Point of Law : Non-payment of escalation - Issue of whether the circumstances in which the appellant was placed, entitled him to plead force majeure, or not, is a pure question of fact.

JUDGMENT :

1. This appeal, under Section 37(2)(b) of the Arbitration and Conciliation Act, 1996 (“the 1996 Act”) challenges orders dated 17th June, 2020 and 15th August, 2020, passed by the learned arbitrator on applications preferred by the appellant M/s World Window Infrastructure and Logistics Pvt. Ltd. under Section 17 of the 1996 Act.

2. The appellant had, in fact, filed three applications before the learned arbitrator under Section 17, on 21st May, 2020, 18th June, 2020 and 26th June, 2020. The application dated 18th June, 2020 was, later, withdrawn. The orders impugned adjudicate the applications dated 21st May, 2020 and 26th June, 2020.

Facts

3. On 26th April, 2004, the respondent, Central Warehousing Corporation (CWC) issued a Request for Proposal (RFP), inviting tenders for providing Strategic Alliance Management and Operations and Commercial Services at six Inland Container Deports (ICDs)/Container Freight Stations (CFSs). Clause 4.6.5 of the RFP required the operator, to whom the tender was awarded, to submit a minimum yearly return and to commit for a minimum guarantee of business in terms of traffic (referred to, alternatively, as “Minimum Guaranteed Throughput”/“MGT”). In respect of ICD, Loni, the MGT was 18000 TEUs per annum. One TEU represented one (120 foot) container.

4. The appellant was the sole bidder. The financial bid of the appellant was opened on 5th July, 2004. There were various exhibits to the financial bid. Exhibit 10, titled “Format for Commercial Bid”, read thus:

“FORMAT FOR COMMERCIAL BID

NAME OF THE CFS/ICD: LONI

C. The fixed fee as well as variable fee as quoted by the bidder or as negotiated, shall be subject to a yearly escalation of 5% on compoundable basis. The first escalation will take place after one year from the date of commencement of operations.”

Exhibit 11 to the Financial Bid was a “Format for Agreement”. Clause 17.0 of the said Exhibit 11 set out the format for payments to be made by the “operator” to the CWC, and read thus:

“17.0 Payment to CWC

(i) Fixed Fee

In return for the rights granted to the Operator (Name of the Operator) under the Strategic Alliance Management Contract, the Operator shall pay CWC a fixed fee of Rs. for CFS, per annum.

(ii) Variable Fee

In addition to the above, the Operator (Name of the Operator) shall pay CWC a per TEU fee for each loaded container entering and leaving the Facility @ Rs. for B (i) and Rs. for B(ii). The variable fee shall be payable to the Corporation for the actual number of containers or for the minimum guaranteed throughput (calculated on monthly basis), whichever is higher.

(iii) Payment shall be exempt on:

Empty containers leaving the Facility provided they entered the facility in loaded status and per TEU variable fee has already been paid

Empty containers entering the facility provided the containers leave the Facility in loaded Status and pay the per TEU variable fee

(iv) The Fixed fee and the variable fees, even for the minimum guaranteed throughput, as mentioned above shall be subject to a yearly escalation of 5% P.A. on compoundable basis effective from the date of commencement of the operations.”

Thus, Clause C of Exhibit 10 as well as Clause 17.0 (iv) of Exhibit 11 to the Financial Bid, which set out the Formats for the Commercial Bids and for the Agreement to be executed between the successful operator and CWC, required yearly escalation of 5% p.a. on compoundable basis to be paid both on the fixed fee as well as the variable fee. No relaxation, from this dispensation, was envisaged or provided in the RFP or in the Financial Bid.

5. Following the opening and acceptance of the appellant’s financial bid, Lett