The arbitration agreement encompasses the extended period and merged areas, with the tribunal's findings on price escalation and interest rates upheld as reasonable.

JUDGEMENT :

SOMASEKHAR SUNDARESAN, J.

Context and Factual Background:

1. This challenge to an arbitral award dated September 30, 2014 (“Impugned Award”) under Section 34 of the Arbitration and Conciliation Act, 1996 (“the Act”) relates to a dispute over collection and transportation of waste in Navi Mumbai by the Respondent, Antony Waste Handling Cell Private Limited (“Antony”) for the Petitioner, Navi Mumbai Municipal Corporation (“NMMC”).

2. Pursuant to four near-identical tenders, NMMC and Antony were party to four agreements (essentially four work orders and the tender documents including Conditions of Contract) of a five-year term (collectively, the “Contract”) relating to specific segments of NMMC’s territory, for collection and transportation of residential garbage. The territories covered by the four agreements were: (i) Group I (Parimandal-I); (ii) Group II (Parimandal II); (iii) MIDC-I and (iv) MIDC-II. This was for the period between August 8, 2007 and August 7, 2012.

3. Additional area falling in Sector 1 to Sector 9 of the Ghansoli node (“Ghansoli Area”) was added to the municipal territory of NMMC with effect from October 1, 2009. The Ghansoli Area was earlier under the jurisdiction of the City and Industrial Development Corporation of Maharashtra Ltd. (“CIDCO”) and was merged into the territory falling in Parimandal II. The rates payable were Rs. 770 per ton for wet garbage; Rs. 805 per ton for dry garbage; and Rs. 200 per ton for debris. These rates were negotiated rates arrived at, lowering the rates quoted by Antony in its bid responding to NMMC’s tender.

4. The garbage collection and transportation work for the entire area continued for an extended period beyond the first five years – until August 13, 2013, with monthly extensions. The Contract entailed price escalation linked to inflation i.e. the Wholesale Price Index (“WPI”), which, at the time of executing the Contract, was pegged to the prices in 1993-94 as the base year. Price escalation for the years 2008-09 and 2009-10 was computed and paid. However, on September 14, 2010, the WPI was reset with the base year being shifted to 2004-05. NMMC recomputed the price escalation for these years and treated the difference in price escalation on the basis of the new WPI as of 2010, as excess payment, and demanded it back. So also, no price escalation was computed for the extended period of work that continued until August 13, 2013.

5. Disputes and differences arose between the parties. The disputes ranged from the rate payable for garbage collection and transportation in the Ghansoli Area and whether the terms of the Contract would cover such work. Disputes also related to computation of price escalation and interpretation of the agreed terms, and whether the agreed terms would cover the extended period too. NMMC withheld amounts claimed by Antony and the parties went into arbitration, which led to the eventual Impugned Award.

Impugned Award:

6. The core findings in the Impugned Award are as follows:-

A) Garbage collection in the Ghansoli Area would be governed by the terms agreed in the Contract;

B) The same terms of the Contract would apply to the period after the initial period of five years;

C) Price escalation was to be effected every year, linked to the WPI, on August 8 every year starting with 2008. The base year for the computation of the WPI for the escalations until 2009-10 was 1993- 94 while the base year for escalation thereafter was 2004-05. There would be price escalation for the period after the fifth year;

D) The price escalation was meant to be capped at an annual 20% and not an overall 20% for all five years put together;

E) Withholding of amounts by NMMC was illegal and such amounts ought to be returned with interest;

F) Interest for the pre-award and post-award period shall be 15% per annum;

G) In view of the foregoing, NMMC was held liable to pay costs to Antony.

Analysis and Findings:

7. Mr. Tejesh Dande, Learned Counsel on behalf of NMMC and Mr. Navroz Se