Delhi High Court | Non-consideration of a clause in a concession agreement not an error that goes into the root of the award; cannot amount to patent illegality

delhi high court

Delhi High Court: An appeal was filed under Section 37 of the Arbitration and Conciliation Act against the judgment dated 29-10-2021 passed by the Single Judge setting aside the arbitral award on the ground that the same is contrary to the express terms of the contract in a petition filed by the respondent under Section 34 of the Arbitration Act challenging the arbitral award dated 02-11-2019. A division bench of Satish Chandra Sharma, CJ., and Subramonium Prasad, J., held that the findings of the majority of the Arbitral Tribunal is a view that is reasoned and plausible and interference by a Court under Section 34 of the Arbitration Act was not necessary.

The Respondent entered into a Concession Agreement with the National Highway Authority of India (appellant) in respect of the project for “widening of existing 2-lanes to 6-lanes divided carriageway facility including rehabilitation of existing 2-lanes on Jaipur-Kishangarh section of NH-8 in Rajasthan on Build Operate and Transfer (BOT) basis. While the Completion Certificate was issued, the project was not completed as the Respondent was required to construct the ETC system in one toll lane in each direction. In a project review meeting, the issue of increased traffic at the Jaipur Toll Plaza was discussed and the Respondent was directed to prepare and submit a proposal for construction of additional toll lanes at the toll plaza.

The Respondent submitted its proposal wherein it stated that the project would require additional facilities and there should be a change in the scope of the Concession Agreement as per Good Industry Practices. IC recommended the construction of additional toll lanes/additional toll collection facilities to reduce the waiting time of vehicles, but the Respondent disagreed as additional facilities would be contrary to the Concession Agreement. Thus, IC requested the Respondent to provide details of the land proposed to be acquired along with a scientific plan, indicating the locations of existing toll plazas, right of way, and proposed additional toll lanes which were provided. The respondent requested the Appellant to issue a Change of Scope Notice and later asked the Independent Consultant to examine the feasibility of the submitted estimate as per the Concession Agreement.

There was disagreement between the Appellant and the Respondent whether the construction of new toll lanes at the Toll Plaza would constitute a change of scope and whether the obligations of the Appellant were limited to making available additional land or would it also include reimbursement of cost associated with the construction of the proposed additional lanes. Unable to settle the dispute amicably, the Respondent filed a Statement of Claim, claiming an amount of Rs. 5,43,07,356/- along with 18% interest per annum. The Arbitral Tribunal, by majority, rejected the claims of the Respondent and held that the Appellant was not required to issue a ‘Change of Scope’ order for construction of the additional lanes and the NHAI was justified in not issuing the same under the Concession Agreement. The Respondent-herein challenged the arbitral award under Section 34 of the Arbitration Act wherein the arbitral award was set aside and thus the present appeal was filed.

The issue under consideration is whether the construction of two additional lanes falls within the scope of the contract or not and whether the award is vitiated because of non-consideration of Clause 18.4 of the Concession Agreement.

The Court noted that the Tribunal held that whatever is required to be done to ensure uninterrupted flow of traffic during normal operating conditions was the obligation of the Respondent and the construction of the toll plazas cannot be considered as extra additional work requiring change of scope. If the arbitral tribunal has given its reasons for a finding on an issue before it and the same is a plausible view, then a Court should not interfere with the award in the exercise of its jurisdiction under Section 34 of the Arbitration Act. Thus, upon a reading of Clauses 18.1 and 18.4 of the Concession Agreement and the Arbitral Award, it is apparent that the view as taken by the majority of the Arbitral Tribunal is a plausible view.

The Court remarked that the majority undertakes a thorough discussion on Clause 18.1 of the Concession Agreement, what the obligations of the Concessionaire are under the agreement, particularly with regards to the operation and maintenance of the project and whether the same includes the construction of additional toll lanes or not. The majority has discussed whether the construction of additional toll lanes would require a change of scope notice under the Concession Agreement. It is only when the majority concluded that the construction of the additional toll lanes is a part of the Project and that a change of scope notice is not required, did the majority reject the claim raised by the Respondent-Claimant.

The Court observed that the concession agreement is neither a statute, nor is it a law which protects the national interests of this nation and a mere failure of the arbitral tribunal to consider an argument on the same would not render the arbitral award in contravention of the fundamental policy of Indian law. Thus, the non-consideration of Clause 18.4 of the Concession Agreement cannot be said to be an error made by the arbitral tribunal which is opposed to the fundamental policy of Indian law, nor can the same be said to be patently illegal.

The Court set aside the impugned award and held that the findings made by the arbitral tribunal in the majority award dated 02-11-2019 present a plausible view and the same ought not to have been set aside by a Court in the exercise of its jurisdiction under Section 34 of the Arbitration Act.

[National Highways Authority of India v. GVK Jaipur Expressway Pvt Ltd., 2023 SCC OnLine Del 3790, decided on 03-07-2023]

Advocates who appeared in this case :

Mr. Manish K. Bishnoi and Mr. Nirmal Prasad, Advocates for the Appellants;

Mr. Samudra Sarangi, Ms. Shruti Raina and Ms. Abhilasha Khanna, Advocates for the Respondents.

Must Watch

maintenance to second wife

bail in false pretext of marriage

right to procreate of convict

Criminology, Penology and Victimology book release

Join the discussion

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.