2022 Supreme(Del) 1707

IN THE HIGH COURT OF DELHI AT NEW DELHI
Vibhu Bakhru, J.
National Highway Authority Of India - Appellant
Versus
Shree Jagannath Expressways Pvt. Ltd. - Respondent
Original Miscellaneous Petition (COMM.) No. 51 of 2018
Decided On : 07-03-2022

Headnote:

ARBITRATION - Setting aside of award - Patent illegality - Fee Notification issued by Central Government in exercise of delegated legislative powers - Arbitral Tribunal had no jurisdiction to read down the Fee Notification or interpret it in a manner contrary to its plain language - Award of compensation to SJE in respect of loss allegedly suffered by it was prohibited under Clause 35 of the Concession agreement - Award of the said amount in its favour, was patently illegal - Impugned award set aside.

Fact of the Case:

SJE submitted its bid and after evaluation of the bids, a Letter of award (hereinafter the 'Loa') was issued in favour of SJE by NHAI on 29.04.2010. Thereafter, on 06.08.2010, the Concession agreement was signed between the parties. In terms of the Concession agreement, SJE was granted the exclusive right, license and authority to construct, operate and maintain the Project Highway for a period of 26 years (including a construction period of 910 days) commencing from the appointed Date. Further, SJE was also given the right to collect toll at the rate prescribed under the Fee Notification (hereinafter the 'Fee Notification'). On 02.11.2010, NHAI forwarded a draft of the Fee Notification and sought SJE's consent regarding the same. SJE, responded by a letter dated 15.11.2010, pointing out certain inconsistencies with the draft of the Fee Notification. Thereafter, on 19.01.2011, SJE sent a letter referring to Schedule R of the Concession agreement and requested NHAI to modify the Fee Notification in conformity with the said schedule. On 29.04.2011, NHAI, once again, forwarded the Draft Fee Notification, without incorporating the suggestions of SJE, and called upon SJE to give its consent to the same. The Draft Fee Notification provided for tolling of the Mahanadi Bridge, on completion of the six- laning. In response to this, by a letter dated 04.05.2011, SJE conveyed its consent to the Draft Fee Notification subject to its right to seek 'suitable contractual remedies'. On 10.06.2011, NHAI sent another letter seeking unconditional consent from SJE that it would not raise any litigation with respect to the Draft Fee Notification. SJE responded by a letter dated 16.06.2011 complying with the said request. The Fee Notification was finally published in the Official Gazette by the Ministry of Road, Transport and Highways (MORTH) on 19.10.2011. On 28.02.2014, SJE informed NHAI that the construction of Mahanadi Bridge (additional three lanes) had been completed and thus, it was entitled to collect additional toll under the provisions of the Concession agreement. Thereafter, on 08.04.2014, after completion of all tests, the Mahanadi Bridge was opened to traffic. On 30.04.2014, SJE through its letter, proposed to NHAI to revise the User Fee Rates, which were to be effective from 01.04.2014. However, NHAI, by a letter dated 28.05.2014, denied SJE's request to permit collection of additional toll for the Mahanadi Bridge. according to NHAI, SJE could collect additional toll in respect of the Mahanadi Bridge only after competition of the six-laning of the Project Highway. The Completion Certificate for the Mahanadi Bridge was issued on 02.05.2014 after completing all the requisite formalities as stipulated in the Concession agreement. On 08.07.2014, SJE lodged a claim for loss of toll for the period of 08.04.2014 to 31.05.2014 amounting to ?6,54,72,105/-. SJE continued to update its claim periodically. However, NHAI did not accept SJE's demand for revising the User Fee Rates to include additional toll for the Mahanadi Bridge. SJE being aggrieved by NHAI declining to revise the User Fee Rates to include additional toll in respect of the Mahanadi Bridge, issued a notice dated 04.11.2015 initiating the dispute resolution mechanism. a committee of 3 CGMs was constituted to assist the parties in resolution of the disputes. However, the Conciliation attempts failed. On 29.12.2015, SJE invoked Clause 44.3 of the Concession agreement (the arbitration Clause) and sought reference of the disputes to arbitration.

Finding of the Court:

The impugned award is vitiated by patent illegality as it was beyond the terms of the Concession agreement and was, ex facie, contrary to the plain language of the Fee Notification. The arbitral Tribunal (majority) had in fact re-written the terms of the Fee Notification, which is impermissible. The Fee Notification expressly provided that the words and expressions, which were not defined in the Fee Notification but were defined in the Concession agreement, would have the same meaning as assigned to them in the Concession agreement. The expression 'Six-Laning' and 'Construction Period' were defined under the Concession agreement and the conclusion of the arbitral Tribunal that SJE was entitled to collect additional toll in respect of the Mahanadi Bridge prior to completion of the Project (Six-Laning of the Project Highway) and during the Construction Period, was contrary to the plain language of the Fee Notification. The arbitral Tribunal had embarked on an exercise to interpret the Fee Notification contrary to its plain language on the premise that it was not in conformity with Schedule R of the Concession agreement and therefore, was required to be interpreted on a conjoint reading with Schedule R. The arbitral Tribunal (majority) awarded a sum of ?104,05,69,939/-, in favour of SJE. In addition, it also awarded pre-award interest at the rate of 5% above the bank rate; future interest at a rate of 2% above the bank rate; and costs amounting to ?45 lacs.

Issues: Whether the impugned award is in conflict with the public policy of India or is vitiated by patent illegality on the face of the award.

Ratio Decidendi: The scope of interference in an arbitral award is restricted to the grounds as set out in Section 34(2) of the a&C act. In the context of the present petition, the question to be examined is whether the impugned award is in conflict with the public policy of India or is vitiated by patent illegality on the face of the award. It is well settled that if the arbitral award is contrary to the terms of the agreement, it would be amenable to challenge on the ground of patent illegality.

Final Decision: The impugned award is set aside.