2015 (2) TMI 1303 - HC - Indian Laws

Awards passed by an arbitral tribunal - Separate awards were rendered by the arbitral tribunal in the two references - Whether the Respondent committed breach/ breaches of the terms and conditions of the Contract Agreement No.COM/BOT/1 of 2000-2001 supplemented by the Supplemental Agreement dated 11th May, 2005 as alleged by the Claimant? - Whether any delay in completion of the project was caused by the Claimant? - If so, whether the delay in completion of the project was caused due to any default and/or breach on the part of the Respondent? Extra Overheads and loss of expected profit - Held that - Once it is accepted that the grant of escalation is justified on principle, the next question is of the quantum of damages that can be awarded on this account. The arbitrators have taken 10 % per year as the basis. This was on the footing of a rate of escalation accepted by the parties themselves, as reflected in Form 6 forming part of the BOT contract. The basis thus adopted by the arbitral tribunal cannot be termed as unreasonable, arbitrary or impossible - The claim awarded by the arbitral tribunal in this behalf is, thus, not open to challenge under Section 34. Compensation/ damages on account of subsequent legislation - Held that - Clause 3.7.14 is not a clause about subsequent legislation at all. The arbitrators are aware of this. But they say, clause 3.7.14 though explicitly not a clause of subsequent legislation, it implies that the claimant is entitled for compensation on account of withdrawal of the concession in terms of income tax which was available to him on the date of submission of the bid . Nothing can be further from the true interpretation of the clause. Reimbursement of royalty charges - Held that - This claim could possibly be justified on account of the increased cost incurred by the contractor during the extended period as a result of the delay ensuring from the employer s breaches. But then we do not have before us any analysis or working of extra costs incurred during the extended period in this behalf. It cannot be ascertained from the material available on record if any royalty had to be paid on minerals or materials particularly during the extended period, which the contractor would not have paid during the original period of contract and therefore could be claimed as extra costs incurred on account of delay, particularly so because the subject royalty was introduced by the Government during the original period of contract. Besides, that may even amount to rewriting of the award, which is not permissible in a challenge under section 34 - the award in relation to this claim cannot be sustained. Excess excavation work due to landslide and shifting of alignment - Held that - The arbitrators noted that the contractual provisions, clause 3.6.6 of GCC read with Form 6, implied that any extra work carried out by Atlanta was to attract 22% charges over the rate; and that accordingly the Superintending Engineer had prepared his estimate in the recommendation made by him. In the premises, the arbitrators accepted the claim. The arbitrators rejected the State s contention that the work involved only shifting (loading, unloading and transportation) and not excavation and therefore, payable only at the rate of ₹ 51.70 / cum (which was exclusive of excavation) - This view of the arbitrators is clearly a possible view. It is based on a reasonable and possible interpretation of contract, is supported by material on record and there is no legal infirmity in either the admissibility of the claim or its assessment in value. No infirmity can be found with this part of the award. Difference in the rates and cost as claimed and allowed on account of additional work ordered - Held that - The arbitrators considered the provisions of Form 3 of the original contract agreement and standard practice followed in comparable matters to consider such escalation in cash flow. Barring the reliance on the recommendation of the Superintending Engineer as in the case of other claims, the reasons discussed and material considered in this behalf by the arbitrators can very well support the award. No interference is called for in relation to this part of the award under Section 34. Demand of interest - Held that - The arbitrators have granted pendente lite and post award interest on the principal amount of the award at 20 per cent per annum. The rate of interest is in accordance with the provisions of the contract, namely, the concession agreement, and need not be interfered with - Award of interest on the principal amount awarded by the arbitrators is within the discretion of the arbitral tribunal and no fault can be found either with the date (the date of commencement of arbitration) with reference to which such interest is calculated in the award or the manner of calculating such interest, namely, simple interest method as opposed to annual compounding method - There is, thus, no merit in Atlanta s challenge to the impugned award. On the question, whether Atlanta was in beach of the provision in the contract concerning repairs and maintenance, the arbitrators considered the records placed before them, and came to a conclusion that from the correspondence on record, and having regard to the proof tendered by Atlanta for maintaining the road in pothole free condition including the certified copies of deployment of manpower and machinery, Atlanta did what was reasonably expected of it and the State had failed to prove that Atlanta was negligent or careless in road maintenance. These are matters of fact, and the conclusion of the arbitrators is a possible view on the basis of the material available before the arbitrators. The conclusion is supported by evidence. Sufficiency of the evidence and the merits of its assessment by the arbitrators are not matters for this Court to examine, and no interference is called for. Arbitration Petition is partly allowed.

Summary

Issues Involved:
1. Extension of concession period due to extra work and damages.
2. Suspension of toll collection during specific periods.
3. Responsibility for project delay.
4. Compensation claims for various heads including overheads, productivity loss, price escalation, subsequent legislation, royalty charges, excess excavation, and additional work.
5. Interest and costs awarded.

Detailed Analysis:

1. Extension of Concession Period Due to Extra Work and Damages:
The arbitration petitions arose from awards passed by an arbitral tribunal regarding a Build, Operate and Transfer (BOT) contract for road construction. The contractor, Atlanta, claimed an extension of the concession period due to extra work and damages. The State challenged the arbitral tribunal's award, which partly allowed Atlanta's claims and awarded Rs. 58,59,31,595 with interest at 20% per annum. The tribunal directed the State to extend the concession period based on Atlanta's cash flow statement or pay the awarded sum with interest.

2. Suspension of Toll Collection During Specific Periods:
The second reference involved Atlanta's claims for compensation due to the suspension of toll collection by the State during specific periods. The tribunal accepted Atlanta's claims and awarded Rs. 14,92,38,050 with interest. The State challenged this award, but the tribunal found that the suspension was not justified under the BOT contract, which did not provide for toll suspension as a remedy for maintenance issues.

3. Responsibility for Project Delay:
The tribunal examined the causes of project delay, attributing it to breaches by the State, including failure to hand over land, non-removal of encroachments, and additional work orders. The tribunal split the contract period into three phases and found that Atlanta was not responsible for the delays, which were caused by the State's breaches.

4. Compensation Claims for Various Heads:
- Extra Overheads and Loss of Expected Profit: The tribunal awarded Rs. 8,80,00,000 based on a 20% rate of overheads and profit, supported by evidence, trade practices, and the National Highway Authority of India's norms.
- Reduced Productivity of Plant and Machinery: The tribunal awarded Rs. 4,94,27,000 for idling machinery, but this was found unsustainable due to lack of evidence for the entire extended period.
- Reimbursement for Escalation in Prices: The tribunal awarded Rs. 16,95,47,000 for escalation in prices of materials, justified by the principle that contractors are entitled to compensation for extra expenses due to delays caused by the employer.
- Compensation Due to Subsequent Legislation: The tribunal awarded Rs. 8,38,61,595 for Minimum Alternate Tax (MAT) imposed after the contract, but this was found unjustified as the contract did not guarantee perpetuation of tax concessions.
- Reimbursement of Royalty Charges: The tribunal awarded Rs. 1,96,18,000 for royalty charges, but this was found unsustainable as the contract did not provide for compensation due to subsequent changes in law.
- Excess Excavation Work: The tribunal awarded Rs. 7,16,62,000 for extra excavation due to landslides, supported by bilateral measurement books and certificates.
- Difference in Rates for Additional Work: The tribunal awarded Rs. 10,38,16,000 for additional work, based on a reasonable interpretation of the contract and supported by evidence.

5. Interest and Costs Awarded:
The tribunal awarded interest at 20% per annum from the commencement of arbitration till payment, in accordance with the contract. The award of costs to Atlanta was upheld as they succeeded substantially in the reference.

Conclusion:
The court partially allowed the State's challenge, setting aside awards for reduced productivity, subsequent legislation, and royalty charges, while upholding the rest of the award. The challenges by Atlanta and the State regarding other claims were dismissed, confirming the tribunal's awards on various heads of compensation, interest, and costs.