PSA SICAL TERMINALS PVT. LTD. vs. THE BOARD OF TRUSTEES OF V.O. CHIDAMBRANAR PORT TRUST TUTICORIN

REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION  CIVIL APPEAL NOS. 3699­3700 OF 2018 PSA SICAL TERMINALS PVT. LTD.     ...APPELLANT(S) VERSUS THE BOARD OF TRUSTEES OF V.O. CHIDAMBRANAR PORT TRUST TUTICORIN AND OTHERS ...RESPONDENT(S) J U D G M E N T B.R. GAVAI, J. 1. The appellant has approached this Court being aggrieved st by the judgment and order dated 1  November 2017, passed by the Division Bench of the Madras High Court in C.M.A. (MD) No. 345 of 2016 and C.M.P. (MD) No. 4867 of 2016, thereby allowing   the   appeal   of   the   respondent   No.1   herein   under Signature Not Verified Digitally signed by R Natarajan Date: 2021.07.28 16:20:39 IST Reason: Section 37(1)(c) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Arbitration Act’) vide which the 1 th High   Court   set   aside   the   award   dated   14   February   2014, passed by the Arbitral Tribunal and the order passed by the th District   Judge   dated   25   February   2016,   rejecting   the application filed by the respondent No.1 herein under Section 34 of the Arbitration Act.  2. The facts necessary for adjudication of the present appeals are as under:­ The   respondent   No.1­The   Board   of   Trustees   of   V.O. Chidambranar Port Trust, Tuticorin (hereinafter referred to as th ‘TPT’) issued a global tender on 9  April 1997, inviting bids for development of the Seventh Berth at V.O. Chidambranar Port, Tuticorin   as   a   Container   Terminal   and   for   operating   and maintaining the same for 30 years on a Build, Operate and Transfer (hereinafter referred to as ‘BOT’) basis.  In response to the   tender,   the   appellant­PSA   Sical   Terminals   Pvt.   Ltd. th (hereinafter referred to as ‘SICAL’) submitted its bid on 24 October 1997.  The financial offer was submitted by SICAL on th 19  December 1997.  Since SICAL’s offer was the highest, the same was accepted and a Letter of Intent (hereinafter referred 2 th to as ‘LoI’) was issued to it on 29  January 1998 and the same th was followed by a License Agreement dated 15  July 1998. 3. In   the   meantime,   the   Tariff   Authority   for   Major   Ports (hereinafter   referred   to   as   ‘TAMP’)   which   is   an   authority constituted   under   the   Major   Port   Trusts   Act,   1963   adopted th th guidelines on 26 /27   February 1998.   SICAL submitted its th tariff proposal with regard to the Container Terminal on 28 September 1999.  A revised proposal came to be submitted by th SICAL on 8   October 1999, thereby including royalty as an element of cost.   The said proposal was approved by TAMP’s th th order dated 8  December 1999.  TAMP notified its order of 8 th December 1999 vide gazette notification dated 28   December 1999, thereby approving the tariff as proposed by SICAL vide th proposal dated 8   October 1999. SICAL submitted a further th proposal   on   8   February   2002   for   review   in   tariff,   again including   therein   an   increase   in   royalty   to   be   paid   as   an element of cost and proposed for an increase in the tariff.  TPT th vide   communication   dated   10   April   2002,   objected   to   the proposal of SICAL for increase in tariff.   TAMP vide its order 3 th dated 20  September 2002, rejected the proposal of SICAL for increase in tariff. 4. SICAL filed Writ Petition Nos. 40637­40639 of 2002 before the Madras High Court for quashing of the TAMP order dated th 20  September 2002.  In the said proceedings, the Madras High th Court   passed   an   order   dated   8   November   2002   granting interim  relief   in favour   of  SICAL,  thereby   staying  the   TAMP th order dated 20  September 2002.  Vide the said order, SICAL was permitted to charge tariff at the rate prevailing prior to the TAMP order impugned in those petitions. 5. Ministry   of   Shipping,   Government   of   India   (hereinafter th referred   to   as   ‘GoI’)   vide   notification   dated   29   July   2003, clarified   that   revenue   sharing/royalty   payment   shall   not   be factored into as cost for fixation/revision of tariff by TAMP and further   directed   that   the   same   shall   be   clearly   indicated   in st subsequent bid documents. On 31  March 2005, TAMP notified the revised guidelines thereby disallowing royalty as an element of cost.   However, it also provided that in BOT cases where th bidding processes were finalized before 29  July 2003, the tariff 4 computation will take into account royalty/revenue share as cost for tariff fixation in such a manner as to avoid likely loss to the operator on account of the royalty/revenue share not being taken into account.   This was subject to a maximum of the amount quoted by the next lowest bidder.  This was also to be allowed only for the period up to which such likely loss would arise.  It further provided that this would not be applicable if there is a provision in the concession agreement on treatment of royalty/revenue share. th 6. On   17   August   2005,   a   Memorandum   of   Compromise (hereinafter referred to as the ‘MoC’) came to be filed before the Madras High Court between SICAL, GoI and TAMP who were parties to the Writ Petition Nos. 40637­40639 of 2002.  As per the said MoC, SICAL was to submit a proposal to the Ministry of  Shipping   and   Transport,   GoI   in   the   matter   of   permitting royalty to be allowed to be factored into cost while fixation of st tariff   for   the   period   prior   to   31   March   2005.     It  was   also clarified that for the period thereafter, new guidelines provide the manner and mode in which this has to be done.  The MoC 5 provided   that   on   receipt   of   the   proposal,   the   Central Government   would   consider   the   same   and   pass   appropriate orders consistent with the policy decision of the Government of India   (hereinafter   referred   to   as   the   ‘GoI’)   in   the   matter   of Chennai Container Terminal Limited  (hereinafter referred to th as the ‘CCTL’) dated 5   August 2003 and accordingly issue a directive under Section 111 of the Major Port Trusts Act, 1963. Vide the said MoC, it was further provided that SICAL would continue to charge the 1999 Tariff which was permitted as per the interim orders passed by the High Court till new tariff was gazetted.   It further provided that advantages/ gains, if any, that SICAL has enjoyed by virtue of not implementing the 2002 Tariff, will be quantified by TAMP and such advantages/gains will be adjusted/set­off in the proposed new tariff and such set­ off will be spread over a period of three years.  7. In   pursuance   of   the   aforesaid   MoC,   GoI   issued   a th directive/order to TAMP in case of SICAL on 17   April 2006. Vide the said directive/order, the request of SICAL for claiming a part of royalty as pass through came to be rejected.  SICAL 6 th thereafter submitted its proposal for fixation of tariff on 18 rd April 2006.   TAMP passed a tariff order on 23  August 2006, th which came to be notified on 15  September 2006, vide which SICAL’s proposal for increase in tariff was rejected.   th 8. SICAL made a written representation to TPT on 6  October 2006, thereby seeking relief under the terms of Article 14.3 of the   License   Agreement.   Vide   the   said   representation,   SICAL requested   for   amending   the   License   Agreement   so   as   to incorporate   the   revenue   sharing   method   and   incidental changes. 9. SICAL also filed Writ Petition Nos. 38845 and 38846 of th 2006   before   the   Madras   High   Court   on   9   October   2006, th thereby challenging the GoI directive dated 17  April 2006 and rd th the TAMP order dated 23  August 2006. On 27  October 2006, TPT refused to consider SICAL’s application for amendment of the License Agreement on the ground that the issues raised were pending consideration before the Madras High Court.  The th said   communication   dated   27   October   2006   came   to   be challenged by SICAL before the Madras High Court vide Writ 7 Petition No.43461 of 2006.  The Madras High Court passed an st order dated 21   August 2007, in Writ Petition No. 43461 of 2006 filed by SICAL, observing therein that the representation th dated 6  October 2006, had nothing to do with the pendency of th said writ petition and quashed the communication dated 27 October   2006.   It   directed   TPT   to   consider   and   decide   the representation of SICAL on its own merits. nd Vide   subsequent   order   dated   22   August   2007,   Writ 10. Petition Nos. 38845 and 38846 of 2006 were allowed by setting rd aside  the   TAMP  order   dated   23   August  2006   and  the GoI th directive dated 17  April 2006.  The said order was passed on the ground that SICAL was not given sufficient opportunity of being heard by TAMP and GoI and therefore, directed TAMP and GoI to pass fresh order after giving opportunity of hearing to the SICAL. 11. In pursuance of the order passed by the High Court, the th GoI   issued   a   directive   on   20   February   2008,   therein considering the contentions raised on behalf of SICAL.  The said directive provided that TAMP, while fixing the tariff in case of 8 SICAL, should take into consideration the benefit given in the case of CCTL. th 12. TAMP vide notification dated 26  February 2008, notified the   guidelines   for   upfront   tariff   fixation   for   Public   Private Partnership projects at Major Ports.  In pursuance of the order passed by the High Court dated 13. st th 21  August 2007, the Chairman, TPT passed an order on 25 April 2008, observing therein that any change in the bidding parameter is a matter of policy regarding which a decision can be taken only by the GoI and in effect, rejected the proposal of SICAL   for   amending   the   License   Agreement,   so   as   to incorporate the revenue sharing method. 14. SICAL   thereafter   submitted   its   proposal   for   fixation   of rd tariff   thereby   proposing   an   increase   in  tariff   on  3   October th 2008.   TAMP passed tariff order dated 17   December 2008, th which came to be notified on 30   December 2008, rejecting SICAL’s proposal for increase in tariff.  SICAL thereafter again th on   6   January   2009,   made   a   representation   to   TPT   for amendment of the License Agreement in view of Article 14.3. 9 SICAL also filed Writ Petition Nos. 1350 and 1351 of 2009, th challenging the tariff order dated 17  December 2008 and the th policy direction issued by GoI dated 20  February 2008.  The th Madras High Court vide order dated 15  October 2009 allowed those petitions by setting aside the tariff order of 2008 and the th GoI directive of 20   February 2008.   Vide the said order, the Madras High Court directed TAMP to issue fresh tariff order after   obtaining   necessary   proposal   from   SICAL   and   after according sufficient opportunity including personal hearing to SICAL.  The GoI directive of 2008 also came to be set aside with a direction to the GoI to consider the matter afresh after giving an opportunity of hearing to SICAL.  The said orders have been challenged by TAMP by filing Writ Appeal No. 1845 of 2009 which is pending.  It also appears that an appeal has also been filed by SICAL which is also pending before the Division Bench of the Madras High Court. st 15. SICAL   thereafter   addressed   a   letter   to   TPT   dated   1 December 2009, raising therein the ground of change in law and   therefore   again   praying   for   shifting   to   revenue   sharing 10 model.     A   meeting   was   held   by   the   Secretary,   Ministry   of th Shipping,   GoI   on   28   February   2011,   wherein   the representatives of TPT and SICAL were present.  It was decided in   the   said   meeting   that   two   proposals   each   should   be submitted by SICAL as well as TPT.  These proposals were to be considered by the Expert Committee. th SICAL   thereafter   on   28   June   2011,   moved   a   petition 16. under Section 9 of the Arbitration Act before the District Judge, Tuticorin with a grievance that the royalty payable for each Twenty­foot Equivalent Unit (hereinafter referred to as “TEU”) th was scheduled to exceed the tariff.  On 30  June 2011, District Judge, Tuticorin passed an order granting ad­interim stay in the Section 9 petition, thereby restraining TPT from demanding or recovering any royalty at an escalated rate.   In July 2011, SICAL addressed a letter to the Chairman, TPT requesting for referring the dispute for arbitration under Article 15.3 of the License Agreement.  The said request came to be rejected by the th Chairman,   TPT   vide   communication   dated   28   September 2011.   11 In the meanwhile, the proposals submitted by SICAL as 17. well as TPT were being considered by the Expert Committee. th On 30   April 2012, District Judge, Tuticorin passed an order thereby allowing the Section 9 petition filed by SICAL and made absolute   the   ad­interim   injunction   granted   in   its   favour. Thereafter,   there   was   exchange   of   certain   communications between   SICAL   and   TPT   with   regard   to   the   submission   of performance   bank   guarantee   at   an   escalated   rate.     In   the meantime, TPT challenged the order of injunction granted by the District Judge by filing an appeal being C.M.A.(MD) No. 1131 of 2012 and the same is pending consideration before the Madurai Bench of the Madras High Court.  SICAL addressed a th letter dated 19   November 2012, invoking arbitration clause under Article 15.3 of the License Agreement.  In the meantime, th on   8   August   2013,   TAMP   issued   2013   Guidelines   for determination of tariff for projects at Major Ports. th 18. On 5   April 2013, SICAL filed its Statement of Claim in the arbitration proceedings.  TAMP filed its counter statement in June 2013 to which a statement in rejoinder came to be filed 12 th by SICAL on 28  June 2013. TPT filed its reply to the rejoinder th in August 2013.   Vide award dated 14   February 2014, the Arbitral Tribunal passed the award in favour of SICAL holding that there was a change in law and thereby granting reliefs as prayed   for   by   SICAL.     It   directed   conversion   of   Container Terminal of TPT from royalty model to revenue share model.  th The award of Arbitral Tribunal dated 14  February, 2014 19. came to be challenged by TPT by filing a petition under Section 34 of the Arbitration Act being OP No. 389 of 2014 before the Madras High Court.   SICAL challenged the jurisdiction of the Madras   High   Court   to   adjudicate   the   petition   filed   under Section   34   of   the   Arbitration   Act.     There   were   certain interlocutory   proceedings   to   which   reference   would   not   be th necessary.   By order dated 9   June 2015, the Madras High Court held that the petition filed by TPT under Section 34 of the Arbitration Act was not tenable on the ground of jurisdiction. th As such TPT re­presented its Section 34 petition on 30  June 2015, before the District Judge, Tuticorin being Ar.O.P. No. 260 th of 2015.   The District Judge, Tuticorin vide order dated 25 13 February 2016, dismissed the Section 34 petition filed by TPT. Being aggrieved thereby, TPT filed an appeal before the Madras st High Court which came to be allowed by the order dated 1 November 2017, vide which the award of the Arbitral Tribunal th dated 14  February 2014 and the order passed by the District th Court dated 25  February 2016, came to be set aside.  Being aggrieved thereby, SICAL has approached this Court by way of the present appeals. 20. We  have  heard  Dr. A.M.  Singhvi and   Shri Gopal Jain, learned Senior Counsel on behalf of the appellant­SICAL, Smt. Madhavi Divan, learned Additional Solicitor General of India and Shri Keshav Thakur, learned counsel on behalf of TPT. Dr.   Singhvi   submitted   that   Article   14   of   the   License 21. Agreement   specifically   provides   that   if   after   the   date   of   the agreement, there is a change in law which substantially and adversely   affects   the   rights   of   the   Licensee   under   the   said agreement, so as to alter the commercial viability of the project, the Licensee may, by written notice, request amendments to the terms of the agreement.  He submitted that the definition of law 14 in   Article   14   is   wide   enough   and   includes   any   valid   act, ordinance,   rule,   regulation,   notification,   directive,   orders, policy, bye­laws, administrative guidelines, ruling or instruction having   the   force   of   law,   enacted   or   issued   by   Government Authority.   The learned Senior Counsel submitted that Article 14.3 also provides that subject to the provisions of Article 15.3, the   Licensee   shall   not   be   entitled   to   any   compensation whatsoever from the Licensor as a result of change in law.  He submitted that if Article 14.3 is read in the correct perspective, it   will   be   clear   that   compensation   is   not   provided   to   the Licensee on account of any change in law inasmuch as a relief could be provided to the Licensee by suitably amending the terms of the agreement when such a change substantially and adversely affects the rights of the Licensee.  He submitted that the said Article is a unique one.   22. Dr. Singhvi submitted that the Nhava Sheva Container Terminal Limited (hereinafter referred to as the ‘NSCT’) was the first project which was built on BOT basis.   The second one being the Seventh Berth of TPT.  He submitted that these are 15 the only projects wherein royalty method has been adopted. He submitted   that   all   subsequent   projects   provide   for   revenue sharing model.   He submitted that it will be clear from the stand   of   TPT,   when   the   proposal   was   moved   by   SICAL   for increase   in   tariff   in   1999,   that   it   also   understood   that   the royalty was also to be factored in while finalizing the tariff.  He th submitted that perusal of the tariff order dated 8   December 1999, would reveal that even TAMP has allowed royalty as a pass through.  He submitted that the guidelines of 1998 would also clarify that it was a policy of TAMP that the port pricing was to continue to be cost based with an assured rate of return. He submitted that the said guidelines provide for an assured rate of return. He submitted that TPT, as a matter of fact, vide rd communication dated 3   November 1999 addressed to TAMP, had opposed any reduction of tariff as proposed by SICAL.  23. Dr. Singhvi submitted that the first change in law was th effected vide order of the GoI dated 29  July 2003, by which no percentage of royalty was permitted as a pass through.   The st second   change  in   law  was   effected   on  31   March  2005, by 16 which the royalty was permitted as a pass through, however, restricting the same to the maximum of the amount quoted by the next lowest bidder.  He therefore submitted that on account of these changes in law, SICAL was entitled to get a relief of amendment of the License Agreement and on failure of TPT to provide the relief, SICAL was entitled to invoke arbitration.  He submitted that though several representations were made to TPT, the same had not been responded to and as such, SICAL was   left   with   no   alternative   than   to   invoke   the   arbitration clause. He submitted that this has been rightly construed by the Arbitral Tribunal.  However, the Division Bench of the High Court   has   erroneously   interfered   with   the   finding   of   fact recorded  by  the   Arbitral  Tribunal  which  was   upheld  by the District Judge. 24. Dr. Singhvi further submitted that SICAL has been put in a very precarious situation.  He submitted that on one hand it is   required   to   pay   royalty   to   TPT   on   the   basis   of   annual increment, however the tariff which it can charge, has been so fixed   so   as   not   to   allow   royalty   as   a   pass   through.     He 17 submitted that at one point of time in 2011, the tariff has been so fixed that it surpasses the amount of royalty per TEU, SICAL would be required to pay to TPT.  He submitted that if the same is permitted, SICAL would not be in a position to continue its operations. He submitted that SICAL has provided a minimum guarantee to lift a minimum of 4.5 lakh tons of cargo.   He submitted that this has been rightly appreciated by the Arbitral Tribunal  wherein  it  has  observed   that  if   such  a  position  is permitted to continue, it will substantially and adversely affect SICAL.  He submitted that a chart at Page No. 1132 shows that SICAL would incur a gross loss of Rs. 2250 crores. He further submitted   that   TAMP   and   the   GoI   have   acted   in   a discriminatory manner.   He submitted that when in case of NSCT, a complete pass through so far as royalty is concerned, is permitted, the same is denied in case of SICAL. 25. Dr. Singhvi further submitted that the High Court has grossly erred in referring to the writ petitions and the MoC filed in one of the writ petitions, while setting aside the award.  He submitted that the writ petitions filed by SICAL were basically 18 against TAMP and with regard to the fixation of tariff.  However, the arbitration proceedings were about the change in law which changed   the  policy   of   permitting   pass   through  of   royalty  to denial   of   pass   through   of   royalty.   Whereas   the   proceedings before TAMP are pertaining to fixation of tariff.    He  further submits that the proceedings before the High Court pertain to the   period   prior   to   2013,   whereas   the   present   proceedings pertain to the relief to which SICAL is entitled under Article 14 of the agreement on account of change in law.  He submitted that SICAL was compelled to approach the arbitrator since in 2011­12,   the   royalty  payable   to  TPT   crossed   the   tariff.    He submitted that the contention considered by the High Court with regard to the MoC was only an oral argument made by TPT and not part of the pleadings. 26. Dr. Singhvi submitted that the scope of interference in an application   under   Section   34   and   in   an   appeal   filed   under Section 37 is very limited.  He submitted that unless a finding recorded   by   the   arbitrator   amounts   to   perversity,   an interference would not be warranted either under Section 34 or 19 Section 37.   He submitted that the District Judge had rightly rejected the Section 34 Application.  He further submitted that it was erroneous on part of the High Court in exercise of its jurisdiction under Section 37 to interfere with a well­reasoned award   of   the   Arbitral   Tribunal.     He   relies   on   the   following judgments in support of his submissions:­ 1 MMTC Limited v. Vedanta Limited , Associate Builders v. 2 Delhi   Development   Authority ,   State   of   Jharkhand   and 3 Others   v.   HSS   Integrated   SDN   and   Another ,   Sumitomo Heavy   Industries   Limited   v.   Oil   and   Natural   Gas 4 Corporation Limited , Kwality Manufacturing Corporation 5 v. Central Warehouse Corporation , Rashtriya Ispat Nigam 6 Limited v. Dewan Chand Ram Saran , Steel Authority of 7 India Limited v. Gupta Brother Steel Tubes Limited , Pure Helium   India   (P)   Limited   v.   Oil   and   Natural   Gas 1 (2019) 4 SCC 163 2 (2015) 3 SCC 49 3 (2019) 9 SCC 798 4 (2010) 11 SCC 296 5 (2009) 5 SCC 142 6 (2012) 5 SCC 306 7 (2009) 10 SCC 63 20 8 Corporation   Limited ,   P.V.   Subba   Naidu   and   Others   v. 9 Government of A.P. and Others , Dhannalal v. Kalawati 10 Bai and Others , Swamy Atmananda and Others v. Shri 11 Ramakrishna Tapovanam and Others   and Transcore v. 12 Union of India and Another . 27. Dr. Singhvi submitted that the UNIDROIT Principles of International   Commercial   Contracts   provide   the   rules   of interpretation   of   contracts.     He   submitted   that   the   said principles provide that a contract shall be interpreted according to the common intention of the parties.   It is only when the intention   cannot   be   established   that   the   contract   shall   be interpreted according to the meaning that a reasonable person of   the   same   kind   as   a   party,   would   give   it   in   the   same circumstances.  He submitted that from the perusal of Article 14 as well as the conduct of the parties, it is clear that the parties intended that if there was any change in law   to the detriment of the Licensee, the Licensee was entitled to relief 8 (2003) 8 SCC 593 9 (1998) 9 SCC 407 10 (2002) 6 SCC 16 11 (2005) 10 SCC 51 12 (2008) 1 SCC 125 21 from the Licensor by amendment of the contract.  He submitted that such intention is clarified from the fact that in such an event, the Licensee was not entitled to claim any compensation. The   learned   Senior   Counsel   in   this   respect   relies   on   the judgments of the Delhi High Court in   Sandvik Asia Private 13 and   Limited   v.   Vardhman   Promoters   Hansalaya 14 Properties v. Dalmia Cement (Bharat) Limited . 28. Dr. Singhvi further submitted that the agreement has to be read as a whole.  In his submission, whereas Articles 10.8, 13.4.7 and 13.4.8 make the Licensor’s decision binding, Article 14 does not provide it.  He submitted that Article 14 is unique in the sense that it provides for restoration of equilibrium.  He submitted that the Tribunal had two choices either to grant a pass through or revenue sharing.  If it has chosen one of them, then   even   if   it   is   considered   to   be   a   possible   view,   an interference therein was not warranted. 29. Shri Gopal Jain, learned Senior Counsel submitted that economic viability for long term contracts has to be provided. 13 2007 (94) DRJ 762 14 2008 (106) DRJ 820 22 He   submitted   that   Article   14   was   provided   as   an   in­built safeguard for the said purpose.  Relying on the judgment of this Court   in   Adani   Power   (Mundra)   Limited   v.   Gujarat 15 ,   he Electricity   Regulatory   Commission   and   Others submitted that while construing business contracts, business efficacy is a relevant consideration which has been considered by the Arbitral Tribunal and as such, an interference would not be warranted. 30. Smt. Divan, the learned ASG submitted that the financial th offer made by SICAL was made on 19   December 1997 i.e. much before the 1998 Guidelines came to be published.   She submitted that it is unthinkable that the rates quoted by SICAL in 1997 were on the basis of the guidelines which were for the first time published in the year 1998.  She submitted that even the said guidelines do not provide for permitting royalty as a pass through.  It is further submitted that while submitting the bid,   SICAL   has   submitted   the   bid   on   the   basis   of   royalty payable to TPT during the concession period. 15 (2019) 19 SCC 9 23 Smt. Divan further submitted that SICAL has indulged 31. into the conduct of approbate and reprobate. She submitted that whereas in the writ petitions filed by it, SICAL has taken a specific stand that the guidelines do not have the force of law, it has now turned around and taken a stand in the arbitration proceedings that it amounts to change of law.   She further submitted   that   on   the   date   on   which   the   arbitration proceedings   were  commenced,   the  tariff  orders   were   already quashed in the writ proceedings in favour of SICAL and only with   a   view   to   take   double   advantage,   SICAL   has   initiated arbitration proceedings.  She further submitted that because of the interim order passed by the High Court, the 1999 tariff order is still holding the field,   thereby giving a huge undue benefit   to   SICAL.     She   submitted   that   even   the   conduct   of SICAL needs to be taken into consideration. Though as per MoC which   was   filed   way   back   in   2005,   SICAL   was   required   to compensate TPT, it has not done so.  She therefore submitted that on one hand, SICAL is taking advantage of orders of the Court and on the other hand not complying with the obligations 24 set out in the MoC, on the basis of which the High Court has disposed of writ petition. 32. Smt.   Divan   submitted   that   even   the   third   tariff   order passed in case of SICAL had been quashed by the Madras High Court, challenge to which is pending before the Division Bench. She further submitted that on account of an order passed in Section 9 proceedings, TPT is getting a very meagre amount from SICAL. 33. Smt.   Divan   further   submitted   that   by   the   award,   the Tribunal has provided for entire substitution of the terms of the contract between the parties.   She submitted that when the agreement between the parties was based on royalty method, the   Tribunal,   by   a   substitution,   has   provided   for   revenue sharing method.  She submitted that this is not permissible at all in law.   A party cannot be thrusted with a new contract against its wishes.   Smt. Divan further submitted that SICAL having elected/availed the remedies of filing of the writ petition, cannot for the same relief under the bogey of so­called change in law, invoke arbitration proceedings.  She therefore submitted 25 that the High Court has rightly considered the same and set aside the award.  Smt. Divan relied on the following judgments of this Court in support of her submissions. 16 Raghunathrao   Ganpatrao   v.   Union   of   India ,   Nagubai 17 Ammal   and   Others   v.   B.   Shama   and   Others ,   Suresh 18 Kumar Wadhwa v. State of Madhya Pradesh and Others , All India Power Engineer Federation and Others v. Sasan 19 Power   Limited   and   Others ,   Rashtriya   Chemicals   and 20 Fertilizers   Limited   v.   Chowgule   Brothers   and   Others , South   East   Asia   Marine   Engineering   and   Constructions 21 Limited   v.   Oil   India   Limited ,   J.G.   Engineers   Private 22 Limited v. Union of India and Another , Satyanarayana 23 Construction   Company   v.   Union   of   India   and   Others , Ssangyong   Engineering   and   Construction   Company 24 Limited v. National Highway Authority of India (NHAI) 16 (1994) 1 SCC Supp 191 17 [1956] SCR 451 18 (2017) 16 SCC 757 19 (2017) 1 SCC 487 20 (2010) 8 SCC 563 21 (2020) 5 SCC 164 22 (2011) 5 SCC 758 23 (2011) 15 SCC 101 24 (2019) 15 SCC 131 26 34. Dr. Singhvi, in rejoinder, submitted that a stray statement made by SICAL that the guidelines do not have the force of law, would not be relevant. Inasmuch as in the counter filed by TPT as well as TAMP, they have themselves stated before the High Court that the said guidelines will have the force of law.   He therefore submitted that SICAL was entitled in law to invoke Article 14 since there was a change in law which adversely affects the Licensee. 35. Dr. Singhvi further submitted that the contention of Smt. Divan that reliance has been placed by SICAL on change of law for the first time in 2013, is factually incorrect inasmuch as right from 2006, SICAL has been making representations to TPT   for   giving   relief   under   Article   14.   To   counter   the submission of Smt. Divan that the bid of SICAL was tendered in December   1997,   he   submitted   that   though   the   bid   was tendered in December 1997, the agreement was entered into in July 1998, when the guidelines had already come into effect from February 1998.   He submitted that the perusal of the proposals submitted by TPT in pursuance of the meeting held 27 by Secretary, Ministry of Shipping and Transport, GoI, would show that TPT as well as its consultant had agreed for revenue share model. He reiterated that the proceedings before the High Court were restricted only to TAMP orders and had nothing to do with change of law.  He submitted that none of the case laws cited by Smt. Divan considers a clause analogous to Article 14 and therefore, the said cases would not be applicable to the facts   of   the   present   case.     He   further   submitted   that   the argument with regard to doctrine of election is also without substance. 36. With the assistance of the learned counsel for the parties, we   have   gone   through   the   documents   placed   on   record. Though various judgments of this Court as well as some of the High Courts have been cited by counsel of both the parties, we do not find it necessary to refer to all of them.  In our view, a reference   to   few   recent   judgments   of   this   Court   will   be sufficient.   28 A bench of this Court, of which one of us (R.F. Nariman, 37. J.) was a party, has considered various judgments of this Court in the case of  Associate Builders  (supra) .   38. Another bench of this Court, again to which one of us (R.F.   Nariman,   J.)   was   a   party,   has   considered   various judgments of this Court including the judgment in   Associate Builders   (supra)   and   the   effect   of   the   Arbitration   and Conciliation (Amendment) Act, 2015 in the case of  Ssangyong Engineering   and   Construction   Company   Limited   v. 25 National Highways Authority of India (NHAI) ,  to which we will refer shortly. 39. Before that, it will be apposite to refer to judgment of this Court in the case of  MMTC   Limited  (supra),   wherein this Court has   revisited   the   position   of   law   with   regard   to   scope   of interference with an arbitral award in India.   40. It will be relevant to refer to the following observations of this Court in the case of     (supra): MMTC Limited 25 (2019) 15 SCC 131 29  As far as Section 34 is concerned, the “11. position   is   well­settled   by   now   that   the Court   does   not   sit   in   appeal   over   the arbitral award and may interfere on merits on   the   limited   ground   provided   under Section   34(2)( b )( ii )   i.e.,   if   the   award   is against the public policy of India. As per the   legal   position   clarified   through decisions   of   this   Court   prior   to   the amendments to the 1996 Act in 2015, a violation of Indian public policy, in turn, includes   a   violation   of   the   fundamental policy   of   Indian   law,   a   violation   of   the interest   of   India,   conflict   with   justice   or morality,   and   the   existence   of   patent illegality   in   the   arbitral   award. Additionally,   the   concept   of   the “fundamental policy of Indian law” would cover   compliance   with   statutes   and judicial   precedents,   adopting   a   judicial approach, compliance with the principles of   natural   justice, and  Wednesbury  [ Associated   Provincial Picture   Houses  v.  Wednesbury   Corpn. , (1948)   1   KB   223   (CA)]   reasonableness. Furthermore,   “patent   illegality”   itself   has been   held   to   mean   contravention   of   the substantive law of India, contravention of the   1996   Act,   and   contravention   of   the terms of the contract. 12.  It is only if one of these conditions is met that the Court may interfere with an arbitral award in terms of Section 34(2)( b ) ( ii ), but such interference does not entail a review of the merits of the dispute, and is 30 limited to situations where the findings of the arbitrator are arbitrary, capricious or perverse,   or   when   the   conscience   of   the Court is shocked, or when the illegality is not   trivial   but   goes   to   the   root   of   the matter.   An   arbitral   award   may   not   be interfered   with   if   the   view   taken   by   the arbitrator is a possible view based on facts. (See  Associate   Builders  v.  DDA  [ Associate Builders  v.  DDA , (2015) 3 SCC 49 : (2015) 2   SCC   (Civ)   204]   .   Also   see  ONGC Ltd.  v.  Saw   Pipes   Ltd.  [ ONGC   Ltd.  v.  Saw Pipes Ltd. , (2003) 5 SCC 705] ;  Hindustan Zinc   Ltd.  v.  Friends   Coal Carbonisation  [ Hindustan   Zinc Ltd.  v.  Friends Coal Carbonisation , (2006) 4 SCC   445]   ;   and  McDermott   International Inc.  v.  Burn   Standard   Co.  Ltd.  [ McDermott International Inc.  v.  Burn Standard Co. Ltd. , (2006) 11 SCC 181] )  It   is   relevant   to   note   that   after   the 13. 2015 Amendment to Section 34, the above position   stands   somewhat   modified. Pursuant to the insertion of Explanation 1 to Section 34(2), the scope of contravention of Indian public policy has been modified to the extent that it now means fraud or corruption   in   the   making   of   the   award, violation of Section 75 or Section 81 of the Act,   contravention   of   the   fundamental policy of Indian law, and conflict with the most basic notions of justice or morality. Additionally,   sub­section   (2­A)   has   been inserted in Section 34, which provides that in case of domestic arbitrations, violation 31 of Indian public policy also includes patent illegality   appearing   on   the   face   of   the award. The proviso to the same states that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.  As   far   as   interference   with   an   order 14. made under Section 34, as per Section 37, is concerned, it cannot be disputed that such interference under Section 37 cannot travel   beyond   the   restrictions   laid   down under   Section   34.   In   other   words,   the court   cannot   undertake   an   independent assessment of the merits of the award, and must   only   ascertain   that   the   exercise   of power by the court under Section 34 has not exceeded the  scope of the  provision. Thus, it is evident that in case an arbitral award   has   been   confirmed   by   the   court under Section 34 and by the court in an appeal under Section 37, this Court must be extremely cautious and slow to disturb such concurrent findings.” In  41. Ssangyong Engineering and Construction Company Limited  (supra), this Court after considering various judgments including the judgment in  Associate Builders  (supra) observed thus:  32  What is clear, therefore, is that the “34. expression “public policy of India”, whether contained in Section 34 or in Section 48, would now mean the “fundamental policy of  Indian   law”  as   explained   in  paras  18 and   27   of  Associate   Builders  [ Associate Builders  v.  DDA , (2015) 3 SCC 49 : (2015) 2   SCC   (Civ)   204]   i.e.   the   fundamental policy of Indian law would be relegated to “Renusagar”   understanding   of   this expression.   This   would   necessarily   mean that  Western Geco  [ ONGC  v.  Western Geco International   Ltd. ,   (2014)   9   SCC   263   : (2014) 5 SCC (Civ) 12] expansion has been done   away   with.   In   short,  Western Geco  [ ONGC  v.  Western   Geco   International Ltd. , (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12]   ,   as   explained   in   paras   28   and   29 of  Associate   Builders  [ Associate Builders  v.  DDA , (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , would no longer obtain, as under the guise of interfering with an award on the ground that the arbitrator has not adopted a judicial approach, the Court's   intervention   would   be   on   the merits   of   the   award,   which   cannot   be permitted   post   amendment.   However, insofar as principles of natural justice are concerned,   as   contained   in   Sections   18 and   34(2)( a )( iii )   of   the   1996   Act,   these continue to be grounds of challenge of an award,   as   is   contained   in   para   30 of  Associate   Builders  [ Associate Builders  v.  DDA , (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] . 33  It   is   important   to   notice   that   the 35. ground   for   interference   insofar   as   it concerns “interest of India” has since been deleted, and therefore, no longer obtains. Equally, the ground for interference on the basis   that   the   award   is   in   conflict   with justice or morality is now to be understood as a conflict with the “most basic notions of morality or justice”. This again would be in line  with  paras  36  to  39  of  Associate Builders  [ Associate Builders  v.  DDA , (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , as it is only such arbitral awards that shock the conscience   of   the   court   that   can   be   set aside on this ground. 36.  Thus, it is clear that public policy of India is  now  constricted to  mean  firstly, that a domestic award is contrary to the fundamental   policy   of   Indian   law,   as understood   in   paras   18   and   27 of  Associate   Builders  [ Associate Builders  v.  DDA , (2015) 3 SCC 49: (2015) 2 SCC   (Civ)   204],   or   secondly,   that   such award is against basic notions of justice or morality as understood in paras 36 to 39 of  Associate   Builders  [ Associate Builders  v.  DDA , (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] . Explanation 2 to Section 34(2)( b )( ii )   and   Explanation   2   to   Section 48(2)( b )( ii ) was added by the Amendment Act   only   so   that  Western Geco  [ ONGC  v.  Western   Geco   International Ltd. , (2014) 9 SCC 263: (2014) 5 SCC (Civ) 12],   as   understood   in  Associate Builders  [ Associate Builders  v.  DDA , (2015) 34 3 SCC 49: (2015) 2 SCC (Civ) 204], and paras 28 and 29 in particular, is now done away with.  Insofar  as   domestic   awards   made   in 37. India are concerned, an additional ground is now available under sub­section (2­A), added   by   the   Amendment   Act,   2015,   to Section   34.   Here,   there   must   be   patent illegality   appearing   on   the   face   of   the award,  which  refers  to  such  illegality   as goes to the root of the matter but which does   not   amount   to   mere   erroneous application of the law. In short, what is not subsumed within “the fundamental policy of Indian law”, namely, the contravention of a statute not linked to public policy or public interest, cannot be brought in by the   backdoor   when   it   comes   to   setting aside an award on the ground of patent illegality. 40.  The change made in Section 28(3) by the Amendment Act really follows what is stated   in   paras   42.3   to   45   in  Associate Builders  [ Associate Builders  v.  DDA , (2015) 3   SCC   49:   (2015)   2   SCC   (Civ)   204], namely, that the construction of the terms of a contract is primarily for an arbitrator to decide, unless the arbitrator construes the   contract   in   a   manner   that   no   fair­ minded   or   reasonable   person   would;   in short, that the arbitrator's view is not even a   possible   view   to   take.   Also,   if   the arbitrator   wanders   outside   the   contract and deals with matters not allotted to him, 35 he commits an error of jurisdiction. This ground of challenge will now fall within the new ground added under Section 34(2­A).  Secondly,   it   is   also   made   clear   that 38. reappreciation of evidence, which is what an   appellate   court   is   permitted   to   do, cannot be permitted under the ground of patent illegality appearing on the face of the award. 39.  To   elucidate,   para   42.1   of  Associate Builders  [ Associate Builders  v.  DDA , (2015) 3   SCC   49:   (2015)   2   SCC   (Civ)   204], namely,   a   mere   contravention   of   the substantive  law  of India, by itself, is no longer a ground available to set aside an arbitral   award.   Para   42.2   of  Associate Builders  [ Associate Builders  v.  DDA , (2015) 3   SCC   49:   (2015)   2   SCC   (Civ)   204], however, would remain, for if an arbitrator gives   no   reasons   for   an   award   and contravenes Section 31(3) of the 1996 Act, that would certainly amount to a patent illegality on the face of the award. 41.  What   is   important   to   note   is   that   a decision which is perverse, as understood in   paras   31   and   32   of  Associate Builders  [ Associate Builders  v.  DDA , (2015) 3 SCC 49: (2015) 2 SCC (Civ) 204], while no   longer   being   a   ground   for   challenge under   “public   policy   of   India”,   would certainly   amount   to   a   patent   illegality appearing on the face of the award. Thus, 36 a finding based on no evidence at all or an award   which   ignores   vital   evidence   in arriving at its decision would be perverse and liable to be set aside on the ground of patent   illegality.   Additionally,   a   finding based   on   documents   taken   behind   the back of the parties by the arbitrator would also   qualify   as   a   decision   based   on   no evidence inasmuch as such decision is not based on evidence led by the parties, and therefore,   would   also   have   to   be characterised as perverse.  Given the fact that the amended Act 42. will   now   apply,   and   that   the   “patent illegality” ground for setting aside arbitral awards   in   international   commercial arbitrations will not apply, it is necessary to   advert   to   the   grounds   contained   in Sections 34(2)( a )( iii ) and ( iv ) as applicable to the facts of the present case.” It will thus appear to be a more than settled legal position, 42. that   in   an   application   under   Section   34,   the   court   is   not expected   to   act   as   an   appellate   court   and   reappreciate   the evidence.  The scope of interference would be limited to grounds provided   under   Section   34   of   the   Arbitration   Act.     The interference   would   be   so   warranted   when   the   award   is   in violation of “public policy of India”, which has been held to 37 mean   “the   fundamental   policy   of   Indian   law”.     A   judicial intervention   on   account   of   interfering   on   the   merits   of   the award would not be permissible.   However, the principles of natural justice as contained in Section 18 and 34(2)(a)(iii) of the Arbitration Act would continue to be the grounds of challenge of an award.   The ground for interference on the basis that the award   is   in   conflict   with   justice   or   morality   is   now   to   be understood   as   a   conflict   with   the   “most   basic   notions   of morality or justice”.  It is only such arbitral awards that shock the conscience of the court, that can be set aside on the said ground.  An award would be set aside on the ground of patent illegality appearing on the face of the award and as such, which goes to the roots of the matter.   However, an illegality with regard to a mere erroneous application of law would not be a ground  for  interference.   Equally,  reappreciation  of  evidence would   not   be   permissible   on   the   ground   of   patent   illegality appearing on the face of the award.    43. A   decision   which   is   perverse,   though   would   not   be   a ground   for   challenge   under   “public   policy   of   India”,   would 38 certainly amount to a patent illegality appearing on the face of the award.  However, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality.       44. To   understand   the   test   of   perversity,   it   will   also   be appropriate to refer to paragraph 31 and 32 from the judgment of this Court in  Associate Builders  (supra), which read thus:  The third juristic principle is that a “31. decision which is perverse or so irrational that   no   reasonable   person   would   have arrived   at   the   same   is   important   and requires some degree of explanation. It is settled law that where: ( i ) a finding is based on no evidence, or ( ii ) an Arbitral Tribunal takes into account something irrelevant to the decision which it arrives at; or ( iii ) ignores vital evidence in arriving at its decision, such   decision   would   necessarily   be perverse. 32.  A   good   working   test   of   perversity   is contained in two judgments. In  Excise and Taxation   Officer­cum­Assessing Authority  v.  Gopi Nath & Sons  [1992 Supp 39 (2) SCC 312], it was held: (SCC p. 317, para 7) “ 7 . … It is, no doubt, true that if a finding of   fact   is   arrived   at   by   ignoring   or excluding   relevant   material   or   by   taking into consideration irrelevant material or if the finding so outrageously defies logic as to   suffer   from   the   vice   of   irrationality incurring   the   blame   of   being   perverse, then,   the   finding   is   rendered   infirm   in law.” In  Kuldeep   Singh  v.  Commr.   of Police  [(1999) 2 SCC 10: 1999 SCC (L&S) 429], it was held: (SCC p. 14, para 10) “ 10 . A broad distinction has, therefore, to be   maintained   between   the   decisions which are perverse and  those  which  are not.   If   a   decision   is   arrived   at   on   no evidence or evidence which is thoroughly unreliable and no reasonable person would act upon it, the order would be perverse. But  if   there   is   some   evidence   on   record which is  acceptable  and  which could  be relied   upon,   howsoever   compendious   it may   be,   the   conclusions   would   not   be treated as perverse and the findings would not be interfered with.” 45. Keeping these principles in mind, we will have to examine the present case.  46. The facts in the present case are not in much dispute.  It will be relevant to refer to clause 5.6 of the bid document, 40 th which was published by TPT on 9   April, 1997, which reads thus:    “5.6 TERMS OF THE FINANCIAL OFFER The license to develop the seventh berth as a full­fledged container terminal with ship to   shore   and   shore   to   ship   handling facility, manage, operate and maintain the terminal shall be given for a period of 30 years inclusive of construction period.  The bidder shall state his financial offer to the   TPT   as   the   sum   of   the   following components:  a) Quantum   of   initial   payment   at   the time of executing the contract in order to secure the agreement; b) Royalty fee payable (before the day of each   calendar   month)   after   the commissioning   of   the   terminal   for   each TEU   handled   at   the   terminal   in   the preceding calendar month. In case actual throughput   falls   below   the   minimum throughput guaranteed by the Licensee in his bid, then the Licensee shall pay royalty as   per   his   minimum   guaranteed throughput.  (The operator shall pay to the port royalty fee in the same currency in which charges are realised from users. The exchange rate 41 to be used would be notified rate on the date of realisation). c) Guaranteed   minimum   TEU throughput that will be handled in each year of the contract. The offer shall be in the format shown in Attachment 4.1.” 47. Perusal of the bid document would reveal, that the bid was for a license to develop the seventh berth as a full­fledged container   terminal   with   ship­to­shore   and   shore­to­ship handling facility and also to manage, operate and maintain the same for a period of 30 years inclusive of construction period. The bidder was to state his financial offer to TPT comprising of three aspects: (a) quantum of initial payment at the time of executing the contract in order to secure the agreement; (b) royalty   fee   payable   (before   the   day   of   each   calendar month) after the commissioning of the terminal for each TEU handled at the terminal in the preceding calendar month.   It is also clear, that in case actual throughput falls below the minimum throughput guaranteed by the 42 Licensee in his bid, then the Licensee shall pay royalty as per his minimum guaranteed throughput.  It also clarifies, that royalty was to be paid in the same currency in which the Licensee realizes the charges from users; and  (c) guaranteed   minimum   TEU   throughput   that   will   be handled in each year of the contract. 48. It will also be necessary to refer to clause 4.7.1 and 4.7.2 of the bid document, which reads thus:  “4.7.1  SETTING OF PRICES The   prescribed   rates   and   charges   to   be collected   by   the   LICENSEE   from   users shall   not   exceed   the   maximum   rates   as approved   by   the   Government/Tariff Regulatory Authority. The proposed rates for handling are given in Annexure II. The LICENSEE shall bill the users of the container   terminal   for   services   including terminal   charges,   wharfage   on   cargo containerised,   container   box   and   cargo related   charges   to   be   collected   by   the LICENSEE.   These   revenues   shall   be collected   from   cargo   interests   and   the owners or agents of the vessels and shall accrue   to   and   be   payable   to   the 43 LICENSEE. Charges on account of Berth Hire,   Port   Dues,   Pilotage   etc   shall   be raised and recovered directly by TPT from the users. 4.7.2  REGULATION & REVIEW Normally the tariff will be revised by the Government/Tariff   Regulatory   Authority once in 3 years.  For   any   increase   from   prevailing   scales, the LICENSEE may apply for revision of tariff   to   the   Licensor.   The   Licensor   may recommend   it   for   approval   of   the Committee   constituted   by   the Government/Tariff Regulatory Authority.” It   would   thus   be   clear,   that   the   bid   document   itself provides, that the prescribed rates and charges to be collected by the Licensee from users shall not exceed the maximum rates as approved  by  the  Government/Tariff  Regulatory  Authority. The proposed rates for handling were prescribed in Annexure­II of the bid document.  It is also provided, that the tariff will be revised by the Government/Tariff Regulatory Authority once in three years.  It is further provided, that for any increase from prevailing scales, the Licensee may apply for revision of tariff to the   Licensor   and   that   the   Licensor   may   recommend   it   for 44 approval   of   the   Committee   constituted   by   the Government/Tariff Regulatory Authority.  49. It will be relevant to note that the offer was required to be in   the   format   shown   in   Attachment   4.1   (Bidders   Financial Offer),   which requires to give details in three columns. The first one   being   ‘Traffic   guaranteed   from   the   Seventh   Berth   (in TEUS)’.  The second being ‘Rate of royalty/TEU’; and the third being ‘Amount (Rupees)’.  These details were to be provided for all 30 years.   It will also be relevant to refer to Attachment 4.4, which reads thus:  “All   Responsive   Bids   which   meet   the Qualification   criteria   laid   down   for   the technical evaluation will be ranked based on   the   present   value   of   the   expected payments   to   the   TPT   by   the   Bidder (discounted @ 16% per annum) according to the payment schedule presented in the financial proposal in Attachment 4.1. The calculation of the royalty fees will be based on   the   Licensee’s   minimum   guaranteed volume of traffic. If, in the opinion of TPT, the prices quoted in a bid including royalties and schedule of royalties are found to be unrealistic, then 45 such   bid   will   be   rejected   and   not considered for ranking.”  50. Attachment 4.4 makes it amply clear, that all responsive bids   which   meet   the   qualification   criteria   for   technical evaluation will be ranked on the basis of the royalty fees quoted by the bidder. 51. It will also be relevant to refer to Article 7.3.1 and 7.3.5.1 of the Agreement, which read thus: “7.3.1 Setting Prices  The Licensee shall be entitled to recover from   the   owners/consignees   or   vessel owners/agents rates and/or charges due and   payable   by   them   for   use   of   the Container   Terminal   services   including terminal   charges,   wharfage   on   cargo containerised,   container   box   and   cargo related   charges   in   respect   of   cargo   and other   services   provided   by   the   Licensee provided   however   that   the   rates   and/or charges   to   be   collected   by   the   Licensee shall not exceed the rates fixed by Licensor in   respect   of   similar   services   and   duly notified by the GoI in official gazette or to be fixed by the Tariff Authority for Major Ports constituted under Article 47A of the Major Port Trusts Act, 1963, as applicable, from time to time. For the purpose of fixing 46 or revising existing Tariff, the GoI has set up   an   independent   Tariff   Authority   for Major Ports constituted under Article 47A of  the  Major Port Trusts Act, 1963. The Tariff to be fixed by such authority would be   the   maximum   rate   of   tariff   and   the Licensee would be free to fix the tariff at a rate   lower   than   that   fixed   by   such authority. Regarding fixation of tariff and setting prices, the Licensee shall follow the rules and regulations stipulated by TAMP for fixing/review of tariff.  These   charges   shall   be   collected   from cargo interests and the owners or agents of the   vessels   and   shall   accrue   to   and   be payable   to   the   Licensee.   The   rates prevailing   at   the   time   of   signing   this Agreement are contained in Appendix 15 to this Agreement.  Charges   on   account   of   Berth   Hire,   Port Dues   and   Pilotage   shall   be   raised   and recovered directly by the Licensor from the users.  The Licensee shall be free to give discounts in tariff. However, such discounts shall be given by the Licensee only in respect to the charges   due   and   payable   by   the consignees/owners   or   vessel owners/agents to the Licensee and not in respect   of   the   charges   payable   by   such persons directly to the Licensor. xxx xxx xxx 47 7.3.5 Payment and Payment Terms  7.3.5.1 Initial Payment  In   consideration   of   the   grant   of   this License,   the   Licensee   shall   pay   to   the Licensor an initial amount of Rs.45 million (Rupees   Forty   Five   Millions   only) simultaneously   on   the   Date   of   Award   of License. The   Licensee   shall   pay   to   the   Licensor, royalty   calculated   on   the   basis   of Minimum guaranteed traffic royalty rates, as set out in Appendix 12 irrespective of discounts   in  tariffs,   if   any,  that  may  be granted by the Licensee. Royalty shall be paid every Month on the basis of annual minimum guaranteed traffic as set out in Appendix   12.   Monthly   royalty   shall   be initially   calculated   proportionately   to   the yearly   royalty   based   on   the   annual minimum   guaranteed   traffic   as   per   the Appendix 12 and shall be paid latest by the 7th Day of the subsequent Month. At the end of each 3 Month period the total royalty payable shall be computed and the difference, if any, between the amount of royalty actually payable, calculated on the basis   of   actual   TEUs   handled   and   the corresponding   amount   as   set   out   in  the Appendix 12, and the amount of royalty already   remitted,   shall   be   paid   by   the Licensee   to   the   Licensor   within   fifteen 48 Days of expiry of the relevant 3 Months period.  In case the actual traffic falls below the annual   minimum   guaranteed   traffic   as guaranteed by the Licensee and as set out in the Appendix l2, then the Licensee shall pay   the   amount   of   royalty   as   per   its annual minimum guaranteed traffic.  It   is   to   be   noted   that   the   minimum guaranteed traffic royalty rate as set out in Appendix 12 will be adjusted upwards or downwards   as   a   one   time   measure   on fixation of tariff for containers by the TAMP for the first time. This adjustment will be carried out by the Port based on a single percentage (plus or minus) to be applied to all   the   figures   quoted   as   royalty   vide Appendix 12.  This single percentage shall be decided on the basis of sum of weighted average of variations to the rates in respect of   tariff   or   containers   in   the   following manner...” 52. Perusal of Article 7.3.1 would reveal, that the Licensee was   entitled   to   recover   from   owners/consignees   or   vessel owners/agents, rates and/or charges due and payable by them for   use   of   Container   Terminal   services   including   terminal charges, wharfage on cargo containerized, container box and 49 cargo related charges in respect of cargo and other services provided by the Licensee.   However, it was provided, that the rates and/or charges to be collected by the Licensee shall not exceed the rates fixed by Licensor in respect of similar services and duly notified by the GoI in official gazette or to be fixed by TAMP constituted under Section 47A of the Major Port Trusts Act, 1963.   The Agreement itself clarifies, that the tariff to be fixed by TAMP should be the maximum rate of tariff and the Licensee would be free to fix the tariff at a rate lower than that fixed by such authority.  It is also clear, that the Licensee was to   follow   the   rules   and   regulations   stipulated   by   TAMP regarding fixation of tariff.  Appendix­15 to the Agreement also details out the rates prevailing at the time of signing of the Agreement. The Article specifies that the Licensee was free to give discounts on tariffs.   However, such discount would be given only in respect of the charges payable to the Licensee and not payable to the Licensor.   53. Article 7.3.5.1 provides for initial payment of Rs.45 million simultaneously on the date of award of license.  The   Agreement 50 further clarifies, that the Licensee shall pay to the Licensor royalty calculated on the basis of minimum guaranteed traffic royalty as set out in Appendix­12.   It is also provided, that minimum guaranteed traffic royalty rate as set out in Appendix­ 12   will   be   adjusted   upwards   or   downwards   as   a   one­time measure on fixation of tariff for containers by TAMP for the first time.   It will be relevant to refer to Article 14, which is the bone 54. of contention between the parties, which reads thus: “ARTICLE 14 CHANGE IN LAW 14.  Change in Law 14.1 Definition of Law   For the purposes of this Agreement, “Law" means   any   valid   act,   ordinance,   rule, regulation,   notification,   directive,   order policy,   bylaw,   administrative   guideline, ruling   or   instruction   having   the   force   of law   enacted   or   issued   by   a   Government authority. 14.2    Definition of Change in Law For   the   purposes   of   this   Agreement "Change in Law" means any amendment, 51 alteration,   modification   or   repeal   of   any existing law by Government Authority or through any interpretation thereof by the court of law or enactment or any new law coming   into   effect   after   the   date   of   this Agreement,   provision   for   which   has   not been made elsewhere in this Agreement. 14.3  Relief under Change in Law   If, after the date of this Agreement, there is a 'Change in the Law which substantially and   adversely   affects   the   rights   of   the Licensee   under   this   Agreement   so   as   to alter   the   commercial   viability   of   the project,   the   Licensee   may,   by   written notice request amendments to the terms of this Agreement. Subject to provisions of Article 14.3, the Licensee   shall   not   be   entitled   to   any compensation   whatsoever   from   the Licensor as a result of Change in Law.  14.4   Changes   in   Tax   Laws   and Regulations   The   Licensee   is   not   entitled   to   any compensation   for   any   increase   in   direct and/or indirect tax which the Licensee is liable to pay in respect of the Project.” Article 14 deals with ‘change in law’.  Article 14.1, which 55. defines ‘law’, states, that law means any valid act, ordinance, rule,   regulation,   notification,   directive,   order   policy,   bylaw, 52 administrative guideline, ruling or instruction having the force of law enacted or issued by a Government Authority.   Article 14.2, which deals with ‘change in law’, states, that ‘change   in   law’   would   mean   any   amendment,   alteration, modification   or   repeal   of   any   existing   law   by   Government Authority or through any interpretation thereof by a court of law or enactment of any new law coming into effect after the date of this Agreement, provision for which has not been made elsewhere in the said Agreement.   Article 14.3 provides for relief under change in law.   If, after the date of Agreement, there is a change in the law which substantially and adversely affects the rights of the Licensee under the Agreement so as to alter the commercial viability of the   project,   the   Licensee   may,   by   written   notice,   request amendments   to   the   terms   of   the   Agreement.     It   further provided, that subject to provisions of Article 14.3, the Licensee shall not be entitled to any compensation whatsoever from the Licensor as a result of change in law.  56. The questions therefore that we will have to answer are:  53 (i) As to whether the Arbitral Tribunal was justified in finding a change in law, which entitled the Licensee to invoke Article 14.3 of the Agreement; and  (ii) As   to   whether   the   Arbitral   Tribunal   was   justified   in converting   the   contract   from   royalty   payment   module   to revenue­sharing module of Berth No. VII with the claimant’s liability to the revenue share being fixed at 55.19%.   For answering the aforesaid questions, we will have to 57. consider the documents placed on record.  Apart from that, we will also have to take into consideration the conduct of the parties and their intention as could be gathered from the said material.     In this respect, it will be relevant to refer to paragraph 16 58. in the case of  MMTC   Limited  (supra), which reads thus:  “16.  It is equally important to observe at this   juncture   that   while   interpreting   the terms of a contract, the conduct of parties and   correspondences   exchanged   would also be relevant factors and it is within the arbitrator's   jurisdiction   to   consider   the same.   [See  McDermott   International Inc.  v.  Burn   Standard   Co.  Ltd.  [ McDermott 54 International Inc.  v.  Burn Standard Co. Ltd. , (2006) 11 SCC 181];  Pure Helium India (P)  v.   [ Ltd. ONGC Pure   Helium   India   (P) Ltd.  v.  ONGC , (2003) 8 SCC 593] and  D.D. Sharma  v.  Union   of   India  [ D.D. Sharma  v.  Union   of   India ,   (2004)   5   SCC 325].]” The entire finding of the Arbitral Tribunal is based on a 59. premise   that   when   TPT   entered   into   a   contract   with   SICAL there   was   an   existing   policy,   which   provided   royalty   to   be factored   into   the   cost   while   fixation   of   tariff   and   that th subsequently, the GoI changed its policy on 29   July, 2003 thereby  providing   that  royalty   payment/revenue  sharing  will not   be   factored   into/taken   into   account   as   cost   for fixation/revision   of   tariff   by   TAMP;   and   that   there   was st subsequent change in policy on 31   March, 2005 vide which part   of   royalty   was   permitted   to   be   factored   into   the   cost. However, it being subjected to a maximum amount of the bid of the second lowest bidder.   According to the Arbitral Tribunal, there was a change in policy, which amounted to change in law, which, in turn, adversely affected SICAL.   55 Let us examine the correctness of this finding.   We are 60. fully aware, that neither under Section 34 nor under Section 37 of the Arbitration Act, the Court is entitled to reappreciate the evidence.   The said limitation would be equally applicable to this Court also.    Admittedly, the bid document was published th on 9  April, 1997.  The technical bid of SICAL was submitted th on   24   October,   1997.   The   financial   offer   of   SICAL   was th th submitted on 19   December, 1997.   LoI was issued on 29 January, 1998.  All this has happened prior to the guidelines issued by TAMP in February 1998.  As such, it is beyond any doubt,   that  when  the   bid  document  was  notified  and   when SICAL submitted its bid and LoI was issued to it, there were no guidelines in vogue.     For the first time, the guidelines were th th adopted by TAMP in the workshop held in Chennai on 26 /27 February, 1998.   61. Let us examine what do these guidelines provide.   “The   TAMP   must   adhere   to   established costing systems and pricing principals, its overall objective shall be to move towards competitive pricing.  56   There   are   various   approaches   to   tariff fixation.   Until   more information/knowledge becomes available. Attempts may be made to smoothen the system within the existing framework.  During the Interregnum, port pricing may continue to be cost­based with an assured rate of return.   Although the concept of an   assured   rate   of   return   is   not consonant with a completive system. It will be advisable to maintain it for the time being so as not to destabilize the system   with   abrupt   changes.   At   the same time, to militate the full impact of its continuance, the reasonableness of the existing base and the absolute total costs   may   have   to   be   examined   to ensure   that   costs   of   inefficiencies, uneconomic   user   /practices   or   excess are not passed on to users.   Even if the TAMP is not equipped at present to cope with   the   load   of   work   relating   to   such scrutiny, it must at least start pressuring against such costs being built into tariffs.  An assured rate of return can be achieved either by increasing the surplus through a rationalized   tariff   structure   and/or reducing   the   cost   of   services;   or   by reducing   the   capital   base   by   eliminating unproductive and obsolete assets.” [emphasis supplied] 57 62. It could thus be clearly seen that what is provided is that TAMP must adhere to established costing systems and pricing principals and its overall objective should be to move towards competitive   pricing.     It   further   provides   that   until   more information/knowledge becomes available, attempts should be made to smoothen the system within the existing framework.  It further provides that during the interregnum, port pricing is to be continued to be cost­based with an assured rate of return. It however specifically observes that the concept of an assured rate of return is not consonant with a competitive system.  It provides that however, it will be advisable to maintain it for the time   being   so   as   not   to   destabilize   the   system   with   abrupt changes.  It further provides that to militate the full impact of its continuance, the reasonableness of the existing base and the absolute total costs may have to be examined to ensure that costs of inefficiencies, uneconomic user/practices or excess are not passed on to users.   It further observed, that an assured rate of return can be achieved either by increasing the surplus 58 through   a   rationalized   tariff   structure   and/or   reducing   the capital base by eliminating unproductive and obsolete assets.   63. It could thus clearly be seen, that even 1998 guidelines do not mention, that the royalty could be factored in the cost while determining the tariff.   Though the said guidelines observed, that the port pricing may continue to be cost­based with an assured rate of return, it further observed, that such a concept of   an   assured   rate   of   return   is   not   in   consonance   with   a competitive system. Thus, it is amply clear, that when the bids were invited, and SICAL submitted its bid and LoI was issued to it, there was no policy at all.  Even the 1998 guidelines do not provide for factoring the royalty in cost while determining the tariff.    64. No doubt that when the first proposal for revision of tariff was submitted by SICAL, in its comments submitted to TAMP, TPT has supported the proposal submitted by SICAL.  It is also th undisputed, that TAMP vide order dated 08   December, 1999 th (notified on 28   December, 1999)   has approved the proposal with regard to fixation of tariff insofar as SICAL is concerned.  It 59 will be relevant to refer to sub­para (iv) of paragraph 7 of the TAMP order, which reads thus:  “(iv)  It will be necessary at this point to refer   to   the   royalty   issue.   Even   though some considerations relating to royalty have tariff­ implications, we have not so far chosen  to interfere in this regard; the   royalty   issue   has   been   left   to   be settled   by   the   Port   Trust   and   the Government. That being so, in the light of the TPT's conditional support to the request for dollar­denomination, it will be necessary for us to clarify that our approval   of   the   tariffs   cannot   be interpreted to  amount to any implicit approval   of   royalty­related   issues. Specifically,   in   the   context   of   the   TPT's condition   about   dollar­denomination   of royalty, the method of conversion adopted by   the   Applicant   for   the   purpose   of financial   statements   based   on   tariffs denominated   in   dollar   terms   cannot   be deemed to have been approved by us.” [emphasis supplied] 65. It   could   thus   be   clear,   that   TAMP   has   observed,   that though   some   considerations   relating   to   royalty   have   tariff­ implications, it had not so far chosen to interfere in that regard. 60 The royalty issue has been left to be settled by TPT and the GoI. It has been clarified that its approval to the tariff cannot be interpreted to be amounting to any implicit approval of royalty­ related issues.  It is thus clear, that even the 1999 TAMP order made it clear, that the said order should not be interpreted to amount to any implicit approval of royalty related issues.  It is thus clear, that royalty was permitted to be factored in cost only on account of TPT’s conditional support to the proposal submitted by SICAL.  It will also be relevant to note that TAMP order of 1999 is much after the TAMP guidelines, which were issued in February 1998.   Undisputedly, the said order has been accepted by SICAL including the aforesaid observations in sub­para (iv) of paragraph 7.   The second tariff order in case of SICAL came to be passed 66. th th on 20  September, 2002 (notified on 4  October, 2002).  It will be relevant to refer to sub­para (xi) of paragraph 15. “(xi) One of the main items of expenditure considered by the PSA SICAL is the royalty payment it has to make to the TPT as per the   Concession   Agreement.   This   liability accounts   for   about   11.4%,   15.4%   and 61 19.2% of the operating income estimated on the basis of the existing tariffs for the years 2002, 2003 and 2004 respectively. As has been mentioned earlier, the existing tariffs were allowed to the PSA SICAL by accepting its proposal to adopt the (then) existing CHPT rates. That being so, there was no detailed cost analysis carried out then. It   is   admitted   that   the   issue   of admissibility of ‘royalty’ as a cost item has come under a focused scrutiny only in the case relating to the CCTL which was disposed of in March, 2002. In that case,   this   Authority   decided   not   to allow ‘revenue share’ as a cost element for computation of tariffs at the CCTL. This   Authority   held   that   allowing royalty   in   tariff   would   mean   that   the CCTL   (Private   Terminal   Operator)   and the CHPT (the Licensor) both of whom enjoyed   a   dominant   position,   could enter into any commercial arrangement between   themselves   and   pass   on   the consequential   cost   to   customers .   This Authority   also   observed   that   there   had been no commitment from anywhere about consequential   tariff   adjustments   and   the CA also did not give any assurance to the Licensee   about   tariff   adjustments corresponding to the royalty quoted. 62 In view of the principle set out in the CCTL case, it is necessary to accord a similar treatment in the case of the PSA SICAL   also.   It   is   noteworthy   that   no extraordinary   circumstances   appear   to emerge   in   this   case   warranting   any exceptional   consideration.   That   being so, royalty has not been considered as an admissible item of cost for this tariff exercise. ” [emphasis supplied] 67. Perusal of the aforesaid sub­para would clearly reveal that one of the main items of expenditure considered by SICAL was the   royalty   payment   it   has   to   make   to   TPT   as   per   the Concession Agreement.  It states that the existing tariffs were allowed to SICAL by accepting its proposal to adopt the then existing Chennai Port Trust (hereinafter referred to as “CHPT”) rates.     It   clarifies   that   there   was   no   detailed   cost   analysis carried out then.  It further states that the issue of admissibility of royalty as a cost item came under a focused scrutiny only in the case relating to CCTL, which was disposed of in March 2002.  It states, that in that case, the Authority decided not to allow   ‘revenue   share’   as   a   cost   element   for   computation   of tariffs   for   CCTL.     It  observes,   that   allowing   royalty   in   tariff 63 would mean that CCTL (Private Terminal Operator) and CHPT (the   Licensor),   both   of   whom   enjoyed   a   dominant   position, could   enter   into   any   commercial   arrangement   between themselves and pass on the consequential cost to customers.  It further specifies, that the Authority had observed, that there had been no commitment from anywhere about consequential tariff   adjustments   corresponding   to   the   royalty   quoted.       It further observed that no extraordinary circumstances appear to emerge   in   the   case   of   SICAL   warranting   any   exceptional consideration.  As such, royalty had not been considered as an admissible item of cost in the tariff.  68. The said order is passed when the 1998 guidelines were still holding the field.  In this factual background, it is difficult to   appreciate   as   to   how   it   could   be   said   that   the   1998 guidelines issued by TAMP permitted royalty to be factored in cost while fixation of tariff.   69. The 2002 tariff order has been challenged by SICAL by filing Writ Petitions  being Writ Petition  Nos  40637­40639 of 2002 before the Madras High Court.   The Madras High Court 64 th has also passed interim order on 8   November, 2002 thereby staying the 2002 notification and permitting SICAL to charge tariff on the basis of the 1999 tariff order.  th 70. Then comes the notification dated 29  July, 2003 issued by the GoI, which is in the following terms:  “In a few cases recently a question arose as   to   what   treatment   to   be   given   to revenue sharing/royalty payment made by private   terminal   operators   to   the concerned major ports for the purpose of fixation/revision of tariff. TAMP has also requested for guidelines from Ministry in the matter. The matter has been discussed with Chairman, TAMP and considered in this Ministry and  it has been decided to clarify   as   a   matter   of   policy   that   the revenue sharing/royalty payment shall not be factored into/taken into account as cost for fixation/revision of tariff by TAMP for the following reasons: ­  (i) The   benefit   of   higher   efficiency   on account   of   private   participation   in   ports should also be passed on to shippers or the users which will not be so if royalty is allowed to be factored in the cost of private operators. (ii) If   royalty   is   allowed   as   cost,   the private   bidder   can   offer   any   high 65 percentage which he will recover from the shippers/users in the shape or royalty cost lectured in fixing of higher rates.  It has also been decoded that the position in this regard may be clearly indicated in the bid documents itself while inviting bids for   private   sector   participation   at   major ports.” [emphasis supplied]    71. Perusal of the said notification would clearly show that the GoI  has   decided   to   clarify,   as   a   matter   of   policy,   that   the revenue­sharing/royalty   payment   shall   not   be   factored into/taken into account as cost for fixation/revision of tariff by TAMP.      The   said   notification   specifically   provides   that   the benefit of higher efficiency on account of private participation in ports should also be passed on to shippers or the users which will not be so if royalty is allowed to be factored in the cost of private operators.  It further provides that if royalty is allowed as cost, the private bidder can offer any high percentage which he will recover from the shippers/users in the shape of royalty cost factored in fixing of higher rates.  66 st Then comes a notification dated 31  March, 2005 issued 72. by TAMP.  It will be relevant to note that these guidelines have   been issued subsequent to the consultation meetings held with the stake­holders at Kolkata, Chennai and Mumbai.  It will be relevant to refer to clause 1.4.2, which reads thus: “1.4.2. The earlier guidelines adopted in Feb.   1998   stand   superseded.   The principles   evolved   through   various   tariff orders will, however, continue to apply to the extent they are consistent with and not specifically   superseded   by   these guidelines.   A   compendium   or   digest   of principles   evolved   will   be   published periodically.” st 73. It is   thus  clear,  that  the   31   March,   2005  notification specifically states that the guidelines adopted in February 1998 stand superseded.   However, it provides, that the principles evolved through various tariff orders would continue to apply to the   extent   they   are   consistent   with   and   not   specifically superseded by the 2005 guidelines.   74. It will also be relevant to refer to paragraph 2.8.1 of the 2005 guidelines.   67 “2.8.1. ‘Royalty/Revenue   share’ payable   to   the   landlord   port   by   the private operator will not be allowed as an   admissible   cost   for   tariff computation as decided by the Govt. in the Ministry of Shipping vide its Order th No. PR­14019/6/2002­PG dt. 29   July, 2003. In those BOT cases where bidding process   was   finalized   before   29   July, 2003, the tariff computation will take into account royalty / revenue sharing as   cost   for   tariff   fixation   in   such   a manner  as   to   avoid   likely   loss   to   the operator   on   account   of   royalty   / revenue   share   not   being   taken   into account,   subject   to   maximum   of   the amount   quoted   by   the   next   lowest bidder. This would, however, be allowed for   the   period   upto   which   such   likely loss   will   arise.   This   would   not   be applicable   if   there   is   provision   in   the concession   agreement   on   treatment   of ‘Royalty/Revenue Share’.” [emphasis supplied] The   said   guidelines   specifically   provide   that 75. ‘royalty/revenue   share’   payable   to   the   landlord   port   by   the private operator will not be allowed as an admissible cost for tariff   computation   as   decided   by   the   Government   in   the Ministry of Shipping vide its Order No.PR­14019/6/2002­PG th dated 29  July, 2003.  It further provided, that in those BOT 68 th cases   where   bidding   process   was   finalized   before   29   July, 2003, tariff computation will take into account royalty/revenue sharing as cost for tariff fixation in such a manner as to avoid likely loss to the operator on account of the royalty/revenue share   not   being   taken   into   account.     However,   this   was subjected only to a maximum of the amount quoted by the next lowest bidder.   This was further subjected to be allowed for the period   upto   which   such   likely   loss   would   arise.     It   further provided that this would not be applicable if there is provision in the concession agreement on treatment of royalty/revenue share.  76. A conjoint reading of all these documents would reveal that   when   the   bid   document   was   published   in   April   1997; SICAL   tendered   its   bid   in   October,   1997   and   submitted   its financial offer in December,1997; and the LoI was issued to th SICAL on 29  January, 1998, there were no guidelines at all. Even the guidelines of February 1998 do not provide for royalty being factored as cost while fixation of tariff.   On the contrary, the tariff order of 1999 specifically clarifies that it has left the 69 royalty   issue   to   be   decided   by   TPT   and   the   GoI.     It   has specifically clarified that the approval by TAMP should not be interpreted to be amounting to any implicit approval of royalty­ th related   issue.   Further,   the   tariff   order   issued   on   20 September,   2002 specifically   rejects   the   claim   of   SICAL   for   factoring   any   royalty   as   cost   while   tariff/price   fixation.     As already   stated   herein  above,   SICAL   has   challenged   the   said order before the Madras High Court by way of writ petition, which petition has been allowed.  It is also not in dispute, that on account of interim order passed by the Madras High Court th dated 8  November, 2002, SICAL is still continuing to charge at rates notified in the 1999 tariff order.    77. In this scenario, the finding of the Arbitral Tribunal, that there was a law when the Agreement was entered into between the parties, which provided royalty as a pass­through and that the said law has been changed for the first time in 2003 and subsequently again changed in 2005, in our view, is a finding based on ‘no evidence’.  Had the Arbitral Tribunal perused the tariff orders of 1999 and 2002, it would have found that in the 70 1999   tariff   order   TAMP   has   specifically   observed   that   its approval of the tariff should not be construed as its implicit approval   of   royalty­related   issue   and   the   2002   tariff   order specifically states that royalty was not permitted to be factored in the cost while determining tariff.  The Arbitral Tribunal has totally   failed   to   take   into   consideration   this   aspect   of   the matter.   As such, we are of the view, that since the finding of the 78. Arbitral Tribunal, that there was an existing law to the effect that the royalty payable shall be permitted as a pass­through in cost while fixation of tariff, is based on ‘no evidence’ and the finding, that there was a change in law in 2003 and 2005 is based   on   without   taking   into   consideration   the   relevant evidence, would come in the realm of perversity as explained by this Court in paragraph 31 of the  Associate Builders  (supra). The findings are based on ‘no evidence’ and ‘ignorance of vital evidence’ in arriving at its decision.   79. This brings us to the next issue viz., as to whether the Arbitral  Tribunal  was   justified   in  passing   an  award   thereby 71 substituting ‘royalty payment module’ to the ‘revenue­sharing module’.     A contract duly entered into between the parties cannot be substituted unilaterally without the consent of the parties.  The intention of the parties could be gathered from the documents   on   record.     SICAL,   for   the   first   time,   made th representation to TPT on 6   October, 2006   thereby seeking a th relief under the terms of Article 14.3 of the Agreement.  On 14 October, 2006, TPT informed SICAL that the issues raised by it th were   under   examination.     However,   vide   order   dated   27 October, 2006, TPT refused to consider SICAL’s application for relief   since,   according   to   it,   the   issue   raised   by   SICAL  was pending before the Madras High Court.   SICAL therefore filed writ petition being Writ Petition No. 4361 of 2006 before the Madras High Court.   The Madras High Court allowed the said st writ petition vide order dated 21  August, 2007 clarifying that the petition pending before the High Court had nothing to do with   the   representation   under   Article   14   of   the   License Agreement and remanded the matter to TPT for consideration th afresh.     Vide   a   reasoned   letter   dated   25   April,   2008,   TPT rejected the claim of SICAL.  TPT has specifically observed that 72 any change in the Agreement cannot be done without prior th approval of the GoI.  SICAL on 19  November, 2012 addressed a letter to TPT invoking arbitration under Article 15.3 of the License Agreement.   TPT strenuously contested the claim of SICAL with regard to prayer for change from ‘royalty payment mode’ to ‘revenue sharing mode’.   The stand of TPT has been crystalized   by   the   Arbitral   Tribunal   in   paragraph   5   of   the Award, which reads thus: “5.  Sum and substance of the defence is  as follows:  "There is no dispute at all. The grievance   of   the   SICAL   is   that there   is   an   error   committed   by TAMP   in   fixing   the   tariff.   That grievance   had   been   repeatedly taken   before   the   High   Court   of Madras   by   SICAL   and   at   all stages orders have been passed by   setting   aside   the   orders challenged.   Therefore,   the   real grievance of SICAL is only against TAMP   and   not   against   PORT. Since the issue regarding fixing of tariff   is   pending   finality,   SICAL cannot maintain any claim legally or factually against PORT. PORT is bound by the order of TAMP. Whatever order TAMP passes, the PORT   is   bound   to   obey.   The PORT   has   no   right   to   interfere 73 with   the   tariff   fixing   power   of TAMP   which   is   their   exclusive domain   and   jurisdiction.   The Contract   is   not  entered   into  on the basis of any guidelines. There was   no   guideline,   as   contended by   SICAL,   on   the   date   of   the contract. By the present dispute, SICAL   is   trying   to   change   the entire   nature   of   the   contract, namely, from the royalty module to the revenue sharing module. It is   impermissible   for   a   court   or this Tribunal to compel any party to   enter   into   a   new   contract. Contract is always by consent of parties.   All   the   grievance   put forward   before   the   Tribunal   by SICAL is their grievance in sum and substances before TAMP and High   Court   of   Madras   in   all challenges   made   against   the order of  TAMP. Neither a Court nor the Tribunal can rewrite the Contract.   The   contract   is   an enforceable   one   and   simply because   SICAL   is   stated   to   be losing   monetarily,   the   relief sought for in this dispute cannot be granted. If the case of SICAL is true, it is open to them to put an end   to   the   contract   and   seek appropriate   relief.   If   such   a termination of the contract takes place   at   the   instance   of   SICAL, then the PORT will take steps to get appropriate relief. Section 56 of the Contract Act is applicable to this case"  74 A number of case laws have been cited by the learned Senior Counsel for the PORT and   we   will   refer   to   them   at   the appropriate stage.” It could thus be seen, that SICAL wanted the Agreement to 80. be amended so as to change the ‘royalty payment method’ to ‘revenue­sharing method’.  TPT was always opposed to it.  The intention of TPT is apparent from its various communications and   its   stand   before   the   Arbitral   Tribunal,   that   it   was   not agreeable   for   amendment   of   the   Agreement   from   ‘royalty payment method’ to ‘revenue­sharing method’.  81. However,   ignoring   the   stand   of   TPT,   by   the   impugned Award, the Arbitral Tribunal has thrust upon a new term in the Agreement between the parties against the wishes of TPT.  The ‘royalty payment method’ has been totally substituted by the Arbitral Tribunal, with the ‘revenue­sharing method’. It is thus clear, that the Award has created a new contract for the parties by unilateral intention of SICAL as against the intention of TPT. 82. After   referring   to   various   international   treaties   on arbitration and judgments of other jurisdictions, this Court in 75 Ssangyong   Engineering   and   Construction   Company Limited  (supra), observed thus:   However, when it comes to the public “76. policy   of   India,   argument   based   upon “most basic notions of justice”, it is clear that this ground can be attracted only in very exceptional circumstances when the conscience   of   the   Court   is   shocked   by infraction   of   fundamental   notions   or principles of justice. It can be seen that the   formula   that   was   applied   by   the agreement   continued   to   be   applied   till February 2013 — in short, it is not correct to   say   that   the   formula   under   the agreement could not be applied in view of the Ministry's change in the base indices from 1993­1994 to 2004­2005. Further, in order to apply a linking factor, a Circular, unilaterally   issued   by   one   party,   cannot possibly   bind   the   other   party   to   the agreement   without   that   other   party's consent.   Indeed,   the   Circular   itself expressly   stipulates   that   it   cannot   apply unless   the   contractors   furnish   an undertaking/affidavit   that   the   price adjustment   under   the   Circular   is acceptable to them. We have seen how the appellant   gave   such   undertaking   only conditionally and without prejudice to its argument that the Circular does not and cannot apply.   This being the case, it is clear   that   the   majority   award   has created a new contract for the parties by applying the said unilateral Circular and by substituting a workable formula 76 under   the   agreement   by   another formula   dehors   the   agreement.   This being the case, a fundamental principle of   justice   has   been   breached,   namely, that a unilateral addition or alteration of a contract can never be foisted upon an unwilling party, nor can a party to the   agreement   be   liable   to   perform   a bargain not entered into with the other party. Clearly, such a course of conduct would   be   contrary   to   fundamental principles of justice as followed in this country, and shocks the conscience of this Court. However, we repeat that this ground   is   available   only   in   very exceptional circumstances, such as the fact situation in the present case.  Under no   circumstance   can   any   court   interfere with an arbitral award on the ground that justice has not been done in the opinion of the Court. That would be an entry into the merits of the dispute which, as we have seen, is contrary to the ethos of Section 34 of the 1996 Act, as has been noted earlier in this judgment.” [emphasis supplied] 83. As   such,   as   held   by   this   Court   in   Ssangyong   (supra), Engineering   and   Construction   Company   Limited the   fundamental   principle   of   justice   has   been   breached, namely, that a unilateral addition or alteration of a contract has 77 been foisted upon an unwilling party.   This Court has further held that a party to the Agreement cannot be made liable to perform something for which it has not entered into a contract. In   our   view,   re­writing   a   contract   for   the   parties   would   be breach of fundamental principles of justice entitling a Court to interfere   since   such   case   would   be   one   which   shocks   the conscience   of   the   Court   and   as   such,   would   fall   in   the exceptional category.   84. We may gainfully refer to the following observations of this Court   in   Bharat   Coking   Coal   Ltd.   v.   Annapurna 26 . Construction “22.  There lies a clear distinction between an error within the jurisdiction and error in excess of jurisdiction. Thus, the role of the   arbitrator   is   to   arbitrate   within   the terms   of   the  contract.   He  has   no  power apart from what the parties have given him under   the   contract.   If   he   has   travelled beyond the contract, he would be acting without   jurisdiction,   whereas   if   he   has remained   inside   the   parameters   of   the contract, his award cannot be questioned 26 (2003) 8 SCC 154 78 on   the   ground   that   it  contains   an   error apparent on the face of the record.” 85. It   has   been   held   that   the   role   of   the   Arbitrator   is   to arbitrate within the terms of the contract.   He has no power apart from what the parties have given him under the contract. If he has travelled beyond the contract, he would be acting without jurisdiction.   86. It   will   also   be   apposite   to   refer   to   the   following observations of this Court in the case of   Md. Army Welfare 27 Housing Organization v.   Sumangal Services (P) Ltd.     “43.  An Arbitral Tribunal is not a court of law. Its orders are not judicial orders. Its functions   are   not   judicial   functions.   It cannot   exercise   its   power   ex   debito justitiae. The jurisdiction of the arbitrator being confined to the four corners of the agreement, he can only pass such an order which   may   be   the   subject­matter   of reference.” 87. It has been held that an Arbitral Tribunal is not a Court of law.   Its orders are not judicial orders.   Its functions are not judicial   functions.     It   cannot   exercise   its   powers   ex   debito 27 (2004) 9 SCC 619 79 justitiae . It has been held that the jurisdiction of the arbitrator being confined to the four corners of the agreement, he can only pass   such   an   order   which   may   be   the   subject­matter   of reference.  88. In that view of the matter, we are of the considered view, that   the   impugned   Award   would   come   under   the   realm   of ‘patent illegality’ and therefore, has been rightly set aside by the High Court.   89. The High Court has gone into various other aspects of the matter.   Arguments have also been advanced before us with regard   to   NSCT   being   given   a   discriminatory   treatment   as against SICAL.  The arguments have also been advanced on the ground of approbate and reprobate and doctrine of election.  It has also been argued on behalf of SICAL that it is incurring huge losses. Per contra, it is submitted on behalf of TPT, that it is incurring huge losses on account of various interim orders passed by the High Court and the District Judge in Section 9 applications.   80 We do not propose to go into those aspects of the matter. 90. TAMP has issued various notifications with regard to fixation of tariff so also various orders have been passed by the GoI with regard   to  the  aspect  of   grant   or   refusal  of   pass  through of royalty payable.   Various petitions have been filed by SICAL challenging the said orders and notifications.  All the petitions were allowed thereby remanding the matters to TAMP and GoI. However,   it   is   not   in   dispute,   that   SICAL,   by   virtue   of   the th interim   order   passed   dated   8   November,   2002   in Miscellaneous   Petition   No.   60240   of   2002   in   Writ   Petition No.40638 of 2002 is continuing to levy charges on the basis of th 1999 tariff order (dated 8  December, 1999) passed by TAMP.   The   last   notification   issued   by   TAMP   with   regard   to 91. th price/tariff fixation dated 17   December, 2008, gazetted vide th notification   dated   30   December,   2008   was   challenged   by SICAL   by   way   of   Writ   Petition   No.1350   of   2009.     The   last th direction issued by the GoI dated 20  February, 2008 was also challenged by SICAL by way of Writ Petition No.1351 of 2009. th By   an   order   dated   15   October,   2009,   the   High   Court   has 81 allowed these writ petitions by setting aside the order of the GoI th th dated   20   February,   2008   and   the   notification   dated   17 December, 2008 issued by TAMP and has directed the GoI as well as TAMP to consider the issue afresh.   92. It is informed at the Bar, that the said order has been carried in appeal before the Division Bench of the High Court both by SICAL as well as TAMP, which are still pending before the High Court.    93. We   are   of   the   considered   view,   that   if   we   make   any observation   on   merits   of   the   issue   with   regard   to   aforesaid submissions   made   before   us,   it   may   prejudicially   affect   the rights of either of the parties.  We therefore refrain from making any observation with regard to the aforesaid arguments, though heavily contested before us.   94. We therefore, confine ourselves with the issue as regards the validity of the Award.   We also clarify that any observations made by the High Court with regard to other aspects of the matter except the validity of the Award, would not come in the way of either of the parties raising their grievances in either the 82 proceedings which are pending before the Division Bench of the High Court or any other proceedings to which either of it would be entitled to take recourse in law.   95. In   the   result,   with   these   observations,   we   dismiss   the appeals. However, in the facts and circumstances of the case, there shall be no order as to costs.   Pending applications, if any, shall stand disposed of accordingly.  …..….......................J. [R.F. NARIMAN] …….........................J.        [B.R. GAVAI] NEW DELHI; JULY 28, 2021 83