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IN THE HIGH COURT OF DELHI AT NEW DELHI
Vibhu Bakhru, J.
National Highways Authority Of India - Appellant
Versus
M/s C P Rama Rao [Proprietor] - Respondent
Original Miscellaneous Petition (Comm) No. 127 of 2021; Interlocutory Application No. 4107 of 2021, 4106 of 2021
Decided On : 23-03-2021
NHAI - Arbitration and Conciliation Act, 1996 - Section 34 - Contract Agreement - Clause 25(b) - Change in law - Force Majeure - NHAI v. TGV Projects and Investments Private Limited - O.M.P. (COMM.) 445/2017, decided on 24.05.2018 - TGV Projects & Investments Pvt. Ltd. v. National Highways Authority of India: FAO(OS)(COMM) 244/2018, decided on 11.12.2018
Fact of the Case:
The petitioner NHAI filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996, impugning the Arbitral Award dated 12.12.2020, related to disputes arising from a Contract Agreement for the collection of user fee at Vempadu Toll Plaza. The respondent claimed that the introduction of GST constituted a 'change in law' and a force majeure event, leading to a sharp reduction in traffic and toll collection, seeking remission of payment obligations.
Finding of the Court:
The Arbitral Tribunal held that the introduction of GST constituted a 'change in law' and had a material adverse effect on the respondent's obligations, entitling the respondent to remission of payment obligations and release of performance securities. The Tribunal also awarded interest and arbitration costs in favor of the respondent.
Issues: The principal controversy revolved around whether the introduction of GST constituted a 'change in law' and had a material adverse effect on the obligations of the parties under the Contract Agreement.
Ratio Decidendi: The Arbitral Tribunal's decision on the interpretation of the Contract Agreement and the impact of the introduction of GST on the respondent's obligations was upheld, as it fell within the Tribunal's jurisdiction and was a plausible view.
Final Decision: The Court found no ground to interfere with the impugned award and dismissed the petition, upholding the Arbitral Tribunal's decision.
JUDGMENT
Vibhu Bakhru, J. - The petitioner (hereinafter 'NHAI) has filed the present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter the 'A&C Act'), inter alia, impugning the Arbitral Award dated 12.12.2020 (hereinafter the 'impugned award') passed by the Arbitral Tribunal comprising of a Sole Arbitrator.
2. The impugned award was rendered in respect of disputes that had arisen between the parties in relation to an agreement dated 30.07.2016 (hereinafter the 'Contract Agreement') entered into between the parties for "Collection of user fee of Vemapadu Fee Plaza at Km. 795.498 for Ankaapalli to Tuni Section from Km. 358.00 to Km. 272.00 (New Chainage from Km. 830.525 to Km. 741.255) of NH-5 in the State of Andhra Pradesh" (hereinafter the 'project').
3. On 17.06.2016, NHAI invited tenders by issuing a Request for Proposal (RFP) in respect of work relating to collection of User Fee at Vempadu Toll Plaza located at Km. 795.498 on the stretch extending from Km. 830.525 to Km. 741.255 on National Highway No.5 (now renamed as National Highway No.16) in the State of Andhra Pradesh.
4. On 21.07.2016, the respondent submitted the financial bid for the aforesaid work. He was declared the highest bidder and NHAI issued a Letter of Acceptance. Thereafter, on 30.07.2016, the parties entered into a Contract Agreement, whereby the respondent was granted the concession for collecting User Fee at Vempadu Toll Plaza for a period of one year with effect from 08:00:00 hours on 01.08.2016 to 07:59:59 hours on 01.08.2017. In terms of the Contract Agreement, the respondent was required to pay Rs. 2,24,40,274/- per week to NHAI. The said payment was exclusive of any TCS or any taxes or service charges as applicable.
5. In terms of Clause 19 of the Contract Agreement, the respondent was liable to pay penalty at the rate of 0.2% per day for initial one month delay and at the rate of 0.5% per day for further delay beyond one month in remittance of the agreed amount. In terms of Clause 17(b)(i) of the Contract Agreement, the respondent also furnished the following performance security: (i) cross DD, Pay order in the sum of Rs. 9,75,09,000/- and (ii) bank guarantee being BG No. 24/2016 dated 30.07.2016 in the sum of Rs. 9,75,09,000/- issued by Indian Bank.
6. The Government of India rolled out the Goods of Services Tax (GST) with effect from 01.07.2017. The said levy subsumed all indirect taxes.
7. The respondent claimed that in view of the uncertainty surrounding the implementation of GST, there was a rapid decline in the movement of traffic and it adversely affected the collection of tolls. The respondent brought this to the notice of NHAI by its letter dated 05.07.2017.
8. The respondent informed NHAI that he had incurred a loss of Rs. 52,62,228/- on account of reduction in collection of tolls for the period 28.06.2017 to 05.07.2017. According to the respondent, the said communication was received by the Project Director (PD) and was submitted to the Regional Office (RO) for assessment. Thereafter, the respondent sent another letter dated 08.07.2017, tabulating the loss incurred by him for the period from 28.06.2017 to 07.07.2017 at Rs. 62,89,975/-. This was also followed by another letter dated 12.07.2017 whereby the respondent quantified the loss for the period from 28.06.2017 to 11.07.2017 at Rs. 85,21,924/-. The respondent also sent letters claiming loss on account of demonetization and of high value currency notes and unprecedented floods.
9. Finally, on 08.08.2017, the respondent sent a letter quantifying its loss for the period 28.06.2017 to 04.08.2017 at Rs. 2,39,28,340/-. The respondent claimed as a shortfall in remittances at Rs. 1,31,73,252/-.
10. On 07.04.2018, the concerned PD sent a letter to the RO, providing a detailed analysis of its determination of loss suffered by the respondent for the period from 01.
The introduction of GST constituted a 'change in law' and had a material adverse effect on the obligations of the parties under the Contract Agreement, entitling the respondent to remission of paymen....
The introduction of GST is a change in law that materially affects contractual obligations, enabling claims for force majeure under the Contract Agreement.
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Demonetisation constituted a force majeure event under the contract, materially affecting obligations, thus allowing waiver of payment claims.
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The arbitral Tribunal found NHaI's actions to expel the respondent from the site was unjustified and illegal based on various grounds, including the delay in granting Extension of Time (EOT) and the ....
An expulsion under a contract must have legitimate causes, and unjustified actions by one party render such expulsion illegal, reaffirming constraints under arbitration frameworks.
Parties are entitled to interest on payments due under contracts; if no timeframe is specified, payments are due within 15 days of demand. The distinction between interest payments and debt repayment....
Point of Law - Limited scope of the jurisdiction of this Court vested in it by Section 34 of the 1996 Act, no occasion arises for this Court to revisit the said findings of the learned Arbitral Tribu....
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