REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 5416 OF 2011
M/s. MSK Projects (I) (JV) Ltd. ... Appellant
Versus
State of Rajasthan & Anr. ...Respondents
with
CIVIL APPEAL NO. 5417 OF 2011
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 bye-pass 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 pre-bid 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
2
5.2.1998 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 bye-pass 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:
3
(a) Delay in issuance of Notification prohibiting entry of
commercial vehicles into Bharatpur town and diverting
traffic through the bye-pass; 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
4
directions 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
5
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 bye-
pass and, therefore, the private appellant was entitled to collect the toll
fee from the users of that part of the road also.
6
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
7
component.
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 pre-bid under-
standing 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 La-
bour 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
8
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 dis-
pute on the issue not referred to it. If the award goes beyond the refer-
ence 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 al-
lowed to assume jurisdiction over a question which has not been re-
ferred to him, and similarly, he cannot widen his jurisdiction by hold-
ing contrary to the fact that the matter which he wants to decide is
within the submission of the parties.
9
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 com-
mits a jurisdictional error. Extrinsic evidence is admissible in such
cases because the dispute is not something which arises under or in re-
lation 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 ra-
tionale 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 ex-
trinsic to the award. (See: Gobardhan Das v. Lachhmi Ram & Ors.,
AIR 1954 SC 689; Seth Thawardas Pherumal v. The Union of In-
dia, 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
10
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
11
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 re-
joinder 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 on-
wards or not?
2. Whether there was delay on part of State in issuing noti-
fication 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 respond-
ent?
12
3. 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 proceed-
ings.
14. The Tribunal considered the relevant agreement provisions as
well as land lease deed, total package documents, minutes of pre-bid
meetings and deed authorising collection of toll fee etc., and pro-
ceeded with the arbitration proceedings. The State of Rajasthan had
not taken the defence that it was not agreed between the parties to is-
sue the notification barring the traffic through the markets of Bharat-
pur city. The only issue remained as to whether there was delay in is-
suance of notification and implementation thereof. In such a fact-situ-
ation and considering the settled legal propositions, we are of the
view that the District Judge as well as the High Court fell in error con-
sidering the issue which was not taken by the State before the
Tribunal during the arbitration proceedings.
13
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 post-award 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 & Kash-
mir, AIR 1992 SC 2192; Executive Engineer, Dhenkanal Minor Ir-
rigation 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).
14
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, relev-
ant 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 transac-
tions. Thus, impliedly, the court has a power to vary the rate of in-
terest agreed by the parties.
17. This Court in Krishna Bhagya Jala Nigam Ltd. v. G. Har-
ischandra 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 pre-arbitration
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
15
Court 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
16
of traffic on 14th and 15th April, 1994 to find out the viability and re-
quirement of the establishment of Bharatput bye-pass 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 pre-bid 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 re-
quired to pay the toll fee.
23. Clause 5 of the Concession agreement also provided that Gov-
ernment would levy and charge the fee from all persons using the pro-
ject 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
17
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 en-
titlement 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 re-
spect 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
18
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.
19
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
20
breach 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.
21
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 Bid-documents filed by the private appellant that
the work was to be executed in two phases and the relevant part
22
thereof reads as under:
PHASE - I
Year Const. Supervision Total Interest @ Total Upto date
Charges @ 20% investment investment
Cost
10% of Strs
(in lacs) (in lacs)
(in lacs)
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
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 790 79.0 869.0 176.23 1045.23 1045.23
Total
PHASE - II
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
23
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
24
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
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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
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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 pre-bid 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,
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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
non-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
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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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