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2022 Supreme(Del) 1934
IN THE HIGH COURT OF DELHI
Vibhu Bakhru, J.
Food Corporation of India - Appellant
Versus
Adani Agri Logistics Ltd. - Respondent
O.M.P. (COMM) 82 of 2022 and IA Nos. 1929 of 2022, 1931 of 2022
Decided On : 05-07-2022
Gourab Banerjee, Senior Advocate with Manoj, Ms. Aparna Sinha & M.T. Reddy, Advocates, for the Petitioner.
Ramji Srinivasan, Senior Advocate with Ms. Simran Brar, Srisatya Mohanty, Ms. Ambika, Ms. Rajshree Chaudhary, Pawan Yadav & Amit Garg, Advocates,
The main legal point established in the judgment is that the Arbitral Tribunal cannot alter the express agreement between the parties and must render an award in conformity with the terms of the contract.
Headnote:
Arbitration and Conciliation Act - FCI - Agreements - 34
Fact of the Case:
The case involves a dispute between FCI and Adani regarding the interpretation of the Service Agreements dated 28.06.2005. The dispute primarily revolves around the commencement of the twenty-year Service Period and the calculation of storage cum handling charges (SCH charges) based on Wholesale Price Index (WPI).
Finding of the Court:
The court found that the Arbitral Tribunal's decision to commence the twenty-year Service Period from 28.09.2013 instead of May 2007 was contrary to the express agreement between the parties. The court set aside the decision and rejected Claim nos. 3C and 3D. However, the court did not interfere with the Arbitral Tribunal's decision on the calculation of SCH charges based on WPI.
Issues: The main issue was the interpretation of the Service Agreements regarding the commencement of the twenty-year Service Period and the calculation of SCH charges based on WPI.
Ratio Decidendi: The court held that the Arbitral Tribunal's decision to alter the express agreement between the parties and commence the twenty-year Service Period from 28.09.2013 was impermissible. The court also clarified that it did not interfere with the decision on the calculation of SCH charges based on WPI.
Final Decision: The court set aside the decision to commence the twenty-year Service Period from 28.09.2013 and rejected Claim nos. 3C and 3D. The court did not interfere with the decision on the calculation of SCH charges based on WPI.
JUDGMENT
Vibhu Bakhru, J. The petitioner (hereafter `FCI') has filed the present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereafter the `A&C Act') impugning an arbitral award dated 02.10.2021 as corrected by orders dated 30.10.2021 and 12.11.2021 (hereafter the `impugned award') passed by an Arbitral Tribunal comprising of three members (hereafter `the Arbitral Tribunal').
2. The impugned award has been rendered in the context of the disputes that have arisen between the parties in connection with two separate Service Agreements dated 28.06.2005. The said agreements are similar in material aspects. Whereas, one Service Agreement relates to facilities in respect of Circuit-1 (Moga, Chennai, Coimbatore and Bangalore); the other Service Agreement relates to Circuit-2 (Kaithal, Navi Mumbai and Hooghly). Since the disputes relate to the Clauses of the said agreements which are similarly worded, for convenience, both the agreements are hereafter referred to as `the Agreements' or singularly as `the Agreement'.
Factual Context
3. In June 2000, the Government of India introduced a national policy (hereafter `the Policy') for handling, storage and transportation of food grains. Due to high costs for setting the infrastructure required for handling and storage of food grains, the Policy encouraged private sector participation to build the storage capacity for storing the grains procured by Government Agencies on payment of storage charges.
4. Rail India Technical Enterprises Ltd (hereafter `RITES') was appointed as the Project Consultant, inter alia, to assist and advice the petitioner (hereafter `FCI') in selecting a Developer-Cum-Operator (hereafter `DCO') through a transparent bidding process.
5. RITES proceeded to invite global tenders from private sector developers for setting up storage facilities. Pursuant to the aforesaid invitation to tender, M/s Adani Exports Ltd and M/s Adani Ports Ltd formed the respondent company (hereafter `Adani') which submitted its proposal. On the recommendation of RITES, the Board of FCI approved Adani's proposal/bid.
6. Subsequently, on 18.07.2005, a Letter of Acceptance of Proposal (LAP) was issued to Adani, it was selected as the DCO. On 28.06.2005, the parties executed the Agreements. The parties agreed that Adani would develop and operate food grains handling, storage and transportation facilities as specified in the Agreements. The Agreements stipulated that the facilities would be developed, implemented and operated by Adani on a commercial Build, Own and Operate (BOO) basis.
7. In terms of the Agreements, the facilities for the two Circuits, Circuit 1 (Moga-Chennai-Coimbatore-Bangalore) and Circuit 2 (Kaithal-Navi Mumbai-Hooghly), were to be completed within thirty-six months from the date of execution of the respective Agreements.
8. The Agreements were for a term of twenty years from the Operations Date. The Operations Date was agreed to be the date on which the facilitates in respect of the Circuit were commissioned and Adani commenced providing the services on a commercial basis. FCI agreed to pay the storage-cum-handling charges (hereafter the `SCH charges') on a monthly basis as specified in Annexure 15 of the Agreement.
9. Although, the complete facilities were not commissioned within the prescribed period, Adani developed certain depots, which were capable of being used for storage purposes. It thus proposed that FCI use the said depots on payment of certain usage charges. FCI agreed to the same. By a letter dated 09.05.2007, FCI confirmed that the depots had been operationalized in the year 2007 and therefore, the twenty years guarantee period had begun in the year 2007. Moreover, it was agreed by the parties that for the year 2007, the charges would be paid on actual utilization basis and the commitment for payment for full capacity would commence on commissioning of the complete facilities.
10. In terms of the Agreements, the SCH charges were s
