14.10.2014, provided an important background to consider that
the same was signed under duress. It is also noted that the failure to
receive a PCC/PCOD, prevented the claimant/ respondent from levying
toll and thereby had serious economic implications and also it was under
pressure to repay the principal and interest to the banks.
(i) The Tribunal, therefore, held that only after respondent/Claimant
had signed the Supplementary Agreement on 05.11.2014, the
petitioner/respondent finalized the issuance of PCOD, which was
approved by the Executive Committee of NHAI on 27.11.2014 and
issued on the same date. The Tribunal has also held that petitioner/NHAI
had set up the signing of Supplementary Agreement as a pre-condition
for the issuance of PCC/PCOD.
(ii) With regard to plea of petitioner/NHAI that the Supplementary
Agreement dated 05.11.2014 was drafted by the claimant/ respondent,
the tribunal has opined that the stamp paper was purchased on
14.10.2014, which bears the name of claimant/respondent as the first
party and name of second party is blank. The Tribunal has also relied
upon noting of Mr. M.K. Jain, General Manager of NHAI vide (Tech)-
P&H dated 05.11.2014 addressed to CGM (T) BSS recording that "a
draft Supplementary Agreement to be signed with the concessionaire is
placed for perusal please" to arrive at the finding that the Supplementary
Agreement was drafted and signed on the same date and it was the
petitioner/NHAI herein who had drafted the same.
35. This Court has also gone through the Supplementary Agreement
dated 05.11.2014, the relevant portion of which has caught the eyes of
this Court, is highlighted as under:-
"THE PARTIES HEREIN HAVE AGREED TO THE
FOLLOWING:
(a) Both the parties amicably agree, for issuance of
Provisional Completion Certificate the work of Design,
Engineering, Finance, Construction, Operation and Maintenance
of Pathankot to Amritsar Section of NH-15 from Km. 108+502 in
the State of Punjab subject to completion of certain balance items
as decided by Authority in its Executive Committee Meeting held on
22.10.2014.
(b) Concessionaire amicably agree that he will not raise any
claims whatsoever in this Concession Agreement i.e. idling of
resources (manpower and machinery), increase in cost of
materials, delay in construction of highway, etc. The
Concessionaire amicably agrees that he will not seek any extension
in Concession Period: however, the Concessionaire shall retain his
right for extension of the Concession Period on account of any
valid factor arising after the actual construction of the highway/
project as per provisions of the Concession Agreement.
(c) The concessionaire also claimed that he should be given
EOT for construction period without levy of penalty as delay was
attributable to both the parties. It was amicably settled that the
issue of grant of EOT for construction period shall be dealt
separately.
(d) Concssionaire amicably agrees that it shall not raise any
claim whatsoever, in any form other than for any Change of Scopes
already principally approved by NHAI. A fair decision by NHAI,
as per provisions of the CA, on the variations/ Change of Scopes
will be acceptable to the concessionaire.
(e) The Concessionaire amicably agrees to complete the
balance works mentioned in punch list, as per Concession
Agreement."
36. An undertaking from the claimant/respondent, as mentioned in
Clause- (a) and (b) highlighted above, has been given and after
furnishing thereof, the petitioner finalised issuance of PCC, which was
issued on 27.11.2014. This Court finds that the learned arbitral tribunal
has taken detailed note of the facts and circumstances in which the
Supplementary Agreement dated 05.11.2014 was executed and this Court
is in harmony to the said view of the arbitral tribunal.
37. On the aspect whether respondent herein had a right to claim for
the losses attributable to it, the stand of petitioner/NHAI before the
arbitral tribunal was that in the light of Supplementary Agreement dated
05.11.2014, the claimant/ respondent had waived off its right, however,
this Court finds that the Independent Engineer in letter dated 13.01.2015
had significantly stated that the claimant / respondent had achieved all
the milestones within the time framed and limitation period, as
prescribed under Article 12.4.2 and also recommended Extension of
Time, due to various delays attributable to the petitioner. Therefore, the
tribunal has rightly held that it cannot be accepted that claimant /
respondent will voluntarily give up valuable claims for compensation and
extension of Concession Period on account of petitioner‟s default without
any reciprocal consideration. The tribunal had therefore rightly held that
claimant/ respondent was in a precarious financial condition and that
without signing the Supplementary Agreement, the respondent would not
have issued the PCC/PCOD and it would not have been able to
operationalise the Project Highway and start collecting toll fees. It was
also rightly held that the Supplementary Agreement dated 05.11.2014
was signed by the claimant/ respondent under duress and is, therefore,
rendered voidable. Also, in view of Clause (C) of the Supplementary
Agreement the issue of Extension of Time is to be decided separately,
which makes it further clear that the claimant/ respondent had not given
up its claim for Extension of Time for construction and claim
compensation for the delay caused at the hands of petitioner/ NHAI.
38. With regard to issue No.5 „on estoppels", the tribunal has rightly
held that petitioner/NHAI did not provide any evidence of estoppels nor
any of the witness substantiated and also that once it has been held that
the Supplementary Agreement was signed under duress by
claimant/respondent, the question of estoppels does not arises.
39. On the aspect of claimant/respondent having raised the issue
belatedly on 24.09.2018 i.e. after 04 years of signing the Supplementary
Agreement, the arbitral tribunal has noted that the claimant had prayed
for issuance of a completion certificate on 03.05.2017, followed by a
letter dated 19.06.2017 seeking compensation for the delay of 518 days
under Article 35.2 and 35.3 of the concessionaire agreement. The
aforesaid letter dated 19.06.2017 to the NHAI was after 30 month of the
Supplementary Agreement and the claimant/respondent got the
Completion Certificate only on 25.08.2017. The tribunal has further
observed as under:-
"125. While evaluating this argument, the AT must take
into account the threat of termination under Article
12.4.3 of the CA, since the delay in issuance of PCOD
was more than the period of 270 days mentioned in
Article 12.4.3 and the Respondent had not accepted that
the delay was due to reasons solely attributable to it or
due to a force majeure. In fact, even the Supplementary
Agreement expressly left the question of EQT during the
construction period open, thus leaving the threat of
termination hanging on the Claimant. In this context, the
IE's letter dated 13.01.2015 further recommending an
interim EOT up till the issuance of the PCC dt.
27.11.2014 is revealing of the Respondent's
intentions, since it highlighted that:
"5. It is pertinent to point out that the Authority has
been insisting for imposing of Damages on the
Concessionaire for delay in completing the works on
the stretches made available to the concessionaire
free of any obstruction. However, the Milestones as
per the CA have been achieved. As such, no
damages are leviable on the Concessionaire"
(emphasis supplied).
In the same letter, the IE also specifically references
Article 12.4.3 of the CA noting that the Project
Milestones I, II, and III had been achieved, but the
Scheduled Project Completion Date as per Schedule G
had not been achieved. The IE subsequently
recommended the interim EOT till 27.11.2014."
40. The tribunal has also taken note of the fact that despite issuance of
full Completion Certificate on 25.08.2017, the issue of Extension of
Time was not settled and the claimant/respondent vide letters dated
18.06.2018; 28.06.2018 and 07.08.2018 raised the disputes and sought
conciliation and it is only after petitioner/NHAI failed to reply to the
same, the claimant/respondent invoked arbitration vide letter dated
07.08.2018. The aforesaid reasoning makes it abundantly clear that the
arbitral tribunal has rightly held that there was no delay on the part of the
Claimant in raising the claim of economic duress pursuant to
Supplementary Agreement dated 05.11.2014 and that claims are not
barred by limitation.
41. With regard to third issue whether the compensation sought by the
Claimant under Article 35.2 of the CA towards increase in capital cost is
attributable to the delay caused by the NHAI in completing the Project
Highway, the petitioner/NHAI has averred that the arbitral tribunal has
erroneously held that the delay has occurred for the reasons solely
attributable to the petitioner and therefore, compensation claimed by the
claimant/ respondent towards extra expenditure and increase in capital
cost due to time over run / delayed construction for the period
27.06.2013 to 27.11.2014 is liable to be rejected. Petitioner has also
claimed that once petitioner had extended the concession period
equivalent to the construction delay and the respondent was able to earn
the toll, there was no question of grant of compensation by the arbitral
tribunal. To the contrary, stand of claimant/respondent is that in terms of
Article 35.2 of the Concessionaire Agreement, if petitioner/ NHAI was in
default or breach thereof, it shall be liable to pay all direct costs,
including interest payments on Debt O&M Expenses, any increase in
capital costs on account of inflation and all other costs. Article 35.3
further stipulates that if the delays are caused and proved in terms of
Article 35.2, the petitioner/NHAI shall extend the concession period to
the extent of delay in COD.
42. It is pertinent to mention here that the Independent Engineer vide
its letter dated 07.10.2013 and 23.03.2015 had approved Extension of
Time for 518 days. In the said letter also stated that the claimant/
respondent had reached the Milestones within the contractual limitation
period. In addition, the Statutory Auditor certified the expenses for the
period 27.06.2013 till 27.11.2014 and based thereupon the tribunal was
right in holding that the incremental additional cost incurred by the
claimant/respondent as interest and fixed overhead costs on account of
the respondent‟s 518 days delay was Rs.159.451 crores. The tribunal
further added the direct cost in respect of labour, salary (PMC), Site
establishment costs, Plants & Machinery hire charges etc. to the tune of
Rs.92.71 crores thereto and held that compensation of Rs. 159.541 crores
+ Rs. 92.71 crores = Rs. 252.251 to be paid by the petitioner/NHAI to the
claimant/respondent. The concession period was also extended for 518
days for the delays attributable to the respondent.
43. In view of the above, finding that the arbitral award is based upon
the evidence and material placed on record, it cannot be held to be
perverse or erroneous and so is not required to be interfered with by this
Court.
44. With aforesaid observations, the present petition is dismissed.
(SURESH KUMAR KAIT)
JUDGE
March 08, 2022
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