2013 (8) TMI 1012 - HC - Indian Laws

Award rendered in favour of the Contractor - NHAI claimed to be aggrieved and approached the Court under Section 34 of the Arbitration Act, 1996 - Held that - In this case there is no dispute that the bid was eventually finalized by the letter dated 29th August, 2005. Yet the Court cannot be oblivious of the circumstance that the Contractor in this case was none other than the one who approved the sub-Contractor for the very same contract, which had been successfully tendered for by another Contractor, who had entered into the original Agreement in 2001. The fao(os) 347/2013 Page 6 terms of the bid or offer made by the respondent Contractor itself are revealing - in the letter dated 29th August, 2005, they were willing to execute the balance left out work on the same terms and conditions and BOQ rates with price adjustment formula, as applicable and would be bound by the same rates with original contract as per original sub-Contractors. The Arbitrator held that the subsequent rate of taxation had to be borne by the NHAI; a determination which was also formed by the learned Single Judge. There is no infirmity in the reasoning of the impugned judgment in this regard. If the respondent Contractor stepped into the shoes of the original Contractor as he concededly did, his compelling rationale is obvious; if the original Contractor had continued with the Agreement, the enhanced rates were to be borne by the appellant - NHAI. Even otherwise, the reasonable construction - which has been favoured by the Arbitrator and the learned Single Judge concurrently as to clause 14.3 is that the 28 days of the period, which is determinative for fixing the rate of taxation was applicable in the present case and the period of 28 days prior to the bid or offer made by the Contractor sometimes the end in fao(os) 347/2013 Page 7 December, 2004. At that time, concededly the rate of taxation was lower; it was enhanced later. The Court is unimpressed with the submission that the parties were negotiating and the contract was finalized only on 29th August, 2005. The reason is again simple; even in the case of the original bid, negotiations would have ensued on various aspects. But, it did not necessarily mean that the time or period mentioned in clause 14.3 was variable. It was constant and unaltered. Present appeal is meritless

Summary

Issues:
1. Interpretation of price escalation clause in the contract.
2. Liability for increased tax rates under a specific clause in the contract.

Issue 1: Interpretation of price escalation clause in the contract

The appeal challenged the order of a learned Single Judge regarding a Section 34 petition filed by the National Highways Authority of India (NHAI) against an arbitration award in favor of the respondent Contractor. The Contractor had made claims for price escalation and higher tax liability, which were accepted by the Arbitrator. The Single Judge upheld the award, citing previous judgments of the High Court and emphasizing the finality of the Arbitrator's decision. The Court agreed with the Arbitrator's findings, stating that objections raised by NHAI were not tenable under settled law. The Court also highlighted the principle that the Arbitrator's award on facts and law is final, with no appeal unless there is an apparent legality issue.

Issue 2: Liability for increased tax rates under a specific clause in the contract

The second aspect of the dispute involved the interpretation of clause 14.3 in the contract regarding the liability for increased tax rates. The Contractor had taken over the remaining work from another Contractor and claimed that the increased tax rates should be borne by NHAI. The Arbitrator and the Single Judge agreed with the Contractor's position, stating that the Contractor stepping into the shoes of the original Contractor implied the liability for increased rates. The Court found no fault in this reasoning, emphasizing that the period mentioned in the clause for fixing tax rates was constant and unaltered, regardless of negotiation timelines. The Court dismissed the appeal, concluding that it lacked merit and did not warrant any costs.

This detailed analysis of the judgment from the Delhi High Court covers the interpretation of clauses related to price escalation and tax liability in a contract dispute between NHAI and a Contractor, providing a comprehensive overview of the legal reasoning and decisions involved in each issue.