2015 Supreme(SC) 333

SUPREME COURT OF INDIA
Dipak Misra, Uday Umesh Lalit, JJ.
National Highways Authority of India – Appellant
Vs.
M/s ITD Cementation India Limited – Respondents
CIVIL APPEAL NO. 9799 OF 2010 WITH Civil Appeal No.9908/2011, Civil Appeal No. 9909/2011, Civil Appeal No.2488/2012, Civil Appeal No. 7066/2011, Civil Appeal No.3150/2012, Civil Appeal No. 686/2013, Civil Appeal No.4069/2013, Civil Appeal No. 5162/2012, Civil Appeal No.5661/2014, Civil Appeal No. 10586/2014, Civil Appeal No. 3913/15(@S.L.P. (C) No. 10014/2013), Civil Appeal No.3914/15(@S.L.P. (C) No. 10701/2013), Civil Appeal No.7373/2012 AND Civil Appeal No.6158/2013
Decided on: 24-04-2015

IMPORTANT POINT
Interpretation of contract by Arbitral Tribunal would be final and binding unless patently illegal.
Deciding legality of levy existing on relevant date is beyond jurisdiction of Tribunal.

Headnote:(a) Government Contract – Interpretation – Interpretation of contract by Arbitral Tribunal – Final and binding – Court does not sit in appeal over the findings and decisions of arbitrator – Can be interfered only if unreasonable – Arbitration and Conciliation Act, 1996 – Section 28(1)(a). (Para 19, 20)

       (2012) 5 SCC 306; (2010) 11 SCC 296; (2015) 3 SCC 49; (2014) 9 SCC 263 – Relied upon

       (2006) 11 SCC 181; (2003) 5 SCC 705 – Referred

       (b) Government contract – Clause 70.1 to 70.7 and 70.8 – Cost due to price escalation and WPI changes on the one hand and additional cost due to increase in royalty due to legislative action – Both stand on different footing – Price escalation covered by clauses 70.1 to 70.7 – Additional cost due to increase in royalty covered by clause 70.8 – Respondent entitled for compensation – No infirmity in Arbitral award. (Para 21)

       (c) Government contract – Clause 32.1 – Rate of royalty enhanced by a legislation subsequent to conclusion of contract – Appellant relying upon clause 45.1 requiring respondent to include anticipated increase in taxes in contract price – Arbitral tribunal accepting that increase in royalty could be covered under the expression ‘future events’ in clause 32.1 – Hence holding respondent entitled to the same – A plausible view – While quoting the initial rates and prices, respondent could not have contemplated any revision in rates of royalty at a future date – No interference warranted. (Para 29)

       (d) Arbitration and Conciliation Act, 1996 – Section 31 – Royalty on ordinary earth already being levied on the relevant date – Must be deemed to have been part of the rates or prices quoted – No change due to any subsequent legislation – Clause 70.8 of COPA not applicable – Tribunal holding existing law to be without any authority in law – Legality of levy existing on relevant date beyond jurisdiction of Tribunal. (Para 36, 37)

       Facts of the case:

       A contact was awarded to the respondent by the appellant on 17.10.2001 for execution of work of widening of lanes and rehabilitation of the existing two lane carriageway of Vaniyambadi-Pallikonda section of NH-6 (from Km.49.00 to Km.100.00). The total value of the contract was appropriately Rs.183.71 crores. The parties adopted FIDIC form of Conditions of Contract with some changes made which are called Conditions of Particular Application (COPA).

       The Government of Tamilnadu by issuing a notification under Section 15 of the Mines and Minerals (Regulation & Development) Act, 1957, increased the seigniorage fee (synonymous with Royalty charges) on stone, sand and earth to the tune of nearly 30% with effect from 1st November, 2002, i.e. after about one year from commencement of the Work.

       The respondent requested for Price Adjustment consequent to the increase in rates of Royalty under Sub-Clause 70.8 of COPA. The request was rejected on the ground that the increase in royalty charge cannot be paid separately as the same was already considered under the Price Adjustment formula being paid for general materials under Sub-Clause 70.3 of COPA.

       In the aforesaid circumstances the dispute between the parties stood referred to Arbitral Tribunal.

       The Arbitral Tribunal unanimously found that the respondent had incurred additional cost because of the change in rates of Seigniorage fee pursuant to change in legislation and that the said increase in the rates had not been taken into account in the indexing of any inputs to the price adjustment formula in general materials and therefore the respondent would be entitled to be paid the additional cost incurred by it.

       The appellant being aggrieved by the Arbitral award filed OMP in the High Court of Delhi which was dismissed by a Single Judge of the High Court.

       The Division Bench however agreed with the appellant on the second submission and remitted the matter to the Arbitral Tribunal on the limited issue of quantification of the amount.

       The Arbitral Tribunal, on remand by Supreme Court, by its award dated 07.05.2010 quantified the sum that the respondent was entitled to on account of increase in the rates at Rs.43,06,810/- and awarded interest @ 12% p.a. from the date of publication till realization.

       

       Finding of the Court:

       Levy of royalty or taxes subsequent to contract would be additional cost.

       Result: All Civil Appeals except Civil Appeal No.6158 of 2013 dismissed.