M/s. MSK Projects (I)
(JV) Ltd. Vs. State of Rajasthan & ANR.
J U D G M E N T
Dr. B.S. CHAUHAN, J.
1.
Both
these appeals have been preferred by the rival parties against the judgment and
order dated 24.4.2007 passed by the High Court of Rajasthan (Jaipur Bench) in
Civil Misc. Appeal No.1581 of 2006 under Section 37(1)(A) of the Arbitration
and Conciliation Act, 1996 (hereinafter called "Act 1996") against the
order dated 17.1.2006 passed by the District Judge, Jaipur City, Jaipur in
Arbitration Case No.89/2004 whereby the application filed by the State of
Rajasthan under Section 34 of the Act 1996 for setting aside the arbitral award
dated 1.12.2003 had been allowed.
2.
Facts
and circumstances giving rise to these appeals are:
A. The Public Works Department
of the State of Rajasthan (hereinafter called "PWD") decided in
September 1997 to construct the Bharatpur byepass for the road from Bharatpur to
Mathura, which passed through a busy market of the city of Bharatpur. For the
aforesaid work, tenders were invited with a stipulation that the work would be executed
on the basis of Build Operate and Transfer (BOT). The total extent of the road had
been 10.850 k.ms. out of which 9.6 k.ms. was new construction and 1.25 k.ms. was
improvement, i.e. widening and strengthening of the existing portion of Bharatpur
Deeg Road.
B. After having prebid conference/meeting
and completing the required formalities it was agreed between the tenderers and
PWD that compensation would be worked out on the basis of investment made by the
concerned entrepreneur. The tender submitted by MSK appellant for Rs.1,325 lacs
was accepted vide letter dated 25.2.1998 and the MSK appellant was called upon
to furnish security deposit which was done on 25.7.1998. Concession agreement
dated 19.8.1998 was entered into between the parties authorising collection of
toll fee by MSK appellant. According to this agreement, period of concession had
been 111 months including the period of construction. The said period would end
on 6.4.2008. It also contained the provisions for making repayment/collection
of toll fee and in case of any difference/dispute to refer the matter to the
Arbitrator.
C. MSK appellant completed
the Bharatpur byepass Project on 10.4.2000 and also started collection of toll
fee as provided under the agreement with effect from 28.4.2000. There had been some
problem in collecting the toll fee because of agitation by local people. The State
issued Notification dated 1.9.2000 under the provisions of the Indian Tolls Act,
1851 and Rajasthan Motor Vehicles Taxation (Amendment) Act, 1994 (hereinafter called
the `Notification dated 1.9.2000') preventing the entry of vehicles into
Bharatpur city stipulating its operation with effect from 1.10.2000. MSK
appellant invoked arbitration clause raising the dispute with respect to: (a)
Delay in issuance of Notification prohibiting entry of commercial vehicles into
Bharatpur town and diverting traffic through the byepass; and (b) Collection of
toll from vehicles using Bharatpur Deeg patch of the road.
D. The State/PWD failed
to make appointment of the Arbitrator. MSK appellant preferred SB Civil
Arbitration Application No.31 of 2002 before the High Court and the High Court
vide order 12.4.2002 appointed the Arbitrator. The Arbitrators so appointed in their
meeting on 8.5.2002 appointed the third Arbitrator. Claim Petition was filed
before the Tribunal by MSK appellant on 23.9.2002. The State submitted its
reply to the claim petition on 7.12.2002.
E. The Arbitral Award
was made in favour of MSK appellant on 1.12.2003 according to which there had
been delay on the part of the State of Rajasthan in issuing the Notification
and the State failed to implement the same and the contractor was entitled to
collect toll fee even from the vehicles using Bharatpur Deeg part of the road .
The State of Rajasthan was directed to pay a sum of Rs.990.52 lacs to MSK
appellant as loss due upto 31.12.2003 with 18% interest from 31.12.2003 onwards.
The Tribunal further gave various other 4directions to the State in this
regard.
F. Being aggrieved, the
State of Rajasthan filed objections under Section 34 of the Act 1996 and while
deciding the same, the District Judge vide order dated 17.1.2006 set aside the
Arbitral Award on the grounds that there was no clause in the agreement to issue
notification barring the entry of vehicles in the city of Bharatpur; and the
Tribunal erred in taking 1997 survey as basis for calculating the loss suffered
by MSK appellant. It held that MSK appellant was not entitled to any monetary compensation
under clause 10 of the concession agreement, but only entitled to extension of concession
period, and the rate of interest was reduced from 18% to 10%.
G. Being aggrieved, MSK
appellant preferred an appeal before the High Court wherein the High Court vide
impugned judgment and order dated 24.4.2007 held that Bharatpur Deeg section
was part of the project and the contractor could collect the toll fee from the
users of this part of the road also. Clause 10 of the concession agreement was
not attracted in the facts of the case. There was no agreement for issuance of
Notification by the State barring the use of old route and directing the
vehicles to use the new route alone. Therefore, the question of grant of
compensation on that account for the traffic loss could not arise. The District
Judge was justified in reducing the rate of interest from 18% to 10% in view of
the provisions of Section 31(7)(b) of the Act,1996 and economic realities,
whereby the rate of interest had been reduced by the Banks in India. Hence,
these two appeals.
3.
Mr.
K.K. Venugopal, learned senior counsel appearing for the private appellant, has
submitted that it was implied in the agreement and there has been an understanding
between the parties that State Government would issue notification barring the vehicles
driven through the markets of Bharatpur City. This was not even an issue before
the Tribunal and thus, could not be agitated by the State at all. Thus, the courts
below erred in setting aside the award of arbitral tribunal to that extent, and
secondly, that the rate of interest as reduced from 18 per cent to 10 per cent
by the District Court as well as the High Court is in contravention of the
terms of contract between the parties which fixed the rate of interest at 20 per
cent. Further opposing the appeal by the State of Rajasthan, Shri Venugopal has
submitted that Bharatpur Deeg patch was an integral part of the project as there
was only one composite contract of the entire byepass and, therefore, the
private appellant was entitled to collect the toll fee from the users of that
part of the road also.
4.
Per
contra, Dr. Manish Singhvi, learned Additional Advocate General for the State of
Rajasthan, has submitted that arbitration proceedings could not be proceeded in
contravention to the terms of agreement and statutory provisions. There was no
obligation on the part of the State authorities to issue the notification restraining
the entry of vehicles to the market side of the city. The rate of interest has
rightly been reduced considering the prevailing rate of interest in banking
transactions during the relevant period of contract.
In support of the
appeal of the State, it has been submitted that there was a clear understanding
between the parties that the private appellant shall not collect any toll fee
on the Bharatpur Deeg patch and to that extent the Tribunal and the courts
below committed an error. It has further been submitted that the total contract
had been for a sum of Rs.13.25 crores including interest. The project was to be
executed in two phases. The second phase for a sum of Rs.3.24 crores had never
been executed by the private appellant. The contractor could collect the compensation
only on the basis of investment made by it. The concept of toll fee is of compensatory
in nature wherein the State which has spent huge amount on construction of
roads/bridges etc. has a right to get the said amount reimbursed, and
therefore, in such a contract the concept of profit which prevails in other
forms of contract cannot be the relevant 7component.
5.
We
have considered the rival submissions made on behalf of the parties and perused
the record. In the appeal filed by the private contractor, MSK Projects, two
issues are involved; namely, whether it was mandatory/necessary in view of the agreement/contract
or on the basis of prebid understanding that the State had to issue the notification
barring the vehicles through the markets of Bharatpur city; and secondly whether
the rate of interest could be reduced from 18% to 10% by the courts below. In
the State appeal, the only issue required to be considered is whether the
private appellant had a right to collect the toll fee on the patch between
Bharatpur Deeg.
6.
The
issue regarding the jurisdiction of the Arbitral Tribunal to decide an issue
not referred to is no more res integra. It is a settled legal proposition that
special Tribunals like Arbitral Tribunals and Labour Courts get jurisdiction to
proceed with the case only from the reference made to them. Thus, it is not permissible
for such Tribunals/authorities to travel beyond the terms of reference. Powers cannot
be exercised by the Tribunal so as to enlarge materially the scope of reference
itself. If the dispute is within the scope of the arbitration clause, it is no
part of the province of the court to enter into the merits of the dispute on
the issue not referred to it. If the award goes beyond the reference or there
is an error apparent on the face of the award it would certainly be open to the
court to interfere with such an award. (Vide: Grid Corporation of Orissa Ltd. &
Anr. v. Balasore Technical School, AIR 1999 SC 2262; and Delhi Development Authority
v. R.S. Sharma and Company, New Delhi, (2008) 13 SCC 80).
7.
In
Associated Engg. Co. v. Govt. of Andhra Pradesh & Anr., AIR 1992 SC 232,
this Court held that an umpire or arbitrator cannot widen his jurisdiction by deciding
a question not referred to him by the parties. If he exceeded his jurisdiction
by so doing, his award would be liable to be set aside. Thus, an arbitrator
cannot be allowed to assume jurisdiction over a question which has not been
referred to him, and similarly, he cannot widen his jurisdiction by holding contrary
to the fact that the matter which he wants to decide is within the submission
of the parties.
8.
If
the arbitrator commits an error in the construction of the contract, that is an
error within his jurisdiction. But if he wanders out side the contract and
deals with matters not allotted to him, he commits a jurisdictional error. Extrinsic
evidence is admissible in such cases because the dispute is not something which
arises under or in relation to the contract or dependent on the construction of
the contract or to be determined within the award. The ambiguity of the award
can, in such cases, be resolved by admitting extrinsic evidence. The rationale
of this rule is that the nature of the dispute is something which has to be
determined outside and independent of what appears in the award. Such a
jurisdictional error needs to be proved by evidence extrinsic to the award. (See:
Gobardhan Das v. Lachhmi Ram & Ors., AIR 1954 SC 689; Seth Thawardas
Pherumal v. The Union of India, AIR 1955 SC 468; Union of India v. Kishorilal
Gupta & Bros., AIR 1959 SC 1362; Alopi Parshad & Sons. Ltd. v. Union of
India, AIR 1960 SC 588; Jivarajbhai Ujamshi Sheth & Ors. v. Chintamanrao Balaji
& Ors., AIR 1965 SC 214; and Renusagar Power Co. Ltd. v. General Electric Company
& Anr., AIR 1985 SC 1156).
9.
In
Kishore Kumar Khaitan & Anr. v. Praveen Kumar Singh, (2006) 3 SCC 312, this
Court held that when a court asks itself a wrong question or approaches the
question in an improper manner, even if it comes to a finding of fact, the said
finding of fact cannot be said to be one rendered with jurisdiction. The failure
to render the necessary findings to support its order would also be a
jurisdictional error liable to correction.(See also: Williams v. Lourdusamy
& Anr., (2008) 5 SCC 647)
10.
In
Cellular Operators Association of India & Ors. v. Union of India &
Ors., (2003) 3 SCC 186, this Court held as under: "As regards the issue of
jurisdiction, it posed a wrong question and gave a wrong answer................The
learned TDSAT, therefore, has posed absolutely a wrong question and thus its
impugned decision suffers from a misdirection in law."
11.
This
Court, in Oil & Natural Gas Corporation Ltd. v. SAW Pipes Ltd., AIR 2003 SC
2629; and Hindustan Zinc Ltd. v. Friends Coal Carbonisation, (2006) 4 SCC 445),
held that an arbitration award contrary to substantive provisions of law, or
provisions of the Act, 1996 or against terms of the contract, or public policy,
would be patently illegal, and if it affects the rights of the parties, it
would be open for the court to interfere under Section 34(2) of the Act 1996.
12.
Thus,
in view of the above, the settled legal proposition emerges to the effect that the
arbitral tribunal cannot travel beyond terms of reference; however, in exceptional
circumstances where a party pleads that the demand of another party is beyond
the terms of contract and statutory provisions, the tribunal may examine by he
terms of contract as well as the statutory provisions. In the absence of proper
pleadings and objections, such a course may not be permissible.
13.
Be
that as it may, in the instant case, a reference to the Tribunal had been made
on the basis of statement of facts, claims by the private appellant, defence taken
by the respondent State and rejoinder by the claimant. After completing the
formalities of admission and denial by each party in respect of each other's documents
and submission of draft proposed issues and respective oral evidence, the
Tribunal on 4.1.2003 framed the following issues: 1. Whether claimant as per
agreement is entitled to recover its amount of claim of Rs.453.69 lacs upto
31.12.2002 and onwards or not?2. Whether there was delay on part of State in
issuing notification for restriction of traffic through the Bharatpur Town,
which has effected the toll tax or not?
If so, how much delay
and delay in full rate of safe implementation as on date, or not? By virtue of it,
is the claimant entitled to recover its claim of Rs.292.17 lacs upto 31.12.2002
and thereafter onward or not; or merely by extension of concession period as
averred by respondent? 123. As a consequence of issue 1 & 2, which party breached
the contract?4. Whether the claimant is entitled to claim interest on its any
due claim amount as per decision of issue 1 & 2? If so, from what date and
at what rate of simple/compound interest?5. Whether claimant or respondent is
entitled for cost of arbitra tion incurred and claimed by, each party? If so,
what amount and to which party?6. Any other if any demanded by any party during
proceedings.
14.
The
Tribunal considered the relevant agreement provisions as well as land lease
deed, total package documents, minutes of prebid meetings and deed authorising collection
of toll fee etc., and proceeded with the arbitration proceedings. The State of
Rajasthan had not taken the defence that it was not agreed between the parties
to issue the notification barring the traffic through the markets of Bharatpur
city. The only issue remained as to whether there was delay in issuance of
notification and implementation thereof. In such a factsituation and considering
the settled legal propositions, we are of the view that the District Judge as
well as the High Court fell in error considering the issue which was not taken by
the State before the Tribunal during the arbitration proceedings.
15.
Furthermore,
it is a settled legal proposition that the arbitrator is competent to award interest
for the period commencing with the date of award to the date of decree or date
of realisation, whichever is earlier. This is also quite logical for, while
award of interest for the period prior to an arbitrator entering upon the
reference is a matter of substantive law, the grant of interest for the postaward
period is a matter of procedure.(Vide: Seth Thawardas Pherumal (Supra); Union
of India v. Bungo Steel Furniture Pvt. Ltd., AIR 1967 SC 1032; Executive
Engineer, Irrigation, Galimala & Ors. v. Abnaduta Jena, AIR 1988 SC 1520;
Gujarat Water Supply & Sewerage Board v. Unique Erectors (Gujarat) (P) Ltd.
& Anr., AIR 1989 SC 973; Secretary, Irrigation Department, Govt. of Orissa
& Ors. v. G.C. Roy, AIR 1992 SC 732; Hindustan Construction Co. Ltd. v. State
of Jammu & Kashmir, AIR 1992 SC 2192; Executive Engineer, Dhenkanal Minor
Irrigation Division, Orissa v. N.C. Budharaj (Dead) by Lrs., AIR 2001 SC 626; Bhagawati
Oxygen Ltd. v. Hindustan Copper Ltd., AIR 2005 SC 2071; and Indian Hume Pipe
Co. Ltd. v. State of Rajasthan, (2009) 10 SCC 187).
16.
So
far as the rate of interest is concerned, it may be necessary to refer to the
provisions of Section 3 of the Interest Act 1978, relevant part of which reads
as under: "(1) In any proceedings for the recovery of any debt or damages
or in any proceedings in which a claim for in terest in respect of' any debt or
damages already paid is made, the court may, if it thinks fit, allow interest
to the person entitled to the debt or damages or to the person making such claim,
as the case may be, at a rate not ex ceeding the current rate of
interest...." (Emphasis ad ded) Thus, it is evident that the aforesaid provisions
empower the Court to award interest at the rate prevailing in the banking transactions.
Thus, impliedly, the court has a power to vary the rate of interest agreed by
the parties.
17.
This
Court in Krishna Bhagya Jala Nigam Ltd. v. G. Harischandra Reddy & Anr.,
AIR 2007 SC 817, while dealing with the similar issue held as under: "...after
economic reforms in our country the interest re gime has changed and the rates have
substantially re duced and, therefore, we are of the view that the interest awarded
by the arbitrator at 18% for the prearbitration period, for the pendente lite
period and future interest be reduced to 9%."
18.
In
H.U.D.A v. Raj Singh Rana, AIR 2008 SC 3035, this 15Court considered various earlier
judgments of this Court including Ghaziabad Development Authority v. Balbir
Singh, AIR 2004 SC 2141; Bihar State Housing Board v. Arun Dakshy, (2005) 7 SCC
103; Haryana Urban Development Authority v. Manoj Kumar & Anr., (2005) 9 SCC
541; H.U.D.A v. Prem Kumar Agarwal & Anr., JT 2008 (1) SC 590 and came to
the conclusion: ".......the rate of interest is to be fixed in the circumstances
of each case and it should not be imposed at a uniform rate without looking into
the circumstances leading to a situation where compensation was required to be
paid."
19.
Be
that as it may, the High Court while dealing with the rate of interest has relied
upon the judgment of this Court in Krishna Bhagya Jala Nigam Ltd. (supra) and
thus, there is no scope for us to interfere with the rate of interest fixed by
the courts below.
20.
The
issue raised by the State before this Court in its appeal as to whether the
Bharatpur Deeg patch was an integral or composite part of the project and the
private appellant could collect the toll fee on that part also stands concluded
by the High Court after considering the entire evidence on record.
21.
It
is evident from the record as well as the judgments of the courts below that
bid documents contained data collected on the flow of traffic on 14th and 15th April,
1994 to find out the viability and requirement of the establishment of
Bharatput byepass and it included the traffic flow on the Bharatpur Deeg section
also which indicates that this particular patch had also been an integral part
of the project.
22.
In
prebid conference the interveners wanted a clarification as to whether the persons
using this particular patch of road between Bharatpur Deeg could be liable to
pay toll fee. It was clarified by the respondent State authorities that the
users of this patch would be required to pay the toll fee.
23.
Clause
5 of the Concession agreement also provided that Government would levy and
charge the fee from all persons using the project facilities. The project was
not in parts rather it was a composite and integrated project which included the
Bharatpur Deeg section also. Hence, it was not permissible for the respondent
State to take the plea that persons using such section of the road were not
liable to pay the toll fee. We do not find any force in the submission made by
Dr. Manish Singhvi, learned counsel for the State that it was not a newly
constructed road. However, he is not in a position to deny that the said portion
of road had been widened and strengthened by the private appellant and could
not be termed as service road which could be used free of charge in view of
clause 7 of the concession agreement as service road has been defined as any
road constructed temporarily for use of traffic for short period during construction
of the main road. Such a facility had to be provided in order to maintain the
free flow of traffic during the construction of the road.
24.
Thus,
in view of the above, the issue raised by the State that Bharatpur Deeg section
of the road was out of the project and the private appellant was not entitled
to collect the toll fee on that part of the road, stands settled in favour of
the private appellant.
25.
Determination
of the aforesaid three issues brings us to the entitlement of the private
appellant. The Court is not oblivious to the fact that the State authorities
cannot be permitted to use the collection of toll fee as augmenting the State
revenues. In State of U.P. & Ors. v. Devi Dayal Singh, AIR 2000 SC 961,
this Court defined 'toll' as a sum of money taken in respect of a benefit
arising out of the temporary use of land. It implies some consideration moving to
the public either in the form of a liberty, privilege or service. In other
words, for the valid imposition of a toll, there must be a corresponding
benefit. The Court further held: "Although the section has empowered the State
Government to levy rates of tolls "as it thinks fit", having regard
to the compensatory nature of the levy, the rate of toll must bear a reasonable
relationship to the providing of benefit. No doubt, by virtue of Section 8 of
the Act, the tolls collected are part of the public revenue and may be absorbed
in the general revenue of the State, nevertheless by definition a toll cannot
be used for otherwise augmenting the State's revenue." (Emphasis added)
26.
In
fact, the toll fee under the Tolls Act, 1851 is of compensatory in nature
wherein the Government can reimburse itself the amount which it had spent on
construction of road/bridge etc. Clause IV(a) of the statutory notification dated
10.2.1997 which entitled the government to give present road on toll is
reproduced below: "IV(a). The toll of any of the aforesaid facilities/constructions
shall be levied only for so long as the total cost of its construction and
maintenance including interest thereupon, and the total expenditure in realisation
of toll has not been realised in full or for a period of 30 years." (Emphasis
added) It is evident that Clause IV(a) of the Notification dated 10.02.1997
envisages that toll can only be collected as long as total cost of construction
and maintenance including interest thereupon is recovered. A person is debarred
by law and statutory inhibition as contained in Clause IV(a) of the notification
from collection of toll beyond the recovery of cost of construction.
27.
Thus,
from the above referred provisions, it is evident that toll fee is compensatory
in nature and can be collected by the State to reimburse itself the amount it has
spent on construction of the road/bridge etc. The State is competent to
levy/collect the toll fee only for the period stipulated under the Statute or
till the actual cost of the project with interest etc. is recovered. However,
it cannot be a source of revenue for the State.
28.
In
common parlance, "reimbursement" means and implies restoration of an equivalent
for something paid or expanded. Similarly, "Compensation" means anything
given to make the equivalent. (See: State of Gujarat v. Shantilal Mangaldas
& Ors., AIR 1969 SC 634; Tata Iron & Steel Co. Ltd. v. Union of India
& Ors., AIR 2000 SC 3706; Ghaziabad Development Authority (Supra); and
H.U.D.A v. Raj Singh Rana, (Supra).
29.
However,
in Dwaraka Das v. State of Madhya Pradesh & Anr., AIR 1999 SC 1031, it was
held that a claim by a contractor for recovery of amount as damages as expected
profit out of contract cannot be disallowed on ground that there was no proof that
he suffered actual loss to the extent of amount claimed on account of 20breach
of contract.
30.
In
M/s. A.T. Brij Paul Singh & Ors. v. State of Gujarat, AIR 1984 SC 1703,
while interpreting the provisions of Section 73 of the Indian Contract Act, 1972,
this Court held that damages can be claimed by a contractor where the government
is proved to have committed breach by improperly rescinding the contract and
for estimating the amount of damages, court should make a broad evaluation instead
of going into minute details. It was specifically held that where in the works
contract, the party entrusting the work committed breach of contract, the contractor
is entitled to claim the damages for loss of profit which he expected to earn by
undertaking the works contract. Claim of expected profits is legally admissible
on proof of the breach of contract by the erring party. It was further observed
that what would be the measure of profit would depend upon facts and
circumstances of each case. But that there shall be a reasonable expectation of
profit is implicit in a works contract and its loss has to be compensated by way
of damages if the other party to the contract is guilty of breach of contract cannot
be gainsaid.
31.
In
B.S.N.L v. Reliance Communication Ltd., (2011) 1 SCC 394, this court held as
under: "53. Lastly, it may be noted that liquidated damages serve the useful
purpose of avoiding litigation and promoting commercial certainty and, therefore,
the court should not be astute to categorise as penalties the clauses described
as liquidated damages."
32.
This
Court further stated in Oil & Natural Gas Corporation Ltd. v. SAW Pipes
Ltd. (Supra): "64....This section is to be read with Section 74, which
deals with penalty stipulated in the contract, inter alia (relevant for the present
case) provides that when a contract has been broken, if a sum is named in the contract
as the amount to be paid in case of such breach, the party complaining of
breach is entitled, whether or not actual loss is proved to have been caused,
thereby to receive from the party who has broken the contract reasonable compensation
not exceeding the amount so named. Section 74 emphasizes that in case of breach
of contract, the party complaining of the breach is entitled to receive
reasonable compensation whether or not actual loss is proved to have been
caused by such breach...."
33.
Thus,
the case requires consideration in the light of the aforesaid settled legal
principles. Undoubtedly, the total construction was for Rs. 13.25 crores. It is
evident from the Biddocuments filed by the private appellant that the work was to
be executed in two phases and the relevant part 22 thereof reads as under:
date
|
Const.
Cost (in lacs)
|
Supervision
Charges @ 10%
|
Total
investment (in lacs)
|
Interest
@ 20%
|
Total
investment of Strs
|
Upto (in
lacs)
|
Year 1998-99
|
|
6/98
|
75
|
7.5
|
82.50
|
4.12
|
86.62
|
86.62
|
9/98
|
80
|
8.0
|
88.00
|
8.52
|
92.52
|
183.14
|
12/98
|
80
|
8.0
|
88.00
|
12.92
|
100.92
|
284.06
|
3/99
|
80
|
8.0
|
88.00
|
17.32
|
105.32
|
389.32
|
Total
|
315
|
31.5
|
346.50
|
42.88
|
389.38
|
389.88
|
Year 1999-2000
|
|
6/99
|
110
|
11.0
|
121
|
23.37
|
144.37
|
533.75
|
9/99
|
120
|
12.0
|
132.0
|
29.97
|
161.97
|
695.72
|
12/99
|
120
|
12.0
|
132.0
|
36.57
|
168.57
|
864.29
|
3/2000
|
125
|
12.50
|
137.50
|
43.44
|
180.94
|
1045.23
|
Total
|
475
|
47.50
|
522.50
|
133.35
|
655.85
|
1045.23
|
Grand
Total
|
790
|
79.0
|
869.0
|
176.23
|
1045.23
|
1045.23
|
PHASE
– II
|
|
Year 2005-06
|
|
6/2005
|
150
|
15.0
|
165
|
8.25
|
173.25
|
173.25
|
9/2005
|
150
|
15.0
|
165
|
16.50
|
181.50
|
354.75
|
Total
|
300
|
30.0
|
330
|
24.75
|
354.75
|
354.75
|
The documents further reveal that phase II work was of worth Rs.354.75 lacs and
it included repairing, maintenance and second layer of bitumen on the entire road.
Admittedly, this part of the contract had never been executed by the private
appellant. More so, the chart filed by the State of Rajasthan shows that the
estimated cost of the work had been recovered by the private appellant as the
schedule prepared for repayment tally with the amount collected by the private
appellant as toll fee within the stipulated period.
34.
In
the first phase, the private appellant spent about Rs.10.45 crores and recovered
the said amount with certain profit, though the actual figure i.e. the toll fee
recovered has not been disclosed. So far as the second phase is concerned,
admittedly, the amount of Rs.354.75 lacs has not been spent by the private
appellant. This issue has been agitated by the State of Rajasthan before this Court
in its Counter Affidavit wherein it is stated as under: "It is
respectfully submitted that as per the terms of the Agreement, petitioner was
required to complete the project in two phases. In the first phase investment
of Rs.1045 lacs and after 5 years in the second phase Rs. 354.75 lacs was to be
made by the petitioner. However, the petitioner has not abided by the terms of
the agreement and has not made any investment for the second phase and, therefore,
it has breached the terms of the contract and, therefore, it is respectfully submitted
that the contention of the petitioner that he is entitled to recover its
investment, is erroneous and petitioner is trying to give wrong picture about investment
made and has not come to this Hon'ble Court with clean hands and, therefore, the
present Special Leave Petition is liable to be dismissed by the Hon'ble Court.
The concession period has come to an end."
35.
The
aforesaid allegations have not been denied by the private appellant while submitting
its rejoinder. Relevant part of the rejoinder affidavit reads: ".....the
present contention as raised was not part of the arbitration proceeding, before
the arbitral Tribunal. It is further submitted that this contention was never raised
before the District Court and as well as before the Hon'ble Court of Rajasthan.
The point as raised is subsequent to completion of the project and work to be
done after the period of 5 years...." Thus, there is no specific denial of
the allegations/averments taken by the State as required by the principle
enshrined in Order VIII Rule 5 of the Code of Civil Procedure, 1908.
36.
It
is strange that a person who has not complied with terms of contract and has acted
in contravention of the terms of agreement claims that he was entitled to earn
more profit. The private appellant cannot be permitted to claim
damages/compensation in respect of the amount of Rs.13.25 crores, as he did not
spend the said amount stipulated in the terms of agreement. Private appellant
cannot claim the amount of Rs. 7.13 crores for a period of three years for a
small patch of 1.25 kilometres out of the total length of the road to the
extent of 10.85 kilometres.
37.
In
fact, the tribunal has dealt with the issue in correct perspective only to the extent
the period of delay by which the notification barring the heavy vehicles through
market of Bharatpur had been issued stating as under: "The traffic survey conducted
by the claimant on 17th, 18th & 19th April, 2000 has not been accepted by
the respondent. The arbitral tribunal also feels that this survey, which has
been done by the claimant alone, cannot be relied upon for this purpose,
because respondent is not a party to this survey.
The claim lodged by
claimant on its own survey as per para 12.3(iii) from 12/4/2000 to 30/9/2000 is
for Rs.31.18 lacs. In this regard tribunal is of the opinion that traffic survey
of 1997 as per agreement in which both parties bears consent of each other
therefore can safely be relied upon for purpose of assessment of such losses to
the claimant, because the occurrence of loss as such to the claimant has not
been denied by respondent, which otherwise is an established fact as per
documentary evidence on record. The tribunal has assessed this part of loss on the
traffic survey of 1997 for commercial vehicles only as Rs.26.34 lacs from 12/4/2000
to 30/9/2000." As the notification had been issued, and it was not the responsibility
of the State to establish a police chowki etc. to implement the notification,
there was no occasion for the tribunal to proceed further. Therefore, any award
in favour of the private appellant in that respect for non issuance of notification
beyond the date of the notification, cannot be held to be justified and the
same is liable to be set aside.
38.
The
State authority has decided to establish a toll road as it was not having sufficient
funds. In case the claim of the private appellant is allowed and as the State is
not in a position to grant further facility to collect the toll fee at such a belated
stage, the purpose of establishing the toll road itself stands frustrated. More
so, the toll fee cannot be collected to recover the amount never spent by the
contractor. It is evident from the discourse in prebid meetings of the parties that
it had been decided that compensation would be worked out on the basis of
investment made by concerned contractor. More so, the statutory notification dated
10.2.1997 provided to recover the cost of construction and maintenance including
interest thereon. Therefore, the question of non-execution of work of second
phase of the contract becomes very material and relevant to determine the real
controversy.
The State authorities
for the reasons best known to them, did not make reference to the arbitration
proceedings for non-execution of the work of the second phase of the contract.
However, the relief claimed by the private appellant would prove to be a
"windfall profit" without carrying out the obligation to execute the
work just on technicalities. We have held in this very case, that the arbitrator
cannot proceed beyond the terms of reference and, therefore, the question of considering
the non-execution of work of second phase of the work was neither permissible nor
possible as it had arisen subsequent to the date of award in the arbitration
proceedings. Be that as it may, in order to do complete justice between the
parties and protect the public exchequer, we feel that the matter requires
adjudication and reconsideration on the following points by the arbitration
tribunal:
i) What amount could have
been recovered by the private appellant for Bharatpur Deeg part of the road from
the vehicles using the road?
ii) What could be the
effect on the contract as a whole for no executing the work of the second
phase? In view of the fact that a long time has elapsed, we request the learned
tribunal to decide the case as early as possible after giving due opportunity to
the parties concerned.
The private appellant
shall be entitled only for a sum of Rs.26.34 lacs awarded by the tribunal for delay
in issuing the notification with 10% interest, if not paid already or it could be
adjusted in the final accounts bills. With these observation, the appeals stand
disposed of. No costs.
.............................J.
(P. SATHASIVAM)
.............................J.
(Dr. B.S. CHAUHAN)
New
Delhi,
July
21, 2011
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