2019 Supreme(Raj) 815

IN THE HIGH COURT OF RAJASTHAN BENCH AT JAIPUR
Mohammad Rafiq, Alok Sharma, JJ.
State of Rajasthan and Ors. - Appellants
Vs.
A.N.S. Infrastructure Pvt. Ltd. and Ors. - Respondent
D.B. Civil Miscellaneous Appeal Nos. 4761 and 4638 of 2017
Decided On : 22-08-2019

The determination of compensation payable as a one time capital grant - in the instant case as reimbursement under the additional clause, the Arbitrator could not act in a manner incompatible with the terms of the CA, the operating law i.e. the Act of 2002 and the Rules made thereunder and contrary to the "public policy of India" as the words have been ad nauseum construed by the Apex Court.

Headnote:

JUDGMENT : Alok Sharma, J. 1. These two appeals under Section 37 of the Arbitration and Conciliation Act, 1996 (hereafter 'the Act of 1996') have been filed one by the Concessionaire, the claimant company as the Concessionaire (hereafter 'the Concessionaire') under the Concession agreement dated 8-7-2005 and the other by the non claimant State (hereafter 'the State'). Both are aggrieved of the order dated 12-5-2017 passed by Commercial Court (Additional District Judge No. 1) Jaipur Metropolitan, Jaipur. The State against the court's refusal to allow its objections under Section 34 of the Act of 1996 against the award dated 15-1-2015 as modified by the Arbitrator on 9-3-2015, and the Concessionaire against the court's refusal to enhance the award amount, the State seeks the award as also the order upholding it passed by the Commercial Court to be quashed and set aside. The Concessionaire seeks its enhancement to Rs. 220.19 crores from Rs. 43.7281 crores, as awarded by the Arbitrator, along with interest 8.5%. These two appeals are thus being together decided.

Fact of the Case:

The facts of the case are that the State floated a Notice Inviting Tender (NIT) for improvement of (i) Kaman-Nandgaon-Kosi road 54 to 64/200, (ii) Kaman Byepass-SH-44, Kaman-Jurhera-Punhana Road 0/0 to 20/0 Km. and (iii) Kaman-Pahadi Road 0/0 to 22/0 km. (Roads 1, 2, and 3 respectively). On receiving the sole bid of the Concessionaire, letter of acceptance in terms of the NIT was issued on 14-12-2004. The concession period agreed was 98 months, including 12 months of construction. A Concession Agreement (CA) was accordingly executed on 8-7-2005.

Finding of the Court:

We are of the considered view that the additional clause to the CA dated 8.7.2005 making it obligatory for the State to make the project viable entailed determination and payment by way of a reimbursement of a one time capital grant as compensation to the concessionaire to the extent it was necessitated by the mining ban in the Kaman area (Kaman and Deeg tehsils). The words "making viable" in the additional clause visualise a situation similar if not identical to a viability gap being funded. A viability funding gap is a well known concept in public private partnership projects where the economic necessity of the project is unequal to its financial viability. In such situations the State takes upon itself in public interest to supply the financial gap through a one time capital grant between the cost of the project and the financial returns therefrom. The additional clause of the CA dated 8.7.2005 was such a mechanism of viability gap funding to be brought into play in the circumstance detailed therein.

Issues: 1. Whether the Arbitrator acted in a manner incompatible with the terms of the CA, the operating law i.e. the Act of 2002 and the Rules made thereunder and contrary to the "public policy of India" as the words have been ad nauseum construed by the Apex Court. 2. Whether the Arbitrator exhibited a non judicial approach and found amounts payable thereunder on his ipse-dixit without disclosing any discernible consistent rule in the making of Table Z to the award - the compensation payable chart. 3. Whether the Arbitrator overlooked the stark fact that the resultant non collection of user fee from the vehicles on the project roads during the period of delay could not be taken to impact the viability of the project to the State's account under the additional clause.

Ratio Decidendi: 1. The Arbitrator under his award dated 15.1.2015 rectified on 9.3.2015 determined the reimbursement/compensation payable to the concessionaire in terms of additional clause of the CA dated 8.7.2005 at Rs. 43.7281 crores and held that such payment would entail discharge of the obligation of the State to make the project in issue viable after it was adversely affected on its viability by greatly reduced collection of toll resulting from lesser vehicular traffic following the mining ban in the Kaman and Deeg tehsils (Kaman area) effective 3.7.2008. 2. The determination of the amounts payable to the concessionaire under the additional clause being primarily a question of fact would ordinarily be beyond the ken of the court's jurisdiction against awards under Section 34 of the Act of 1996 and appeals there against under Section 37 of the Act of 1996. Yet, it cannot be gainsaid that no matter how limited by statute the court's jurisdiction under Section 34 and 37 of the Act of 1996 be, it can be exercised even in respect of determination of amounts payable under a contract, when the determination is palpably perverse, arbitrary, capricious, reflects lack of judicial approach and is contrary to the public policy of India in the sense of contravention of the fundamental policy of Indian law and notions of justice. 3. In the instant case, the Arbitrator under his award dated 15.1.2015 (9.3.2015) has exhibited a non judicial approach and found amounts payable thereunder on his ipse-dixit without disclosing any discernible consistent rule in the making of Table Z to the award - the compensation payable chart. That renders his award arbitrary, capricious, unreasoned in the cross-hair of Section 31 (3) of the Act of 1996 and perverse to the facts on record to the extent it shocks the conscience of the court.

Final Decision: State's Appeal allowed.