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2021 (9) TMI 1479 - SC - Indian LawsValidity of Arbitral Award - validity of the termination notice dated 08.10.2012 - DMRC claimed that the termination notice issued by DAMEPL is illegal, as DMRC had taken various steps honouring its obligations under the Concession Agreement - curable defect or not - HELD THAT - The defects pointed out by DAMEPL regarding gaps between the shear key and the girder being more than 25 mm and between 10 mm to 25 mm were not addressed and only gaps below 10 mm were addressed by some grinding, detailed methodology for which was not brought out by DMRC in its evidence, as per the findings of the Arbitral Tribunal. Therefore, the Tribunal concluded that these defects were neither cured nor effective steps taken by DMRC within the cure period up to 08.10.2012, constituting a material breach on the part of DMRC. On the basis of the above findings and findings in relation to other defects, deficiencies and constraints in the civil structure of the AMEL which are not referred to herein, the Arbitral Tribunal concluded that the defects had not been cured within the cure period of 90 days from 09.07.2012 nor had effective steps been taken to cure such defects. Ergo, the termination notice issued by DAMEPL on 08.10.2012 was valid. Whether the issue of certificate by the Commissioner on 18.01.2013, giving clearance for resuming operations of the AMEL, showed that the defects were duly cured? - HELD THAT - After examining the certificate issued by the Commissioner, the Arbitral Tribunal held that while the Commissioner had sanctioned resumption of services, certain conditions were imposed, essentially relating to the restriction of speed up to 50 km per hour, which had a material bearing on the prime purpose of the AMEL intended to serve as a high-speed connectivity line. Moreover, the Commissioner himself recognized that the operation of the Line had to be regularly monitored. The subsequent operation of the Line by DMRC was found to be not relevant for determining the validity of the termination notice dated 09.07.2012. The Arbitral Tribunal answered this issue in favour of DAMEPL. We do not intend to re-examine the entire material on record for the purpose of deciding whether the High Court was right in reversing the conclusion of the Tribunal in relation to computation of the amount under Article 29.5.2 of the Concession Agreement. The opinion of the Tribunal is that the amount of Rs.611.95 crore was an amount advanced by DAMEPL s promoter which was not disputed by DMRC. The contention advanced by DMRC, that it was only the equity share capital as is understood within the meaning of the Companies Act, 2013 which is liable to be paid by DMRC under Article 29.5.2, was rejected by the Tribunal. The view taken by the Tribunal that the amount contributed by a member of the consortium or by shareholders to meet the Concessionaire s Capital Costs in any form, including where such funds are classified as subordinated debt, cannot be treated as Subordinated Debt in terms of its definition in the Concession Agreement, is a reasonable and possible view - After a detailed consideration of the relevant clauses of the Concession Agreement, the High Court held that the Tribunal had committed a serious error in its tabulation of Adjusted Equity by completely ignoring the evidence on record. There are no fault with the approach of the Tribunal that the understanding of the term equity as per the Companies Act, 2013 is not relevant for the purposes of determining Adjusted Equity in light of the express definition of the term in the Concession Agreement - the findings of the High Court set aside - the award by the Tribunal in respect of the computation of Termination Payment under Clause 29.5.2 upheld. The Tribunal awarded interest in accordance with the terms of the Concession Agreement on termination payment. DMRC contended before the High Court that the award in respect of interest had to be set aside on the ground that it would result in unjust enrichment. After a thorough consideration of Article 29.8 and Article 36.2.6.1 of the Concession Agreement, the High Court has rightly refused to interfere with the findings by the Tribunal relating to interest and there exists no cause for interference. Appeal dismissed.
Issues Involved:
1. Validity of the termination notice dated 08.10.2012. 2. Computation of ‘Adjusted Equity’ for Termination Payment. 3. Waiver of termination notice due to DAMEPL’s conduct. 4. Grant of interest on termination payment. 5. Specific performance of the Concession Agreement. Detailed Analysis: 1. Validity of the Termination Notice: The primary issue was whether the defects pointed out by DAMEPL were cured within the stipulated 90 days from the cure notice dated 09.07.2012. The Arbitral Tribunal concluded that the defects were not cured and thus, DAMEPL's termination notice dated 08.10.2012 was valid. The Tribunal noted that there were significant defects, including 1551 cracks in 367 girders and twists in about 80 girders, which were not effectively addressed by DMRC. The Tribunal also considered the CMRS certificate dated 18.01.2013, which allowed for the resumption of the AMEL with certain conditions, indicating that the defects were not fully cured. The Supreme Court upheld the Tribunal's findings, stating that the Tribunal's interpretation of the Concession Agreement was a possible view and should not be interfered with by the courts. 2. Computation of ‘Adjusted Equity’: The Tribunal included Rs. 611.95 crore advanced by DAMEPL’s promoter as 'Equity' for the purpose of calculating 'Adjusted Equity'. The Division Bench of the High Court disagreed, stating that the amount was converted into subordinated debt and should not be treated as equity. The Supreme Court held that the Tribunal's view was reasonable and within its jurisdiction to interpret the terms of the Concession Agreement. The Tribunal's decision to include the amount as equity was upheld, and the High Court's interference was deemed incorrect. 3. Waiver of Termination Notice: DMRC argued that DAMEPL waived its right to terminate the Concession Agreement by participating in the reconciliation process and operating the AMEL for more than five months. The Tribunal found that DAMEPL's participation was without prejudice and did not constitute a waiver. The High Court agreed with the Tribunal's findings, and the Supreme Court saw no reason to interfere with this conclusion. 4. Grant of Interest on Termination Payment: The Tribunal awarded interest on the termination payment as per the Concession Agreement. DMRC contended that this would result in unjust enrichment. The High Court, after examining the relevant clauses, upheld the Tribunal's decision. The Supreme Court found no cause for interference with the award of interest. 5. Specific Performance of the Concession Agreement: DMRC sought specific performance of the Concession Agreement, which was refused by the Tribunal. The High Court noted that this finding was not challenged before it. Consequently, the Supreme Court did not adjudicate on this point. Conclusion: The Supreme Court allowed DAMEPL's appeal, setting aside the judgment of the Division Bench of the High Court and upholding the Arbitral Tribunal's award. The appeal by DMRC was dismissed, affirming the Tribunal's findings on the validity of the termination notice, computation of 'Adjusted Equity', waiver of termination notice, and the grant of interest on termination payment.
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