The main legal point established in the judgment is the interpretation of contract terms, specifically Clause 14 of the Special Conditions of Contract, and the entitlement of the contractor to reimbursement of increased royalty charges.

The Petitioners, a Government of Maharashtra undertaking, have challenged the award dated 29 February 2008 passed by the Sole Arbitrator, as appointed on the basis of Arbitration clause in the agreement in question between the parties.

2. On or about December 2001, the Petitioners invited tender for Four Laning of Satara Kolhapur upto Maharashtra State Border Section of NH4 Package III from km. 639/000 to 668/000. The Petitioners awarded the work to the Respondents and issued a letter of acceptance. A formal contract was entered into between the parties. On 3 May 2002, a notice to proceed with the work was issued to the Respondents, which work was to be completed by 2 August 2004. On 1 June 2005, the work was completed by the Respondents.

3. Certain disputes arose between the parties in respect of the contract with regard to reimbursement of increase in royalty charges under the provisions of Clause 14 of the Special Conditions of Contract mentioned hereinabove and Price Escalation in respect of 32 mm MS Dowel Bars used in Pavement Quality Concrete (for short, PQC).

4. On 6 April 2006, the Respondents gave a notice under Clause 67.2 of the contract calling upon the Petitioners to refer the claims to the Steering Committee. The decision of the Petitioners on the recommendation of the Steering Committee was communicated to the Respondents. The Respondents referred the matter for Arbitration.

5. On 7 November 2006, Shri Sharad P. Upasani IAS (Retd.) Former Chief Secretary, Government of Maharashtra was appointed as a Sole Arbitrator. The learned Arbitrator issued notice of a preliminary meeting. A preliminary meeting was held. The Respondents filed their statement of claims. The Petitioners filed their statement of defence. the Respondents filed their rejoinder. On 29 February 2008, the Award was passed.

6. The Award is passed claim-wise, which reads as under:-

“19 In view of the above, I have no hesitation to conclude that the Claimant has proved his case for entitlement of reimbursement of the enhanced Royalty which comes to Rs.1,16,71,879 as per the joint calculations dated 4th February 2008 given as per the direction of the Arbitral tribunal. The contract provides for interest at the rate of 15% p.a. To be paid on unpaid sums. In the joint statement the parties have also given interest calculations at 15% from 30-9-2005 till 30-11-2007. The amount of interest comes to Rs. 32,908.95. I therefore award the payment of entire amount of Rs.1,49,62,774 plus further interest at 15% on the principle amount of Rs. 1,16,71,879 till the date of payment.”

7 The relevant clause for deciding the issue with regard to the reimbursement of increase in royalty charges is as under:

“14.0 TAXES

The rates quoted by the Contractor shall be deemed to be inclusive of Sales and other taxes on all materials that the contractor will have to purchase for performance of this Contract. Any further increase in Central or State Sales Tax or other taxes on complete items of work of this contract as may be levied and paid by the contractor shall be reimbursed by the Employer to the contractor on proof of payment. The octroi charges, if paid any, shall be reimbursed by the employer on proof of payment.”

The said Clause 14 was amended as per corrigendum/addendum to Volume-1 of Bid document SECTION-VII, SPECIAL CONDITIONS OF CONTRACT, as follows, namely:

“4 Page No. 111, Para 14.0 TAXES Line No.2 Add `including royalty charges' after `taxes'.”

8 The relevant portion of clause, after amendment, reads as under:

“The rates quoted by the contract shall be deemed to be inclusive of sales and other taxes including Royalty charges on all materials that the construction will have to purchase for performance”.

9 It is relevant to note that the National Highways Authority of India (The NHAI) constituted by the Government of India, had taken up the work of Four Laning of (National Highway) NH-4 from Mumbai to Chennai known as “Golden Quadrangle Project”. The NHAI,