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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
Somasekhar Sundaresan, J.
State of Maharashtra - Petitioner
Versus
Kalyan Sangam Infratech Ltd. - Respondent
Commercial Arbitration Petition No. 537 Of 2017 With Interim Application No. 101 OF 2023
Interim Application No. 1296 of 2021
Decided On : 03-11-2025
| Table of Content |
|---|
| 1. petition under arbitration act challenging an arbitral award. (Para 1 , 2 , 3 , 4) |
| 2. background details of the concession agreement and arbitration. (Para 5 , 6 , 7 , 8) |
| 3. arbitral tribunal's issues centered on contract compliance and payment. (Para 9 , 10 , 11) |
| 4. arguments against the arbitral award: project cost and breach. (Para 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19) |
| 5. defenses supporting the arbitral award and breaches by gom. (Para 20 , 21 , 22 , 23 , 24 , 25) |
| 6. court's review of the arbitral tribunal's findings on breaches. (Para 26 , 27 , 28 , 29 , 30 , 31 , 32) |
| 7. substantiation of material adverse effects due to gom's actions. (Para 33 , 34 , 35 , 36 , 37 , 38 , 39) |
| 8. findings on the nature of breaches impacting toll collections. (Para 40 , 41 , 42) |
| 9. assessment of terminal payments obligations due to gom's breach. (Para 43 , 44 , 45 , 46) |
| 10. justification of interest rates awarded in arbitration. (Para 47 , 48) |
| 11. final order dismissing the petition with costs. (Para 50 , 51 , 52) |
JUDGMENT :
Somasekhar Sundaresan, J.
1. This is a Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 (“the Act”) challenging an arbitral award dated October 10, 2017 (“Impugned Award”) rendered by a three-member arbitral tribunal, as also an additional award dated February 24, 2018, passed pursuant to corrections sought under Section 33 of the Act.
2. The disputes and differences between the parties arose in connection with a Concession Agreement dated March 23, 2009 (“Concession Agreement”) under which the Respondent Kalyan Sangam Infratech Limited (“Kalyan Sangam”) was awarded the project of construction, operation, maintenance and transfer of the South Kasheli and North Kasheli Bridge along with its approaches on Thane-Bhiwandi-Wadapa Road in Thane District (“Project”).
3. In consideration for building, operating and maintaining the Project with a transfer at the expiry of the Concession Agreement, Kalyan Sangam was entitled to collect toll from users plying vehicles on the infrastructure built by it. The Concession Agreement was preceded by a Letter of Intent dated August 5, 2008 (“LOI”) issued by the Petitioner, State of Maharashtra through its Public Works Department (“GOM”) which was followed by a Work Order dated January 12, 2009 (“Work Order”).
4. The Project was awarded on the basis of the shortest period quoted by bidders for hand over to the GOM, of the infrastructure that was to be built to specifications. The project costs indicated was Rs. 227.63 crores while the toll collections over the concession period of 23 years 5 months and 7 days (“Concession Period”) was projected at Rs. 1,733.18 crores. The Concession Agreement inter alia provides for certain payments that would need to be made to Kalyan Sangam by GOM, in the event of termination of the contract owing to any default on the part of GOM.
5. The Project was built, and the infrastructure was created. Toll collection by Kalyan Sangam began on November 17, 2011. On November 29, 2011, Kalyan Sangam raised issues with GOM claiming material reduction in toll collections, and an increase in the scope of work to the extent of Rs. 40.76 crores. The fall in toll collections was attributed by Kalyan Sangam to:
a) imposition of an entry ban on vehicles approaching the toll road pursuant to a Transport Control Notification dated April 9, 2010 issued under Section 115 of the Motor Vehicles Act, 1988 to enable certain flyover work that would stop access of vehicles to the toll road for material parts of the day until work on the flyover was completed;
b) a concession in toll rates being given to light motor vehicles registered by residents living in 5-KM radius of the tool booths, pursuant to a Toll Policy dated July 30, 2009 issued under the Motor Vehicles Act, 1988, which was said to be at material variance with the projected tolls set out in Schedule F of the Concession Agreement (the projected monthly pass for frequently traveling vehicles was
The court upheld that materially adverse effects on toll collections justified the arbitral tribunal's conclusion of a material breach leading to terminal payments under the Concession Agreement.
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Point of Law : Commercial Vehicles - Toll plazas/posts/barriers - Collection of Toll Tax – Whether rights of petitioner is violated - Conduct of parties is governed by the Contract Agreement and the ....
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