Full Judgment Text
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P. (COMM) 126/2017
NATIONAL HIGHWAYS AUTHORITY OF
INDIA ..... Petitioner
Through: Mr S. Nanda Kumar, Mr Pravnish
Singh, Mr M.S. Saran Kumar and Mr
Ramdhan Singh Narwal, Advocates.
versus
N.K. TOLL ROAD LIMITED ..... Respondent
Through: Mr Akhil Sibal, Mr Hasan Murtaza
and Ms Tanvi Mishra, Advocates.
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
O R D E R
% 23.03.2017
VIBHU BAKHRU, J
CAV No. 247/2017
1. The caveat stands discharged as the learned counsel for the
respondent has entered appearance.
I.A. No. 3311/2017
2. Allowed, subject to all just exceptions.
3. Application stands disposed of.
I.A. No. 3312/2017 (Condonation of Delay in re-filing)
4. National Highways Authority of India (hereafter ‘NHAI’) has filed
the present petition under Section 34 of the Arbitration and Conciliation Act,
1996 (hereafter ‘the Act’) assailing the arbitral award dated 31.08.2016
(hereafter ‘the impugned award’) rendered by the Arbitral Tribunal,
O.M.P. (COMM) 126/2017 Page 1 of 13
constituted by Shri S. S. Agarwal, Shri Arun Kumar Sinha and Shri
Ravindra Kumar (Presiding Arbitrator) (hereafter collectively referred to as
‘the Arbitral Tribunal’) by majority. The dissenting award was passed by
Shri Arun Kumar Sinha, which is being relied upon by NHAI.
5. The impugned award was made and published by the Arbitral
Tribunal in respect of the disputes raised by the respondent, M/s N. K. Toll
Road Ltd. (hereafter ‘N K Toll’), in connection with the Concession
Agreement dated 30.01.2006 (hereafter ‘the Agreement’) entered into
between the parties.
6. The impugned award was made on 31.08.2016 and the present
petition was filed on 28.11.2016. However, the petition was defective and
was, therefore, returned under objection. Admittedly, NHAI was unable to
rectify the defects till 15.03.2017; that is, about six and a half months after
the impugned award was made.
7. It is, thus, seen that the time taken by NHAI in re-filing far exceeds
the period available under Section 34(3) of the Act for filing a petition
assailing the award. A Division Bench of this Court in the case of Delhi
Development Authority v. Durga Construction Co : 2013 (139) DRJ 133
had considered the issue whether the cumulative delay in filing and re-filing
the petition under Section 34 of the Act could be condoned by this Court
beyond the period of three months and thirty days as specified under Section
34(3) of the Act. This Court concluded that whilst the Court has the power
to condone the delay in re-filing even if the period cumulatively taken
exceeds the maximum period available under section 34(3) of the Act; the
O.M.P. (COMM) 126/2017 Page 2 of 13
discretion to do so must be exercised in conformity with the legislative
intent as expressed under Section 34(3) of the Act. Thus, it would be
necessary for a party seeking condonation of delay in re-filing to satisfy the
Court that it was prevented by sufficient cause to re-file the petition within
the time specified.
8. In the present case, the only explanation provided for the inordinate
delay in re-filing is that it was caused because of delay in getting “ the copy
of the documents from the project office which is situated at Karur, Tamil
Nadu” . Plainly, the said explanation cannot be accepted. Merely because the
project office of NHAI is located in Tamil Nadu cannot justify a period of
over about three months to obtain the relevant documents.
9. This excuse - of delay in obtaining the relevant documents - seems
even more hollow, when one finds that, in fact, NHAI has not even filed the
most basic documents required for examining the controversy between the
parties; NHAI has neither filed a copy of the Agreement nor the statement of
claims/defence. The only documents filed along with the present petition are
a copy of the impugned award along with the dissenting note and four letters
issued by NHAI/Engineer. Having heard the learned counsel for NHAI on
merits, the said letters are of little relevance to the arguments advanced for
assailing the impugned award. The Statement of Truth filed in support with
the petition inasmuch as it has been affirmed that all relevant documents
have been filed with the petition, is also palpably false.
10. In view of the above, this Court is unable to condone the delay in re-
filing and the application is dismissed.
O.M.P. (COMM) 126/2017 Page 3 of 13
11. Accordingly, the petition is liable to be dismissed on the ground of
delay alone. However, notwithstanding the above, this Court has also heard
the arguments advanced by Mr Nanda Kumar, learned counsel appearing for
NHAI and has considered the petition on merits as well.
O.M.P. (COMM) 126/2017 and IA No. 3310/2017
12. The only controversy raised on behalf of NHAI is that, according to
NHAI, the damages awarded are in conflict with the terms of the
Agreement.
13. Briefly stated, the relevant facts necessary to address the controversy
are as under:-
13.1 NHAI had invited bids for the work of ‘ design, construction,
development, finance, operation and maintenance of km. 258.645 (end of
Namakkal Bypass) to km. 292.6 (start of Karur Bypass) and (ii)
improvement, operation and maintenance of km 248.645 (start of proposed
flyover on Namakkal Bypass) to km 258.645 (end of Namakkal Bypass) on
NH-7 in the state of Tamil Nadu on Build Operate & Transfer (BOT) basis:
Contract Package NS-2/BOT/TN-3’ (hereafter ‘the works’). Reliance Energy
Limited submitted its bid, which was accepted by issuance of a letter of
acceptance dated 30.09.2005. For the execution of the works, N K Toll was
incorporated as a Special Purpose Vehicle.
13.2 Subsequently, the parties entered into the Agreement dated
30.01.2006. In terms of the Agreement, the works had to be completed
within 30 months from the date of Notice to proceed. The concession was
O.M.P. (COMM) 126/2017 Page 4 of 13
granted for a period of 20 years from the appointed date. A tripartite
agreement also existed between the parties and the State of Tamil Nadu.
14. According to NHAI, the execution of the Agreement was delayed by
N K Toll as it neither completed the pre-construction activities before the
appointed date nor mobilized the requisite manpower and other resources.
As a result, disputes arose between the parties. On the other hand, it is the
stand of N K Toll that NHAI defaulted in performance of its obligations of
handing over the land for the works within the time prescribed which
resulted in delay in execution of the works, increased costs and resultant loss
to N K Toll.
15. In view of the disputes, N K Toll invoked the arbitration clause by its
letter dated 18.12.2013 pursuant to which the Arbitral Tribunal was
appointed.
16. N K Toll filed its statement of claims raising the following claims:
Claim no.1 - ₹13,11,85,005/- as compensation for additional expenses on
account of extended stay of machineries at site; Claim no. 2 - ₹1,59,86,791/-
compensation for additional increase in cost of input materials incurred due
to extended construction period; Claim no.3 - ₹6,28,02,533/- being
compensation for loss of opportunity and profits due to extended period of
construction; Claim no.4 - ₹20,87,00,000/- towards compensation for loss of
revenue due to delay in commercial operation date (COD); Claim no.5 -
₹10,03,08,510/- as compensation for additional overhead costs incurred due
to extended construction period; and Claim no.6 - ₹71,20,945/- as
compensation for delayed payment of grant during the construction period.
O.M.P. (COMM) 126/2017 Page 5 of 13
17. On considering the material available on record, the Arbitral Tribunal
found that land was not handed over to N K Toll on time as the payment of
compensation to the landowners was delayed by NHAI. And, therefore, the
Arbitral Tribunal held NHAI responsible to pay compensation to N K Toll
for breach of Agreement, in terms of Sub-clause 31.2 of the Agreement.
Further, the deployment of machineries at the site was also considered to be
adequate and NHAI’s contention in this regard was rejected.
18. In view of the above, insofar as Claim no.1 was concerned, the
Arbitral Tribunal allowed the claim to the extent of ₹9,64,66,650/- on the
basis of percentage costs. Similarly, Claim no.2 to the extent of
₹1,32,98,506/- was also accepted. With regard to Claim no.3, an amount of
₹6,28,025/- was awarded in the absence of adequate proof of loss of
opportunity. A sum of ₹18,26,07,897/- was also awarded in respect of Claim
no. 4 as the principle of payment of compensation to the concessionaire for
delays not attributable to it, was recognized by the Government of India.
19. In addition, under Claim no.5, N K Toll was awarded a sum of
₹3,09,33,245/-. Likewise, Claim no.6 for ₹71,20,945/- was also accepted as
the terms of the Agreement provided for payment of interest on delayed
disbursement of grant.
20. The awarded amounts in Claim nos.1 to 5 also carried interest at the
rate of 2% above the SBI PLR from the date of actual COD till the date of
the impugned award. Further, the Arbitral Tribunal also awarded interest at
the rate of 12% p.a. on the amounts awarded from the date of the impugned
award till realization. However, it was also held that future interest would be
O.M.P. (COMM) 126/2017 Page 6 of 13
payable only if the awarded amounts were not discharged within a period of
60 days from the date of the award. Further, N K Toll was awarded ₹47.66
lacs along with interest at the rate of 12% p.a. for the share paid by it on
behalf of NHAI towards arbitration.
21. However, Shri Arun Kumar Sinha in his dissenting award observed
that damages for delay in handing over the land had to be determined as per
Sub-clauses 13.5.1 and 13.5.2 of the Agreement and found N K Toll entitled
to a sum of ₹1,23,52,215/- along with interest at the rate of 10% p.a. as pre-
award interest for its claims. Future interest was also awarded at 2% above
the current rate of interest.
22. Mr Nanda Kumar, did not dispute that NHAI had defaulted in handing
over the site to N K Toll. He sought to assail the impugned award on the
solitary ground that the Arbitral Tribunal had erred in holding that the
question of damages was to be addressed in terms of Sub-clause 31.2 of the
Agreement read with Sections 55 and 73 of the Indian Contract Act, 1872
(hereafter ‘the Contract Act’). He submitted that the Agreement between the
parties included specific clauses for award of damages in case of delay in
handing over the Right of Way (ROW)/additional ROW: Sub-clauses 13.5.1
and 13.5.2 of the Agreement. He submitted that in terms of the Agreement,
any default in handing over the site was required to be compensated in terms
of the aforesaid sub-clauses and the Arbitral Tribunal had grossly erred in
taking recourse to Sub-clause 31.2 of the Agreement. He earnestly
contended that the Arbitral Tribunal had not considered the applicability of
Sub-clauses 13.5.1 and 13.5.2 of the Agreement and, therefore, the
impugned award needs to be set aside. He referred to the dissenting note
O.M.P. (COMM) 126/2017 Page 7 of 13
entered by one of the members of the Arbitral Tribunal, accepting the
contention now advanced by Mr Nanda Kumar and holding that
compensation as specified in Sub-clauses 13.5.1 and 13.5.2 would be
payable.
23. I have heard Mr Nanda Kumar at length.
24. At the outset, it is necessary to observe that there is no dispute that
NHAI had committed a default in handing over of land for the works to be
executed. The Arbitral Tribunal had found that there was a delay of at least
206 days in handing over the site, which was wholly attributable to NHAI.
The dissenting note entered by Mr Arun Kumar Sinha, which is heavily
relied upon by Mr Nanda Kumar also accepts that NHAI had delayed
handing over the land for at least a period of 206 days.
25. It is also not disputed that NHAI is liable to compensate N K Toll for
the damages on account of delay in handing over the site. The only question
to be addressed is whether the Arbitral Tribunal had erred in assessing the
damages in terms of Sub-clause 31.2 of the Agreement and in terms of
Sections 55 and 73 of the Contract Act. It is, at this stage, also relevant to
note that although Mr Nanda Kumar had contended that Sub-clause 31.2 of
the Agreement was not applicable, he did not articulate any grievance with
regard to the quantum of damages as assessed (assuming that Sub-clause
31.2 of the Agreement was applicable). Thus, the only question to be
addressed is whether the Arbitral Tribunal (majority) had erred in holding
that Sub-clause 31.2 of the Agreement was applicable for determining
damages.
O.M.P. (COMM) 126/2017 Page 8 of 13
26. Mr Nanda Kumar’s contention that Arbitral Tribunal had not taken
into account the provisions of Sub-clauses 13.5.1 and 13.5.2 of the
Agreement is ex facie incorrect. A plain reading of the impugned award
indicates that the Arbitral Tribunal had discussed the issue whether the said
sub-clauses were applicable and had rejected the same. The relevant extracts
of the impugned award wherein the question of applicability of the
provisions of Sub-Clause 13.5.2 are discussed are set out below:-
“Now considering the effect on compensation of clause 13.5.2
of the contract agreement (page 41), it states, quote
“Additional right of way for construction of main carriageway
shall be made available to the concessionaire as per the
handing over schedule mentioned herein free from all
encumbrances and without the concessionaire being required
to make any payment to NHAI on account of any costs,
expenses and charges for the use of such additional right of
way for the duration of the Concession Period. 50% (fifty
percent) of additional right of way for construction of main
carriageway on or before 6 (six) months from the appointed
date, balance 50% (fifty percent) of the additional right of way
for construction of main carriageway on or before 12 (twelve)
months from the appointed date. Additional right of ways for
service roads and other facilities shall be handed over to the
concessionaire on or before 18 (eighteen) months from the
appointed date. On or after the appointed date, the
concessionaire shall commence, undertake and complete all
construction works on the project highway in accordance with
this agreement. Provided, however, that if NHAI does not
enable such access to any part or parts of the additional right
of way for any reason other than a force majeure Event or
breach of this agreement by the concessionaire as per the
schedule mentioned herein, NHAI shall pay to the
concessionaire damages at the rate of Rs. 1,000 (Rupees one
thousand) per month per 1,000 (one thousand) sq. meters or
part thereof if such area is required by the concessionaire for
O.M.P. (COMM) 126/2017 Page 9 of 13
construction works. Such Damages shall be raised to Rs.2,000
(Rupees two thousand) per month after COD if such area is
essential for smooth and efficient operation of the project
highway. Provided further that the completion certificate or
the provisional certificate, as the case may be, for the project
highway shall not be affected or delayed as a consequence of
such parts of the existing right of way remaining under
construction after the scheduled project completion date”.
It is evident that NHAI did not keep its obligations in
providing additional right of way as scheduled in the above
clause of the CA. The consequence of such failure are dealt
with by two provisos to clause 13.5.2. The first proviso states,
quote. “ Provided, however, that if NHAI does not enable such
access to any part or parts of the additional right of way for
any reason other than a force majeure Event or breach of this
agreement by the concessionaire as per the schedule
mentioned herein, NHAI shall pay to the concessionaire
damages at the rate of Rs.1,000 (Rupees one thousand) per
month per 1,000 (one thousand) sq. meters or part thereof if
such area is required by the concessionaire for construction
works. Such Damages shall be raised to Rs, 2,000(Rupees two
thousand) per month after COD if such area is essential for
smooth and efficient operation of the project highway ”.
The second proviso puts a further condition, stating that, quote
“ Provided further that the completion certificate or the
provisional certificate, as the case may be, for the project
highway shall not be affected or delayed as a consequence of
such parts of the existing right of way remaining under
construction after the scheduled project completion date ”.
Thus considering clause 13.5.2 in its entirety, the stated sums
mentioned as Damages against the failure of the Respondent to
make available additional ROW can be applicable only if the
provisional completion certificate was not delayed or affected
as a consequence of delay/non-fulfillment of reciprocal
promises by the Respondent.”
O.M.P. (COMM) 126/2017 Page 10 of 13
27. The Arbitral Tribunal further examined the correspondence between
the parties in relation to N K Toll’s request for issue of provisional
completion certificate and concluded that the same had been denied to N K
Toll until it completed the entire four laning of the Project Highway,
meeting all the requirements as per the specifications and standard. The
Arbitral Tribunal concluded as under:-
“The denial of PCC to the Claimant resulted in non-
fulfillment of second provisio of clause 13.5.2 of the CA and
breach of contract, thereby the pre-determined damages
provided therein will no longer apply. The rate of damages
payable by NHAI to the Concessionaire, if it does not enable
access to any part or parts of the additional ROW to the
Concessionaire as per the schedule mentioned in this clause
are covered by two riders, and there can be no other
interpretation that these damages will not be applicable, if
the second rider is not complied with.
Thus material breach has been committed by the Respondent
and the damages on this account will have to be dealt with
by clause 31.2 (page 74 of CA) read with section 55 and 73
of the Indian Contract Act 1872.”
28. Sub-clause 31.2 of the Agreement (as quoted in the impugned award)
reads as under:
"31.2 In the event of NHAI being in material default of this
Agreement and such default is cured before Termination,
NHAI shall pay to the Concessionaire as compensation, all
direct additional costs suffered or incurred by the
Concessionaire arising out of such material default by
NHAI, in one lumpsum within 30 (thirty) days of receiving
the demand or at NHAI's option in 3 (three) equal
installments with interest @ SBI PLR plus 2% (two per
cent)".
O.M.P. (COMM) 126/2017 Page 11 of 13
29. As noticed above, there is no dispute that the damages awarded by the
Arbitral Tribunal are in conformity with the aforesaid sub-clause.
30. The extent of judicial review in proceedings under Section 34 of the
Act is limited. The arbitral tribunal is the final adjudicating authority in
respect of the disputes between the parties. The question as to the
interpretation of the agreement between the parties falls squarely within the
jurisdiction of the arbitral tribunal. Thus, even if it is accepted – although
there is no reason to do so – that the Arbitral Tribunal has interpreted the
Agreement erroneously, no interference with the impugned award would be
warranted unless the Court finds that the view is patently illegal and
perverse. The Court does not act as a Court of first appeal over the decision
of the arbitral tribunal and cannot supplant its view over that of the arbitral
tribunal. In Associate Builders v. Delhi Development Authority : (2015) 3
SCC 49, the Supreme Court had explained the above principle in the
following words:-
“It must clearly be understood that when a court is applying
the "public policy" test to an arbitration award, it does not act
as a court of appeal and consequently errors of fact cannot be
corrected. A possible view by the arbitrator on facts has
necessarily to pass muster as the arbitrator is the ultimate
master of the quantity and quality of evidence to be relied
upon when he delivers his arbitral award. Thus an award based
on little evidence or on evidence which does not measure up in
quality to a trained legal mind would not be held to be invalid
on this score. Once it is found that the arbitrators approach is
not arbitrary or capricious, then he is the last word on facts."
31. Thus, if the view expressed by the arbitral tribunal is a plausible one,
the same cannot be interfered with even if the Court disagrees with the
O.M.P. (COMM) 126/2017 Page 12 of 13
same.
32. In view of the above, this Court is unable to hold that the decision of
the Arbitral Tribunal is perverse or patently illegal.
33. In view of the above, the petition and the pending application are
dismissed, both on the grounds of limitation as well as on merits.
34. No order as to costs.
VIBHU BAKHRU, J
MARCH 23, 2017
RK
O.M.P. (COMM) 126/2017 Page 13 of 13
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P. (COMM) 126/2017
NATIONAL HIGHWAYS AUTHORITY OF
INDIA ..... Petitioner
Through: Mr S. Nanda Kumar, Mr Pravnish
Singh, Mr M.S. Saran Kumar and Mr
Ramdhan Singh Narwal, Advocates.
versus
N.K. TOLL ROAD LIMITED ..... Respondent
Through: Mr Akhil Sibal, Mr Hasan Murtaza
and Ms Tanvi Mishra, Advocates.
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
O R D E R
% 23.03.2017
VIBHU BAKHRU, J
CAV No. 247/2017
1. The caveat stands discharged as the learned counsel for the
respondent has entered appearance.
I.A. No. 3311/2017
2. Allowed, subject to all just exceptions.
3. Application stands disposed of.
I.A. No. 3312/2017 (Condonation of Delay in re-filing)
4. National Highways Authority of India (hereafter ‘NHAI’) has filed
the present petition under Section 34 of the Arbitration and Conciliation Act,
1996 (hereafter ‘the Act’) assailing the arbitral award dated 31.08.2016
(hereafter ‘the impugned award’) rendered by the Arbitral Tribunal,
O.M.P. (COMM) 126/2017 Page 1 of 13
constituted by Shri S. S. Agarwal, Shri Arun Kumar Sinha and Shri
Ravindra Kumar (Presiding Arbitrator) (hereafter collectively referred to as
‘the Arbitral Tribunal’) by majority. The dissenting award was passed by
Shri Arun Kumar Sinha, which is being relied upon by NHAI.
5. The impugned award was made and published by the Arbitral
Tribunal in respect of the disputes raised by the respondent, M/s N. K. Toll
Road Ltd. (hereafter ‘N K Toll’), in connection with the Concession
Agreement dated 30.01.2006 (hereafter ‘the Agreement’) entered into
between the parties.
6. The impugned award was made on 31.08.2016 and the present
petition was filed on 28.11.2016. However, the petition was defective and
was, therefore, returned under objection. Admittedly, NHAI was unable to
rectify the defects till 15.03.2017; that is, about six and a half months after
the impugned award was made.
7. It is, thus, seen that the time taken by NHAI in re-filing far exceeds
the period available under Section 34(3) of the Act for filing a petition
assailing the award. A Division Bench of this Court in the case of Delhi
Development Authority v. Durga Construction Co : 2013 (139) DRJ 133
had considered the issue whether the cumulative delay in filing and re-filing
the petition under Section 34 of the Act could be condoned by this Court
beyond the period of three months and thirty days as specified under Section
34(3) of the Act. This Court concluded that whilst the Court has the power
to condone the delay in re-filing even if the period cumulatively taken
exceeds the maximum period available under section 34(3) of the Act; the
O.M.P. (COMM) 126/2017 Page 2 of 13
discretion to do so must be exercised in conformity with the legislative
intent as expressed under Section 34(3) of the Act. Thus, it would be
necessary for a party seeking condonation of delay in re-filing to satisfy the
Court that it was prevented by sufficient cause to re-file the petition within
the time specified.
8. In the present case, the only explanation provided for the inordinate
delay in re-filing is that it was caused because of delay in getting “ the copy
of the documents from the project office which is situated at Karur, Tamil
Nadu” . Plainly, the said explanation cannot be accepted. Merely because the
project office of NHAI is located in Tamil Nadu cannot justify a period of
over about three months to obtain the relevant documents.
9. This excuse - of delay in obtaining the relevant documents - seems
even more hollow, when one finds that, in fact, NHAI has not even filed the
most basic documents required for examining the controversy between the
parties; NHAI has neither filed a copy of the Agreement nor the statement of
claims/defence. The only documents filed along with the present petition are
a copy of the impugned award along with the dissenting note and four letters
issued by NHAI/Engineer. Having heard the learned counsel for NHAI on
merits, the said letters are of little relevance to the arguments advanced for
assailing the impugned award. The Statement of Truth filed in support with
the petition inasmuch as it has been affirmed that all relevant documents
have been filed with the petition, is also palpably false.
10. In view of the above, this Court is unable to condone the delay in re-
filing and the application is dismissed.
O.M.P. (COMM) 126/2017 Page 3 of 13
11. Accordingly, the petition is liable to be dismissed on the ground of
delay alone. However, notwithstanding the above, this Court has also heard
the arguments advanced by Mr Nanda Kumar, learned counsel appearing for
NHAI and has considered the petition on merits as well.
O.M.P. (COMM) 126/2017 and IA No. 3310/2017
12. The only controversy raised on behalf of NHAI is that, according to
NHAI, the damages awarded are in conflict with the terms of the
Agreement.
13. Briefly stated, the relevant facts necessary to address the controversy
are as under:-
13.1 NHAI had invited bids for the work of ‘ design, construction,
development, finance, operation and maintenance of km. 258.645 (end of
Namakkal Bypass) to km. 292.6 (start of Karur Bypass) and (ii)
improvement, operation and maintenance of km 248.645 (start of proposed
flyover on Namakkal Bypass) to km 258.645 (end of Namakkal Bypass) on
NH-7 in the state of Tamil Nadu on Build Operate & Transfer (BOT) basis:
Contract Package NS-2/BOT/TN-3’ (hereafter ‘the works’). Reliance Energy
Limited submitted its bid, which was accepted by issuance of a letter of
acceptance dated 30.09.2005. For the execution of the works, N K Toll was
incorporated as a Special Purpose Vehicle.
13.2 Subsequently, the parties entered into the Agreement dated
30.01.2006. In terms of the Agreement, the works had to be completed
within 30 months from the date of Notice to proceed. The concession was
O.M.P. (COMM) 126/2017 Page 4 of 13
granted for a period of 20 years from the appointed date. A tripartite
agreement also existed between the parties and the State of Tamil Nadu.
14. According to NHAI, the execution of the Agreement was delayed by
N K Toll as it neither completed the pre-construction activities before the
appointed date nor mobilized the requisite manpower and other resources.
As a result, disputes arose between the parties. On the other hand, it is the
stand of N K Toll that NHAI defaulted in performance of its obligations of
handing over the land for the works within the time prescribed which
resulted in delay in execution of the works, increased costs and resultant loss
to N K Toll.
15. In view of the disputes, N K Toll invoked the arbitration clause by its
letter dated 18.12.2013 pursuant to which the Arbitral Tribunal was
appointed.
16. N K Toll filed its statement of claims raising the following claims:
Claim no.1 - ₹13,11,85,005/- as compensation for additional expenses on
account of extended stay of machineries at site; Claim no. 2 - ₹1,59,86,791/-
compensation for additional increase in cost of input materials incurred due
to extended construction period; Claim no.3 - ₹6,28,02,533/- being
compensation for loss of opportunity and profits due to extended period of
construction; Claim no.4 - ₹20,87,00,000/- towards compensation for loss of
revenue due to delay in commercial operation date (COD); Claim no.5 -
₹10,03,08,510/- as compensation for additional overhead costs incurred due
to extended construction period; and Claim no.6 - ₹71,20,945/- as
compensation for delayed payment of grant during the construction period.
O.M.P. (COMM) 126/2017 Page 5 of 13
17. On considering the material available on record, the Arbitral Tribunal
found that land was not handed over to N K Toll on time as the payment of
compensation to the landowners was delayed by NHAI. And, therefore, the
Arbitral Tribunal held NHAI responsible to pay compensation to N K Toll
for breach of Agreement, in terms of Sub-clause 31.2 of the Agreement.
Further, the deployment of machineries at the site was also considered to be
adequate and NHAI’s contention in this regard was rejected.
18. In view of the above, insofar as Claim no.1 was concerned, the
Arbitral Tribunal allowed the claim to the extent of ₹9,64,66,650/- on the
basis of percentage costs. Similarly, Claim no.2 to the extent of
₹1,32,98,506/- was also accepted. With regard to Claim no.3, an amount of
₹6,28,025/- was awarded in the absence of adequate proof of loss of
opportunity. A sum of ₹18,26,07,897/- was also awarded in respect of Claim
no. 4 as the principle of payment of compensation to the concessionaire for
delays not attributable to it, was recognized by the Government of India.
19. In addition, under Claim no.5, N K Toll was awarded a sum of
₹3,09,33,245/-. Likewise, Claim no.6 for ₹71,20,945/- was also accepted as
the terms of the Agreement provided for payment of interest on delayed
disbursement of grant.
20. The awarded amounts in Claim nos.1 to 5 also carried interest at the
rate of 2% above the SBI PLR from the date of actual COD till the date of
the impugned award. Further, the Arbitral Tribunal also awarded interest at
the rate of 12% p.a. on the amounts awarded from the date of the impugned
award till realization. However, it was also held that future interest would be
O.M.P. (COMM) 126/2017 Page 6 of 13
payable only if the awarded amounts were not discharged within a period of
60 days from the date of the award. Further, N K Toll was awarded ₹47.66
lacs along with interest at the rate of 12% p.a. for the share paid by it on
behalf of NHAI towards arbitration.
21. However, Shri Arun Kumar Sinha in his dissenting award observed
that damages for delay in handing over the land had to be determined as per
Sub-clauses 13.5.1 and 13.5.2 of the Agreement and found N K Toll entitled
to a sum of ₹1,23,52,215/- along with interest at the rate of 10% p.a. as pre-
award interest for its claims. Future interest was also awarded at 2% above
the current rate of interest.
22. Mr Nanda Kumar, did not dispute that NHAI had defaulted in handing
over the site to N K Toll. He sought to assail the impugned award on the
solitary ground that the Arbitral Tribunal had erred in holding that the
question of damages was to be addressed in terms of Sub-clause 31.2 of the
Agreement read with Sections 55 and 73 of the Indian Contract Act, 1872
(hereafter ‘the Contract Act’). He submitted that the Agreement between the
parties included specific clauses for award of damages in case of delay in
handing over the Right of Way (ROW)/additional ROW: Sub-clauses 13.5.1
and 13.5.2 of the Agreement. He submitted that in terms of the Agreement,
any default in handing over the site was required to be compensated in terms
of the aforesaid sub-clauses and the Arbitral Tribunal had grossly erred in
taking recourse to Sub-clause 31.2 of the Agreement. He earnestly
contended that the Arbitral Tribunal had not considered the applicability of
Sub-clauses 13.5.1 and 13.5.2 of the Agreement and, therefore, the
impugned award needs to be set aside. He referred to the dissenting note
O.M.P. (COMM) 126/2017 Page 7 of 13
entered by one of the members of the Arbitral Tribunal, accepting the
contention now advanced by Mr Nanda Kumar and holding that
compensation as specified in Sub-clauses 13.5.1 and 13.5.2 would be
payable.
23. I have heard Mr Nanda Kumar at length.
24. At the outset, it is necessary to observe that there is no dispute that
NHAI had committed a default in handing over of land for the works to be
executed. The Arbitral Tribunal had found that there was a delay of at least
206 days in handing over the site, which was wholly attributable to NHAI.
The dissenting note entered by Mr Arun Kumar Sinha, which is heavily
relied upon by Mr Nanda Kumar also accepts that NHAI had delayed
handing over the land for at least a period of 206 days.
25. It is also not disputed that NHAI is liable to compensate N K Toll for
the damages on account of delay in handing over the site. The only question
to be addressed is whether the Arbitral Tribunal had erred in assessing the
damages in terms of Sub-clause 31.2 of the Agreement and in terms of
Sections 55 and 73 of the Contract Act. It is, at this stage, also relevant to
note that although Mr Nanda Kumar had contended that Sub-clause 31.2 of
the Agreement was not applicable, he did not articulate any grievance with
regard to the quantum of damages as assessed (assuming that Sub-clause
31.2 of the Agreement was applicable). Thus, the only question to be
addressed is whether the Arbitral Tribunal (majority) had erred in holding
that Sub-clause 31.2 of the Agreement was applicable for determining
damages.
O.M.P. (COMM) 126/2017 Page 8 of 13
26. Mr Nanda Kumar’s contention that Arbitral Tribunal had not taken
into account the provisions of Sub-clauses 13.5.1 and 13.5.2 of the
Agreement is ex facie incorrect. A plain reading of the impugned award
indicates that the Arbitral Tribunal had discussed the issue whether the said
sub-clauses were applicable and had rejected the same. The relevant extracts
of the impugned award wherein the question of applicability of the
provisions of Sub-Clause 13.5.2 are discussed are set out below:-
“Now considering the effect on compensation of clause 13.5.2
of the contract agreement (page 41), it states, quote
“Additional right of way for construction of main carriageway
shall be made available to the concessionaire as per the
handing over schedule mentioned herein free from all
encumbrances and without the concessionaire being required
to make any payment to NHAI on account of any costs,
expenses and charges for the use of such additional right of
way for the duration of the Concession Period. 50% (fifty
percent) of additional right of way for construction of main
carriageway on or before 6 (six) months from the appointed
date, balance 50% (fifty percent) of the additional right of way
for construction of main carriageway on or before 12 (twelve)
months from the appointed date. Additional right of ways for
service roads and other facilities shall be handed over to the
concessionaire on or before 18 (eighteen) months from the
appointed date. On or after the appointed date, the
concessionaire shall commence, undertake and complete all
construction works on the project highway in accordance with
this agreement. Provided, however, that if NHAI does not
enable such access to any part or parts of the additional right
of way for any reason other than a force majeure Event or
breach of this agreement by the concessionaire as per the
schedule mentioned herein, NHAI shall pay to the
concessionaire damages at the rate of Rs. 1,000 (Rupees one
thousand) per month per 1,000 (one thousand) sq. meters or
part thereof if such area is required by the concessionaire for
O.M.P. (COMM) 126/2017 Page 9 of 13
construction works. Such Damages shall be raised to Rs.2,000
(Rupees two thousand) per month after COD if such area is
essential for smooth and efficient operation of the project
highway. Provided further that the completion certificate or
the provisional certificate, as the case may be, for the project
highway shall not be affected or delayed as a consequence of
such parts of the existing right of way remaining under
construction after the scheduled project completion date”.
It is evident that NHAI did not keep its obligations in
providing additional right of way as scheduled in the above
clause of the CA. The consequence of such failure are dealt
with by two provisos to clause 13.5.2. The first proviso states,
quote. “ Provided, however, that if NHAI does not enable such
access to any part or parts of the additional right of way for
any reason other than a force majeure Event or breach of this
agreement by the concessionaire as per the schedule
mentioned herein, NHAI shall pay to the concessionaire
damages at the rate of Rs.1,000 (Rupees one thousand) per
month per 1,000 (one thousand) sq. meters or part thereof if
such area is required by the concessionaire for construction
works. Such Damages shall be raised to Rs, 2,000(Rupees two
thousand) per month after COD if such area is essential for
smooth and efficient operation of the project highway ”.
The second proviso puts a further condition, stating that, quote
“ Provided further that the completion certificate or the
provisional certificate, as the case may be, for the project
highway shall not be affected or delayed as a consequence of
such parts of the existing right of way remaining under
construction after the scheduled project completion date ”.
Thus considering clause 13.5.2 in its entirety, the stated sums
mentioned as Damages against the failure of the Respondent to
make available additional ROW can be applicable only if the
provisional completion certificate was not delayed or affected
as a consequence of delay/non-fulfillment of reciprocal
promises by the Respondent.”
O.M.P. (COMM) 126/2017 Page 10 of 13
27. The Arbitral Tribunal further examined the correspondence between
the parties in relation to N K Toll’s request for issue of provisional
completion certificate and concluded that the same had been denied to N K
Toll until it completed the entire four laning of the Project Highway,
meeting all the requirements as per the specifications and standard. The
Arbitral Tribunal concluded as under:-
“The denial of PCC to the Claimant resulted in non-
fulfillment of second provisio of clause 13.5.2 of the CA and
breach of contract, thereby the pre-determined damages
provided therein will no longer apply. The rate of damages
payable by NHAI to the Concessionaire, if it does not enable
access to any part or parts of the additional ROW to the
Concessionaire as per the schedule mentioned in this clause
are covered by two riders, and there can be no other
interpretation that these damages will not be applicable, if
the second rider is not complied with.
Thus material breach has been committed by the Respondent
and the damages on this account will have to be dealt with
by clause 31.2 (page 74 of CA) read with section 55 and 73
of the Indian Contract Act 1872.”
28. Sub-clause 31.2 of the Agreement (as quoted in the impugned award)
reads as under:
"31.2 In the event of NHAI being in material default of this
Agreement and such default is cured before Termination,
NHAI shall pay to the Concessionaire as compensation, all
direct additional costs suffered or incurred by the
Concessionaire arising out of such material default by
NHAI, in one lumpsum within 30 (thirty) days of receiving
the demand or at NHAI's option in 3 (three) equal
installments with interest @ SBI PLR plus 2% (two per
cent)".
O.M.P. (COMM) 126/2017 Page 11 of 13
29. As noticed above, there is no dispute that the damages awarded by the
Arbitral Tribunal are in conformity with the aforesaid sub-clause.
30. The extent of judicial review in proceedings under Section 34 of the
Act is limited. The arbitral tribunal is the final adjudicating authority in
respect of the disputes between the parties. The question as to the
interpretation of the agreement between the parties falls squarely within the
jurisdiction of the arbitral tribunal. Thus, even if it is accepted – although
there is no reason to do so – that the Arbitral Tribunal has interpreted the
Agreement erroneously, no interference with the impugned award would be
warranted unless the Court finds that the view is patently illegal and
perverse. The Court does not act as a Court of first appeal over the decision
of the arbitral tribunal and cannot supplant its view over that of the arbitral
tribunal. In Associate Builders v. Delhi Development Authority : (2015) 3
SCC 49, the Supreme Court had explained the above principle in the
following words:-
“It must clearly be understood that when a court is applying
the "public policy" test to an arbitration award, it does not act
as a court of appeal and consequently errors of fact cannot be
corrected. A possible view by the arbitrator on facts has
necessarily to pass muster as the arbitrator is the ultimate
master of the quantity and quality of evidence to be relied
upon when he delivers his arbitral award. Thus an award based
on little evidence or on evidence which does not measure up in
quality to a trained legal mind would not be held to be invalid
on this score. Once it is found that the arbitrators approach is
not arbitrary or capricious, then he is the last word on facts."
31. Thus, if the view expressed by the arbitral tribunal is a plausible one,
the same cannot be interfered with even if the Court disagrees with the
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same.
32. In view of the above, this Court is unable to hold that the decision of
the Arbitral Tribunal is perverse or patently illegal.
33. In view of the above, the petition and the pending application are
dismissed, both on the grounds of limitation as well as on merits.
34. No order as to costs.
VIBHU BAKHRU, J
MARCH 23, 2017
RK
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