1. The State of Gujarat has filed this petition under Section 34 of the Arbitration and Conciliation Act, 1996 (‘Act’) against Ashvika Construction Private Limited (Respondent No. 1) and the Government of India, Ministry of Road Transport and Highways (impleaded as proforma Respondent No.2) challenging an Award dated 10th December, 2010 passed by the sole Arbitrator in the disputes between the Petitioner and Respondent No. 1 arising out of a tripartite Build, Operate and Transfer (‘BOT’) Agreement dated 19th September, 1996 between the Government of India on the one part, the Petitioner on the second part and Respondent No. 1 on the third part for the construction of a four-lane Road Over Bridge (‘ROB’) and its approaches from KM 259/4 to KM 263/4 in the Ahmedabad-Mumbai section of NH-8 on BOT basis in place of the then existing two-lane Railway level crossing No. 13-A, between KM 261/2 to 261/4 of the said section of the National Highway.

The BOT Agreement

2. In terms of the BOT scheme, the selected Entrepreneur was required to design and construct the four-lane ROB and its approaches and also maintain it for an agreed period known as the 'Concession Period' at its own cost. In lieu thereof, the Entrepreneur was allowed the rights to collect and retain the fees from the users of the facility at agreed rates during the Concession Period, so as to recover its investment with returns.

3. The tender of Respondent No. 1 was accepted and the aforementioned BOT agreement was signed. The construction period was 18 months and the Concession Period was 23 months and 5 days. Under Clause 3.10 of the BOT Agreement, Respondent No. 1 was allowed to levy fee on vehicles using the facility in accordance with the National Highways Act, 1956 (‘NH Act’) only after the Government of India issued a notification to that effect. In effect, therefore, Respondent No. 1 had no say on the fee that was to be collected. That was purely within the ambit of the Government of India.

4. On 10th July, 1998, a Notification was issued by the Ministry of Surface Transport, Government of India in exercise of the powers conferred under Sections 7 and 8A of the NH Act authorising Respondent No. 1 or its authorised legal representative to collect and retain fees as per the rates specified in the Schedule appended to the Notification from 13th July, 1998 to 17th April, 2000 for use of the part of NH-8 i.e., four-lane ROB from km 261/2 to km 261/4 including its approaches from km 259/4 to 263/4 in Ahmedabad-Mumbai Section NH-8. Separate rates were specified for motor cycles, scooters or any other two-wheelers (Nil per trip); motor cars, taxis, jeeps, pick-up vans, station wagons, tempos, auto rickshaws, three-wheeler scooters or other auto driven light vehicles with or without trailer (Rs. 5 per trip per vehicle); buses, trucks and other heavy vehicles including trucks, trailer combinations laden with goods / passengers both loaded and unloaded (Rs. 15 per trip per vehicle); and other mechanically propelled vehicles whether loaded or unloaded (Rs. 20 per trip per vehicle).

5. At this stage it is important to refer to Section 8A of the NH Act, which reads as under:

“8A. Power of Central Government to enter into agreements for development and maintenance of national highways. –

(1) Notwithstanding anything contained in this Act, the Central Government may enter into an agreement with any person in relation to the development and maintenance of the whole or any part of a national highway.

(2) Notwithstanding anything contained in section 7, the person referred to in sub-section (1) is entitled to collect and retain fees at such rate, for services or benefits rendered by him as the Central Government may, by notification in the Official Gazette, specify having regard to the expenditure involved in building, maintenance, management and operation of the whole or part of such national highway, interest on the capital invested, reasonable return, the volume of traffic and t