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IN THE HIGH COURT OF DELHI AT NEW DELHI
Vibhu Bakhru, Amit Mahajan, JJ.
National Highways Authority of India – Appellant
Versus
Irb Pathankot Amritsar Toll Road Ltd. – Respondent
FAO(OS)(COMM) 129 of 2022 & CM Nos. 23948 of 2022 & 34256 of 2022
Decided On : 03-07-2023
Arbitral award was set aside as it was vitiated by patent illegality on the face of the record. Arbitral Tribunal had committed a fundamental error in essentially not addressing the real dispute - whether NHAI was in material default of the CA.
Fact of the Case:
IRB Pathankot Amritsar Toll Road Ltd. (IRB) filed a Statement of Claims before the Arbitral Tribunal raising essentially four claims. First being for extension of the concession period. IRB claimed that it is entitled to extension of the concession period by a further 518 (five hundred and eighteen) days. IRB claimed that it could not achieve the completion of project within the contemplated time on account of delays attributable to NHAI. The same distorted its collection of revenue, which was required to be remedied by extending the concession period. Second, IRB sought compensation of Rs.159.541 crores as reimbursement of extra expenditure incurred due to time overrun in terms of Clause 35.2 of the CA. Third, IRB claimed escalation amounting to Rs.92.71 crores. And, fourth, IRB claimed costs of arbitration.
Finding of the Court:
The court found that the Arbitral Tribunal had not adjudicated the essential dispute - whether NHAI was in material default of the CA, which was necessary for deciding the issue whether IRB was entitled to any compensation under Article 35.2 and extension of the concession period under Article 35.3 of the CA. Although, the determination whether IRB was entitled to EoT is not determinative of the question whether NHAI was in material default of the CA. Indisputably, the determination whether IRB was entitled to EoT is not determinative of the question whether NHAI was in material default of the CA. Thus, whilst IRB would be entitled to EoT for completion of construction on account of a material breach of the CA on the part of NHAI; that is not the sole reason for which EoT could be granted. It plainly follows that the recommendation to grant of EoT cannot be construed as determining that NHAI was in material default of the CA.
Issues: 1. Whether the Independent Engineer approved Extension of Time of 518 days in terms of provision of Article 14 of the Concession Agreement? 2. Whether the Supplementary Agreement dated 05.11.2014 prohibits claims of the Claimant as consequence of delay damages arising out of the overrun? 3. Whether the compensation sought by the Claimant under Clause 35.2 of the Concession Agreement towards increase in capital cost is attributable to delay on the part of NHAI in completion of the Project Highway? 4. Whether the Claims are time barred? 5. Whether the Claimant is estopped from making the Claims in view of execution of the supplementary agreement dated 05.11.2014? 6. Interest & Costs.
Ratio Decidendi: The court held that the Arbitral Tribunal had committed a fundamental error in essentially not addressing the real dispute - whether NHAI was in material default of the CA. The court also held that the Arbitral Tribunal's interpretation of the Supplementary Agreement was wholly erroneous and contrary to its plain language and the admitted intent of the parties.
Final Decision: The court allowed the appeal, set aside the impugned judgment and the impugned award, and disposed of all pending applications.
JUDGMENT
Vibhu Bakhru, J. The appellant (hereafter `NHAI') has filed the present intra-court appeal under Section 37(1)(c) of the Arbitration and Conciliation Act, 1996 (hereafter `the A&C Act') impugning a judgement dated 08.03.2022 (hereafter `the impugned judgement') rendered by the learned Single Judge. By virtue of the impugned judgement, the learned Single Judge has rejected the appellant's application preferred under Section 34 of the A&C Act, being OMP (COMM) 373/2021 captioned National Highways Authority of India v. IRB Pathankot Amritsar Toll Road Ltd., impugning an arbitral award dated 13.07.2021 (hereafter `the impugned award') read with an order dated 27.07.2021. The impugned award was made by an arbitral tribunal comprising of three arbitrators (hereafter the Arbitral Tribunal).
FACTUAL CONTEXT
2. The Government of India has entrusted NHAI with the development, maintenance and management of National Highway No.15 including a section from Km 6.082 to Km 108.502 (approximately a length of 102.420 Km). NHAI decided to augment the stretch of the said highway from Km 6.082 to 108.502 on the Amritsar to Pathankot section by four laning the same on a build, operate and transfer (hereafter `BOT') basis.
3. In March, 2008, NHAI invited proposals for shortlisting the bidders for the said project. NHAI considered the proposals received in response to the said notice and shortlisted bidders including the consortium constituted by IRB Infrastructure Developers Ltd. and Modern Road Makers Pvt. Ltd. with IRB Infrastructure Developers Ltd. as its lead member (hereafter `the Consortium').
4. Subsequently, NHAI invited bids from the shortlisted bidders for executing the project. The Consortium's bid was accepted and NHAI issued a Letter of Acceptance (hereafter `the LoA') dated 27.07.2009 requiring it to execute a Concession Agreement within a period of forty-five days of the issuance of the said LoA.
5. The Consortium promoted the respondent (hereafter `IRB') a special purpose vehicle for executing the project in question and exercising its right under the LoA. And, at the request of the Consortium, NHAI entered into a Concession Agreement dated 16.11.2009 (hereafter `the CA') with IRB for executing the work of design, engineering, finance, construction, operation and maintenance of the Pathankot-Amritsar section of NH-15 from Km 6.082 to 108.502 in the State of Punjab under NHDP, Phase-III on Design, Build, Finance, Operate and Transfer (hereafter `DBFOT') basis in terms of the CA. The concession period was agreed as twenty years from the appointed date. The appointed date was agreed as 31.12.2010 and in terms of the CA the project (construction phase) was to be completed within a period of nine hundred and ten days; that is on or before 27.06.2013 (the Project Completion Date). IRB would be entitled to collect toll for the concession period remaining after the completion of the project (Commercial Operation Date-COD).
6. The construction of the project was admittedly delayed. In terms of Clause 10.3.5 of the CA, the construction works on all lands for which Right of Way (hereafter `the RoW') was granted within ninety days of the appointed date, was required to be completed before the Project Completion Date. According to IRB, 89.09% of the hindrance free length of 79.869 Km out of 102.420 Km of the highway was made available to it on or before 31.03.2011 and therefore, it was bound to complete the construction on such stretch by the COD. However, subsequently, IRB clarified that only 75.66 Km of hindrance free length had been made available within the specified period.
7. The execution of the project was substantially delayed. According to IRB, the delay was mainly for reasons attributable to "NHAI/Railway Authority/Irrigation Authority" and therefore, it was entitled to extension of time for completing the construction (hereafter `EoT').
8. IRB claimed that NHAI had failed to perform its obligation under the CA by not pro
The court held that the respondent's initiation of the execution of the supplementary agreement precluded the argument of coercion, and that the claims were not barred by limitation.
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....
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....
An expulsion under a contract must have legitimate causes, and unjustified actions by one party render such expulsion illegal, reaffirming constraints under arbitration frameworks.
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 ....
The main legal point established is that an arbitral award must be based on relevant material and evidence, and claims for loss of profit must be substantiated with evidence of missed opportunities.
NHAI is contractually obliged to pay 90% of the Debt Due to lenders irrespective of defaults by the concessionaire, with no deductions permitted.
The Court emphasized the limited scope of interference in appeals under Section 37 of the Arbitration Act and upheld the findings of the Arbitral Tribunal and the Single Judge based on plausibility a....
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