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whether Claim No.8 is covered by Clause No.70.8 of COPA. In clause No.13.4 of the Invitation to Tender it was clearly stipulated in the contract that all duties, taxes and other levies payable by the contractor under the contract as of the date 28th days prior to the deadline for submission of bid shall be included in the rates and prices and the total bid price submitted by the bidder. The State Government, as a matter of fact, was levying royalty on ordinary earth and this situation was obtaining on such date. If the State Government lacked power to levy and collect such royalty prior to the notification dated 03.02.2000 whereby ordinary earth was brought under the definition of minor mineral, such ground may certainly entitle a party to lay requisite challenge before an appropriate forum. However, for the purposes of the contract such levy being an existing levy must be deemed to have been part of the rates or prices quoted. By notification dated 20.03.2001, the same rate was maintained and as such there was no change arising due to any subsequent legislation. In our view the matter was therefore completely outside the scope of Sub Clause 70.8 of COPA. The Arbitral Tribunal ought to have confined itself to the terms of the Contract and see if there was any variation for the purposes of Sub-Clause 70.8 of COPA. It went beyond its powers in holding that the existing levy as on the date the contract was entered into was without any authority in law and as such the imposition by notification dated 20.03.2001 created liability for the first time. 37. In our view, the Arbitral Tribunal went beyond the scope of the contract and it clearly exceeded its jurisdiction. We, therefore, set aside the award insofar as it allows Claim No. 8. Consequently, the appeal stands allowed. At the interim stage, this Court had directed the Appellant to deposit a sum of Rs.70,65,039/- which upon deposit was withdrawn by the Respondent on furnishing a bank guarantee. The appellant is entitled to encash that bank guarantee to recover the sum that was deposited. No order as to costs.

                                                                  REPORTABLE

                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL NO. 9799 OF 2010



National Highways Authority of India                   …. Appellant


                       Vs.

M/s ITD Cementation India Limited                …. Respondents

                                    WITH

      Civil Appeal No.9908/2011,  Civil Appeal No. 9909/2011
      Civil Appeal No.2488/2012,  Civil Appeal No. 7066/2011
      Civil Appeal No.3150/2012,  Civil Appeal No. 686/2013
      Civil Appeal No.4069/2013,  Civil Appeal No. 5162/2012
Civil Appeal No.5661/2014,  Civil Appeal No. 10586/2014
Civil Appeal No. 3913/15(@S.L.P. (C) No. 10014/2013)
Civil Appeal No.3914/15(@S.L.P. (C) No. 10701/2013)
          Civil Appeal No.7373/2012  AND Civil Appeal No.6158/2013



                       JUDGMENT

Uday Umesh Lalit, J.


 Leave granted in S.L.P (C) Nos. 10014 of 2013 and 10701 of 2013.
A.  Civil  Appeal  Nos.  9799  of  2010,  9908/2011,  9909/2011,  2488/2012,
7066/2011,  3150/2012,  686/2013,  4069/2013,   5162/2012   and   5661/2014,
10586/14, Civil Appeal @ from SLP © 10014/2013 and Civil Appeal @  from  SLP
© 10701 of 2013:


2.    All these appeals by special leave raise identical  questions  and  as
such are being dealt with  and  considered  by  this  common  judgment.  The
learned counsel for the parties agreed that Civil Appeal No.9799 of 2010  be
taken and was accordingly dealt with as the lead case.
                        CIVIL APPEAL NO. 9799 OF 2010


3.    Civil Appeal No. 9799 of 2010, by Special  Leave  seeks  to  challenge
the judgment and order dated 30.11.2007 passed by the Division Bench of  the
High Court of Delhi at New Delhi in FAO (OS) No.216 of 2007.

4.    The dispute in question relates to the consequences of  an  additional
amount of royalty payable by the respondent as a result of the  notification
for upward revision of royalty (Seignorage Fee as named in  Tamil  Nadu)  on
minor minerals.  This additional royalty was imposed by the State  of  Tamil
Nadu  w.e.f.  01.11.2002.   It  is  the  plea  of  the  appellant  that  the
additional amount of fee was not liable to be  paid  to  the  respondent  in
view of certain clauses in the contract which  provided  for  a  formula  of
escalation, while according to the respondent the  full  amount  had  to  be
compensated.

5.     A  contact  was  awarded  to  the  respondent  by  the  appellant  on
17.10.2001 for execution of work of widening of lanes and rehabilitation  of
the existing two lane carriageway of Vaniyambadi-Pallikonda section of  NH-6
(from  Km.49.00  to  Km.100.00).   The  total  value  of  the  contract  was
appropriately  Rs.183.71  crores.   The  parties  adopted  FIDIC   form   of
Conditions of Contract with some changes made which  are  called  Conditions
of Particular Application (COPA, for short).  In the  invitation  to  tender
forming part of the contact under Clause 13.4  it  was  agreed  between  the
parties as under:
13.4. All duties, taxes and other levies payable  by  the  Contractor  under
the Contract, or for any other cause, as of the date 28 days  prior  to  the
deadline for submission of bids, shall be included in the rates  and  prices
and the total bid price submitted by the  bidder,  and  the  evaluation  and
comparison of bids by the Employer shall be made accordingly.


6.    The aforesaid stipulation dealt  with  the  impact  and  inclusion  of
duties, taxes and other levies,  as  of  the  date  28  days  prior  to  the
deadline for submission of bids and clarified  that  the  same  shall  stand
included in the rates and prices and the total bid price  submitted  by  the
Contractor. Any subsequent variation in Prices  on  account  of  variety  of
reasons or factors after such date was dealt with in Clauses 70 to  70.8  of
the COPA and the relevant parts thereof are quoted hereunder:-
Clause 70:  Changes in Cost and Legislation
Delete the text of Clause 70 in its entirety and substitute,  therefore  the
following clauses 70.1 to 70.8.

            Sub-Clause 70.1 : Price Adjustment
The amount payable to the Contractor and valued at  base  rates  and  prices
pursuant to Sub-Clause 60.1 hereof shall be adjusted in respect of the  rise
or fall in  the  indexed  cost  of  labour,  Contractor’s  equipment,  Plant
materials and other inputs to the Work, by the addition  or  subtraction  of
the amounts determined by the formulae prescribed in this Clause.

            Sub-Clause 70.2: Other Changes in Cost

To the extent that full compensation for any rise or fall in  the  costs  to
the Contractor is not covered by the provisions of this or other Clauses  in
the Contract, the unit rates and, prices included in the Contract  shall  be
deemed to include amounts to cover the contingency of  such  other  rise  or
fall in cost.

            Sub-Clause 70.3 :Adjustment Formulae
Contact price shall be adjusted for increase or decrease in rates and  price
of  labour,  materials,  Plant,  machinery,  equipment,  spares,  fuels  and
lubricants in accordance with the following  principles  and  procedures  as
per formulae given below. The amount certified in each  payment  certificate
shall be adjusted by applying, the respective price increase or decrease.

Price adjustment shall apply for work  carried  out  within  the  stipulated
time or extensions granted by the Employer and  shall  not  apply  for  work
carried out  beyond  the  stipulated  time.  Price  adjustment  for  reasons
attributable to the Contractor, shall be paid in accordance with  Sub-Clause
70.6;

Following expressions and meanings are assigned to the  value  of  the  work
done during the period under consideration:
RI= Total value of work done  during  the  period  under  consideration  and
payable in Indian Rupee currency, it would include the  value  of  materials
on which secured advance has been granted, if any, during the  period,  less
the value of materials in respect of which the  secured  advance   has  been
recovered , if any, during the period. This will exclude  cost  of  work  an
items for which rates were fixed under variation Clauses  (51  and  52)  for
which the escalation will be regulated as mutually agreed  at  the  time  of
fixation of rate.

      To the extent that full compensation for any rise or fall  in  indexed
costs to the Contractor is not covered by the provisions of  this  or  other
Clauses in the Contract, the unit rates and prices included in the  Contract
shall be deemed to be include amount to cover the contingency of such  other
rise or fall in costs.

(c)   Price adjustment for various inputs  into  the  works  done  shall  be
calculated as per formulae given below:

A)    Variation of Price-Local Labour
            ………………
            …………………

B)     Variation of Price-General Materials
      The Contract Price will be  subjected  to  adjustment  on  account  of
general variation of all materials other than specifically provided in  Sub-
Clause 70.5 hereinafter. The  adjustment  will  be  made  according  to  the
formula given below:
V2=R1x (I-Io) x G
      Io
Where,
V2= Variation in price on account of general  variation  of  prices  of  all
materials other than specifically provided in Sub-Clause 70.5 hereinafter.
Io = Base Cost Index corresponding to the Wholesale Price in India (for  all
commodities) for the price under consideration (Base  1993-94=100)  released
by the economic advisor, Ministry of Industry, Government of India,  at  the
time specified in para (E) hereinafter.
I=    Current Cost Index corresponding to the Wholesale Price in India  (for
all commodities ) for the price under consideration  (Base  1993-1994  =100)
released by the same agency at the time specified in para (E) hereinafter.
G=  Factor of 0.15 (zero point one five  )  representing  component  of  all
material other than specifically provided elsewhere in the Contract Price.
R1= Value of the work  done  during  the  period   under  consideration  and
payable in non-convertible Indian Rupee  Currency  at  the  base  rates  and
prices as applicable under the Contact.

C) Variation of Price –POL
            ………………..
            ………………….

Price Adjustment for plant and Equipment
      ……………..
      ……………

 Base, Current and Provisional Indices
      ……………..
      ………………..

Price Adjustment
      …………….
      …………..

The Adjustable Amount
      …………….
      ……………….

The Adjusted Amount
      ……………….
      ………………..

Adjustment after Completion
      ………………
      ……………..

Sub-Clause 70.4: Sources of Indices
The sources of indices shall be those as mentioned  in  Sub-clause  70.3  of
Section III Volume I of the Bid documents.

Sub-Clause 70.5: Increase or Decrease of Price of Specified Materials
Increase or decrease of price of specified materials  will  be  adjusted  by
either an addition to or a deduction to or a  deduction  from  the  Contract
Prices. For the purpose of this Sub-Clause:

“Specified materials” means the materials stated in Schedule  2  of  Section
VII of the Bidding Documents and required on the site for the execution  and
completion of the Permanent Works.

“Basic Price” means  the  price  for  “Specified  materials”   indicated  in
Schedule 2 of Section VII of the Bidding Documents.

(ii)  a)    Adjustments to the Contract Price for Bitumen
      …………..
      ……………

b)    Adjustment to the Contract Price for Cement and Steel:
      ……………………….
      ……………………..

Sub-Clause 70.6: Limit of Price Adjustment
      ……………………..
      ……………………..

      Sub-Clause 70.7: Exemption from Price Adjustment
      ……………………

                 Sub-clause 70.8: Subsequent Legislation
      If, after the date 28 days prior to the closing  date  for  submission
of bids for the  Contract  there  are  changes  to  any  National  or  State
Statute, Ordinance, Decree or other Law or any regulation or by-law  of  any
local or other duly constituted authority or the introduction  of  any  such
State Statute, Ordinance, Decree, Law, regulation  or  by-law  in  India  or
States of India which causes additional or reduced cost to  the  Contractor,
other than under the preceding Sub-Clauses of this clauses in the  execution
of  the  contract,  such  additional  or  reduced  cost  shall,  after   due
consultation with the Employer and the  Contractor,  be  determined  by  the
Engineer and shall be added to or deducted from the Contract Price  and  the
Engineer shall  notify  the  Contractor  accordingly  with  a  copy  to  the
Employer.  Notwithstanding the foregoing, such additional  or  reduced  cost
shall not be separately paid or credited if  the  same  shall  already  have
been taken into  account  in  the  indexing  of  any  inputs  to  the  Price
Adjustment Formulae in accordance with the provisions  of  Sub-Clauses  70.1
to 70.7 of this Clause.


7.    The Government of Tamilnadu by issuing a  notification  under  Section
15  of  the  Mines  and  Minerals  (Regulation  &  Development)  Act,   1957
(hereinafter referred to as 1957 Act), increased the seigniorage fee  (which
is synonymous with Royalty charges in  other  States)  on  stone,  sand  and
earth to the tune of nearly 30% with effect from 1st  November,  2002,  i.e.
after about  one  year  from  commencement  of  the  Work.   The  respondent
requested for Price Adjustment  consequent  to  the  increase  in  rates  of
Royalty under Sub-Clause 70.8 of COPA vide  letter  dated  28.12.2002.   The
request was rejected on 01.01.2003  on  the  ground  that  the  increase  in
royalty charge cannot be paid separately as the same was already  considered
under the Price Adjustment formula being paid for  general  materials  under
Sub-Clause 70.3 of COPA.   The matter was  placed  for  reconsideration  but
the request was finally rejected on  06.09.2003  relying  on  NHAI’s  policy
circular No.11041/21/02-Admn.III dated 01.09.2003.

8.    It  appears  that  in  similar  contracts  with  identical  conditions
requests for  payment  of  increased  royalty  under  Sub-Clause  70.8  were
accepted and appropriate payments were made.  However, during the course  of
audit, the payment made by the NHAI towards increase in Royalty charges  was
considered to be irregular by the Government auditors on the ground that  no
such separate payment was required to be made under Sub-clause 70.8 of  COPA
as payment was already made under the Price  Adjustment  formula  for  price
increase.  In the circumstances, the appellant on 03.09.2003  wrote  to  the
Economic Advisor, Ministry of Commerce and  Industry,  Government  of  India
seeking clarification and advice.  Relevant  portion  of  the  letter  dated
03.09.2003 is quoted hereunder:-
“Anand Bordia
Member (Finance)       NATIONAL HIGHWAYS
Tel: 011-25074100            AUTHORITY OF INDIA
        011-25074200 Ext.1612      (MINISTRY OF ROAD
        011-25093506   TRANSPORT & HIGHWAYS)
Fax:011-25074100 G-5 & 6, Sector-10,
011-25074200 Ext.2617  DWARKA,
                             NEW DELHI-110045
E-mail: abordia@nhai.org




D.O. NO.NHAI/11033/GM/2003-04          September 3, 2003

Dear Shri Nigam

             Sub: Wholesale Price Index

1.    NHAI was set up by the National Highways Authority of India Act,  1988
to develop,  maintain  and  manage  the  national  highways  and  any  other
highways vested in, or entrusted to, it by the Government.

2.    Incidental to this function, for the construction  of  highways,  NHAI
appoints  highway  construction  contractors,  selected  by  a  process   of
competitive bidding.  The bidding process involves the  bidder  quoting  his
delivery cost for predefined quantities of various inputs required  for  the
highway construction.  Since the period of  execution  is  fairly  long,  to
provide protection/neutralize price related impacts to the  contractor/NHAI,
certain mechanism has been incorporated in the contract.   For  example,  to
cover price impact arising out of or in consequence to  any  Legislation  is
provided as under:
(a) Sub-Clause 70.8 Subsequent Legislation.
      …………………
      ………………….

3.    We are enclosing herewith a copy  of  the  extracts  of  the  Contract
document detailing the above provisos vide para 70.1 to 70.8

4.    The issue for which clarification is required  is  the  difference  in
opinion  in  the  interpretation  of  the   clause   70.8   on   “Subsequent
Legislation.”  The CAG Auditors while  auditing  NHAI  have  commented  that
since WPI is derived from the whole sale price data across the  country  and
“price” is  the  derived  composite  reflection  of  all  factors,  whenever
provision has been made for WPI based compensation for price  escalation  to
the contractors, the benefit related “Subsequent Legislation” will be  fully
constrained by the last para (given in  italics).   They  have  opined  that
“price” will be deemed to have  all  factors  including  those  with  purely
local impact, such as Entry tax, Octroi and Royalty.

5.    It is felt that if CAG interpretation is accepted for  implementation,
the entire clause “Subsequent Legislation” will be  hit  and  made  entirely
redundant as a tool to cover price risk.

6.    CAG’s office has raised objection  in  a  specific  case,  details  of
which are narrated here below:
      ……………………………
      ……………………………

7.    All these payments were claimed by the Contractor and  paid  by  NHAI,
as these arose on account of Tax obligations under enactments made or  rates
enhanced during the relevant period thereby entitled under  the  clause  for
subsequent legislations.  We  wish  to  stress  the  fact  that  these  were
imposed and enhanced by the States of Haryana and Rajasthan  and  relate  to
construction inputs which are not in the basket  of  items  listed  for  the
consideration of WPI.

  CAG considered these reimbursements irregular  for  the  reason  that  all
such imposts would have had their effect/would have  been  already  factored
into WPI and WPI based indexation benefits were granted and  given  for  all
these very items under clauses 70.1 to 70.7 by  way  of  the  formula  based
price adjustments.  Affording the  benefit  under  “Subsequent  Legislation”
would amount to a double benefit.  Hence they would  automatically  fail  to
come under the clause “Subsequent Legislation” by virtue of the  restrictive
proviso.

9.    In view of the above, we will be grateful if  you  could  clarify  the
following:

(a)   Will the WPI assessment  include  or  deemed  to  include  such  local
factors as Octroi Entry Tax and Royalty  introduced/enhanced  in  one  state
etc. on items mentioned in  paragraph  6  of  this  letter  such  as  earth,
morram, aggregate, sand, stones etc. which it appears do not come under  the
items considered to work out WPI.

The WPI based compensation for  price  changes  will  create  an  imbalanced
structure  between  two  contractors,  one  operating  within  the  locality
subject to a local impost and another in an adjoining area outside  such  an
impost, if CAG auditors opinion is accepted.  How can the WPI  mechanism  be
used by NHAI to create an equitable structure?

You may recall that the Chairman NHAI Shri Santosh Nautiyal  had  spoken  to
you about this matter.

      Kind Regards,
Yours sincerely,
Sd/-
                        (ANAND BORDIA)
Shri Shrawan Nigam,
Economic Advisor,
Ministry of Commerce and Industry,
(Dept of IP & P), 126-E, Udyog Bhawan,
NEW DELHI -110001.”


9.    The response from the Economic Advisor to the Government of India  was
as under:
“Shrawan Nigam       GOVERNMENT OF INDIA
Economic Advisor MINISTRY OF     COMMERCE
Tel:23012721          & INDUSTRY
Fax:23793502         UDYOG BHAWAN,
Economic Advisor to NEW DELHI-110001
the Government of India
                                                         27th November, 2003
D.O. No. Ec.Ad 11(1)/2003/WPD

Dear Shri Bordia,

      Kindly refer to your D.O. Letter  No.NHAI/11033/GM/2003-04  dated  the
September  3,  2004,  seeking  clarifications  on  constituents  of   prices
utilized for compilation of Wholesale Price Index.  I may  mention  in  this
respect that in case of Minerals, ex-mine prices are  used  for  compilation
of WPI.  Ex-mine prices correspond to Pit Mouth Value  (PMV)  of  a  mineral
i.e. sale value of mineral at pithead.  In case sales are  effected  on  FOR
or FOB or any other basis, pithead value is arrived at after  deducting  all
the expenses incurred from mine to railway station or port  or  other  point
of sale, as the case may be.  However taxes paid by the mine owners are  not
deducted to arrive at PMV.  Thus, ex-mine price  includes  Royalty  but  are
not likely to include octroi and entry tax.

      Since none of the items  mentioned  in  your  letter,  namely,  Earth,
Morram, Aggregate and Sand are included in the Commodity Basket of  WPI,  it
is not possible to supply  the  Wholesale  Price  Indices  of  these  items.
However, the WPI for ALL, COMMODITIES and MINERALS  from  December  1995  to
July 2001 are being enclosed for your appropriate use.

                 With regards,
                                  Yours sincerely,
                                        Sd/-
                                  (Shrawan Nigam)
Shri Anand Bordia,
Member (Finance)
National Highway Authority of India,
Ministry of Road, Transport & Highways,
G-5&6, Sector-10, Dwarka,
NEW DELHI-110045.”


10.   In the aforesaid circumstances the dispute between the  parties  stood
referred to Arbitral Tribunal.  The respondent submitted  its  Statement  of
Claim claiming under Sub Clause 70.8 of COPA  an  amount  of  Rs.91,47,411/-
allegedly due upto 31st January, 2005 towards reimbursement of  increase  in
Royalty (Seigniorage fee) on minerals i.e. aggregate, sand  and  earth  (the
items in issue) along with interest @  12  per  cent  per  annum  compounded
monthly  on  the  sums  found  due  from  the  date  they  became  due  till
realization.

11.   The Arbitral Tribunal comprising of three  experienced  Engineers  who
had retired from Govt. service Departments above the rank of Chief  Engineer
framed the following questions for determination:
“1)   Whether the increase in the rates of  Royalty  has  caused  additional
cost to the Claimant and

2)    Whether the increase in cost because  of  increase  in  the  rates  of
Seigniorage Fee on materials like aggregate, sand and earth has  been  taken
into account in the indexing of any inputs to the Price  Adjustment  Formula
in Sub-Clause 70.3(B) relating to the General Materials.”

      After going through the pleadings and evidence the  Arbitral  Tribunal
unanimously found that the respondent had incurred additional  cost  because
of the change in rates of Seigniorage fee pursuant to change in  legislation
and that the said increase in the rates had not been taken into  account  in
the indexing of any inputs  to  the  price  adjustment  formula  in  general
materials and therefore the respondent would be  entitled  to  be  paid  the
additional cost incurred by.   It was held as under:
21.    We have thoroughly gone through the entire evidence  adduced  by  the
parties and gone through the relevant  Contract  provisions.  We  have  also
judiciously considered the rival contentions and arguments. We are  inclined
to agree with the contention of the claimant that  the  provision  for  cost
escalation  based  on  the  agreed  Price  Adjustment   Formulae   and   the
Compensation for additional cost resulting  from  a  subsequent  legislation
are two separate & specific stipulations, and the claimant  is  entitled  to
be compensated for any additional cost caused to it provided the same  shall
not have already been taken into account in the indexing of  any  inputs  to
the Price Adjustment Formulae in accordance  with  the  provisions  of  Sub-
Clauses 70.1 to 70.7.

The other question now  required  to  be  answered  by  us  is  whether  the
additional cost because of change in the rates of Seigniorage fee  has  been
taken into account in the indexing of any inputs  to  the  Price  Adjustment
Formulae supra.  We  have  examined  the  basket  of  materials  whose  cost
variation is input in the estimation of the WPI.  The  minor  minerals  like
earth, sand and aggregate used in highway construction works,  do  not  find
place in this basket.  We are prepared to concede that  the  WPI  is  to  an
extent likely to indicate the rise or fall in  the  prices  of  these  minor
minerals also, but are not inclined to accept that the full  impact  of  the
additional cost of these specific materials because of a  subsequent  change
in legislation can be said to be taken care of in the  inputs  to  the  WPI,
especially when these  materials   do  not  find  place  in  the  basket  of
materials for working out the WPI.  This conclusion  is  further  reinforced
by the fact that the WPI is a single index applicable uniformly in  all  the
states, the increase in Seigniorage fee can and  does  vary  from  state  to
state, depending upon the policies  of  the  respective  State  Governments.
Further, whereas the contact provisions relating to Price Adjustment as  per
Sub-Clauses 70.2 to 70.7 supra do not assure full compensation for  rise  or
fall in prices, the additional cost on account of a  subsequent  legislation
is stipulated to be paid in full.

23.   We must state that but for the adult objection,  the  Respondent  NHAI
itself was of  the  opinion  that  this  additional  payment  is  admissible
separately. The reference  by  the  NHAI  to  Mr.  Shravan  Nigam,  Economic
Advisor, Ministry of  Commerce  and  Industry,  GOI  vide  Ex.  R/4  clearly
signifies this fact. The reply to this letter by Mr. Shravan  Nigam  annexed
with Ex. R/4 also does not help us in arriving at any contrary conclusion.

Having answered the question, the Arbitral Tribunal rejected the  contention
of the respondent that it was unnecessary for it to prove  actual  incurring
of such additional cost.   The  contention  that  the  respondent  would  be
entitled to the difference in the royalty  payable  on  the  material  by  a
theoretical  calculation  based  on  the  agreed  quantities,  even  without
proving that any  such  additional  cost  had  been  actually  incurred  was
rejected.  On the issue whether the respondent had produced any evidence  to
substantiate its claim that any such additional cost had been incurred,  the
Arbitral Tribunal found that the material placed on record  was  lacking  in
particulars and as such the quantification of the impact of  change  in  the
rates of royalty was left to be determined by the appellant.

12.    The  appellant  being  aggrieved  by  the  Arbitral  award  made  and
published on 12.05.2006 filed OMP No.432 of 2006 in the High Court of  Delhi
which was dismissed by a Single Judge of the High Court  vide  judgment  and
order dated 14.05.2007.  It was observed  that  the  Arbitral  Tribunal  had
found that the minerals in question did not find  place  in  the  basket  of
materials for working out the wholesale price index i.e. WPI, that  the  WPI
would be applicable uniformly in  all  the  States  while  the  increase  in
Seigniorage Fee varied from State to State.  It was concluded that the  view
taken by the Tribunal did not call for any  interference.   In  the  appeal,
namely, FAO(OS) No.216 of 2007 preferred by the appellant, it was  submitted
that the interpretation placed by the Arbitral Tribunal upon the  provisions
of the agreement was erroneous and secondly that  the  award  was  imperfect
inasmuch as it left the question of quantification of the amount  undecided.
 While dealing with the first submission, the Division  Bench  of  the  High
Court observed:
“On the question of interpretation, the  arbitrators  noticed  the  relevant
provisions and came to the conclusion that since  the  basket  of  materials
whose cost variation is an input for filing the WPI did  not  include  minor
minerals like earth, sand and aggregate used in  heavy  construction  works,
the additional cost of those specific materials did  not  include  the  full
impact of the subsequent change in legislation.  The arbitrators noted  that
the WPI was a single index applicable uniformly in all the States while  the
increase in Seigniorage fee varied from State to State  depending  upon  the
policies of the respective State Governments.   The  arbitrators  also  held
that while the contractual provisions related to  price  adjustment  as  per
clauses 70.1 to 70.7,  the  additional  cost  on  account  of  a  subsequent
legislation had to be paid in full.  Suffice it to say that the  arbitrators
not only looked into the provisions of the contract but  also  examined  the
issue like whether minor minerals used for construction of highways were  or
were not included in the basket of materials whose cost variation  is  taken
into consideration as an input in the  assumption  of  the  wholesale  price
index (WPI).  Such being the position,  simply  because  the  interpretation
placed by the arbitrators has not favoured one or the other party can be  no
reason for the Court to interfere under Section  34  of  the  Act  with  the
award made on any such interpretation.  It is fairly well settled by a  long
line of decisions rendered by the Supreme Court that a Court dealing with  a
petition under Section 34 of the  Arbitration  and  Conciliation  Act,  1996
does not sit in an appeal over the arbitral award.”

The  Division  Bench  however  agreed  with  the  appellant  on  the  second
submission and remitted the matter to the Arbitral Tribunal on  the  limited
issue of quantification of the amount.

13.   In this appeal by special leave challenging  the  judgment  and  order
passed by the Division Bench of the High Court, this Court  at  the  interim
stage had directed the arbitration proceedings to continue in terms  of  the
order of  the  High  Court.   The  Arbitral  Tribunal  by  its  award  dated
07.05.2010 quantified the  sum  that  the  respondent  was  entitled  to  on
account of increase in the rates at Rs.43,06,810/- and  awarded  interest  @
12% p.a. from the date of publication  till  realization.   By  order  dated
15.11.2010 this Court directed the appellant to deposit sum of Rs.46  lakhs,
being the amount so quantified.  The amount has since  then  been  deposited
and stands invested in a fixed deposit.

14.   Mr. Parag P. Tripathi learned Senior Advocate assisted by Ms.  Monisha
Handa, learned Advocate appeared for the appellant in the  lead  case.   Ms.
Indu Malhotra, learned Senior Advocate  and  Ms.  Gunjan  S.  Jain,  learned
Advocate appeared for the appellants in  the  companion  matters.    It  was
submitted by them that WPI is a general or representative  index  of  prices
of all commodities  and  as  such  it  would  not  and  need  not  take  all
commodities into account.  The parties having agreed to  go  by  WPI  Index,
that Index alone must be considered irrespective of the fact whether  prices
of minor minerals in question were taken  into  account  specifically  while
arriving at such  Index.     It  was  submitted  that  the  award  correctly
observed in para 22 that “WPI is to an extent likely to  indicate  the  rise
or fall in the prices of these other minerals also”  though  minor  minerals
in question did not specifically find  place in the commodity  basket  taken
into account while determining WPI.  The reason why  Arbitral  Tribunal  was
not inclined “to accept that the full  impact  of  the  additional  cost  of
these materials because of subsequent change in legislation can be  said  to
be taken care of by he inputs to the WPI” in the submission of  the  learned
counsel, was perverse.  It was submitted that the governing  clause  in  the
matter was Sub Clause 70.3 (B) and in terms thereof,  the  respondent  would
at best be entitled to factor of  0.15  i.e.  15%  and  not  the  amount  in
entirety as claimed. It was contended that the view taken  by  the  Arbitral
Tribunal  ignored  the  provisions  of  Sub  Clauses  70.1  to  70.3(B)  and
exclusion in Sub Clause 70.8 and the award so  given  in  disregard  of  the
terms  of  the  contract  stands  vitiated  being  against  public   policy.
Reference  was  placed  on  the  decisions  of  this  Court   in   McDormott
International Inc. v. Burn Standard Co. Ltd.[1], ONGC Ltd. V.  Western  Geco
International Ltd.[2] and ONGC Ltd. v. Saw Pipes[3].

15.   Mr. George Thomas, learned Advocate appearing for  the  respondent  in
the lead case and some companion matters submitted that Sub-Clauses 70.1  to
70.7 of COPA deal with Price Adjustment in respect of rise or  fall  in  the
indexed cost of various inputs to the work due to market fluctuations  while
sub clause 70.8 specifically deals with cases  concerning  change  in  price
due to subsequent legislative changes and that unlike the  former  category,
in respect of cases in the latter category the additional  cost  on  account
of changes in subsequent legislation by virtue of sub clause  70.8  must  be
paid in  full.  Mr.  P.H.  Parekh  learned  Senior  Advocate  appearing  for
respondent in Civil Appeal No.4069 of  2013  and  other  companion  matters,
additionally submitted that but  for  the  audit  objection,  the  appellant
itself was of the  opinion  that  this  additional  payment  was  admissible
separately. Reliance was placed on the letter dated 03.09.2003 addressed  by
the appellant to the  Economic  Advisor.  Mr.  Shyam  Divan  learned  Senior
Advocate appearing for respondent in Civil Appeal No.9909 of 2011  submitted
that both parties understood the terms  of  the  Contract  in  a  particular
manner, that the view taken by the Arbitral Tribunal  was  affirmed  by  the
Single Judge and the Division Bench on independent assessment and such  view
being a plausible view no interference was called  for.  Mr.  Vinay  Navare,
learned Advocate appearing for respondent in Civil Appeal  No.3150  of  2012
and other learned Counsel adopted the submissions.

16.   Since it  was  argued  that  the  Arbitral  Tribunal  disregarded  the
material terms of the Contract while making its  assessment  and  failed  to
consider the impact of sub clauses 70.1 to 70.3 (B)  and  exclusion  in  sub
clause 70.8, the law on the point needs to be briefly  adverted  to.  In  Mc
Dermott International Vs. Burn Standard Co. Ltd. (Supra) this Court held  as
under:-
“112. It is trite that the terms of the contract can be express or  implied.
The conduct of the parties would also be a relevant factor in the matter  of
construction of a contract. The construction of the  contract  agreement  is
within the jurisdiction  of  the  arbitrators  having  regard  to  the  wide
nature, scope and ambit of the arbitration  agreement  and  they  cannot  be
said to have misdirected themselves in passing  the  award  by  taking  into
consideration  the  conduct  of  the  parties.  It  is   also   trite   that
correspondences exchanged by the parties  are  required  to  be  taken  into
consideration for the purpose of construction of a contract.  Interpretation
of a contract is a matter for the arbitrator to determine, even if it  gives
rise to determination of a question of law. (See Pure Helium India (P)  Ltd.
v. ONGC [(2003) 8 SCC 593] and D.D. Sharma v. Union of India [(2004)  5  SCC
325]).

113. Once, thus, it is held that the arbitrator  had  the  jurisdiction,  no
further question shall be  raised  and  the  court  will  not  exercise  its
jurisdiction unless it is found that there exists any bar  on  the  face  of
the award.”

17.   In Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram Saran[4],  the  Court
held:
“43.  In  any  case,  assuming  that  Clause  9.3   was   capable   of   two
interpretations, the view taken by the arbitrator was clearly a possible  if
not a plausible one. It is not possible  to  say  that  the  arbitrator  had
travelled outside his jurisdiction, or  that  the  view  taken  by  him  was
against the terms of contract.  That being the position, the High Court  had
no reason to interfere with the award and substitute its view  in  place  of
the interpretation accepted by the arbitrator.”


18.   In Sumitomo Heavy Industries Ltd.. v. ONGC [5], it was held the  Court
held:
“43. ...  The  umpire  has  considered  the  fact  situation  and  placed  a
construction on the clauses of the agreement which according to him was  the
correct one. One may at the  highest  say  that  one  would  have  preferred
another construction of Clause 17.3 but that cannot make the  award  in  any
way perverse. Nor can one substitute one's own view in such a situation,  in
place of the one taken by the umpire,  which  would  amount  to  sitting  in
appeal.   As  held  by  this  Court  in  Kwality  Mfg.  Corpn.  v.   Central
Warehousing Corpn. [(2009) 5 SCC 142 : (2009) 2 SCC  (Civ)  406]  the  Court
while considering challenge to arbitral award does not sit  in  appeal  over
the findings and decision of the arbitrator, which is what  the  High  Court
has practically done in this matter. The umpire is legitimately entitled  to
take the view which he holds to be the correct  one  after  considering  the
material before him and after interpreting the provisions of the  agreement.
If he does so, the decision of the umpire has to be accepted  as  final  and
binding.”


19.    In  a  recent  decision  in  Associate  Builders  Vs.  DDA[6]   while
discussing  “the public policy of India”  contained  in  Section  34(2)  (b)
(ii) of the Arbitration Act, 1996 this Court dealt with each  of  the  heads
contained in Saw Pipes Judgment (Supra) in the light of three  distinct  and
fundamental juristic  principles  added  in  ONGC  Ltd.  Vs.  Western  Geco.
International Ltd. (Supra).  “Patent-illegality” which is one of  the  heads
contained in Saw Pipes judgment (Supra) was then  elaborated  and  we  quote
paras 42 to 42.3:-
42.  In  the  1996  Act,  this  principle  is  substituted  by  the  ‘patent
illegality’ principle which, in turn, contains three sub heads:

42.1 (a) A contravention of the substantive law of  India  would  result  in
the death knell of an arbitral award. This must be understood in  the  sense
that such illegality must go to the root of the matter and cannot  be  of  a
trivial nature.This again is a really a contravention  of  Section  28(1)(a)
of the Act, which
reads as under:
“28. Rules applicable to substance of dispute.—
(1) Where the place of arbitration is situated in India,—
(a) in an arbitration other than an  international  commercial  arbitration,
the arbitral tribunal shall decide the dispute submitted to  arbitration  in
accordance with the substantive law for the time being in force in India;”

42.2 (b) a contravention of the Arbitration Act itself would be regarded  as
a patent illegality- for example if an arbitrator gives no  reasons  for  an
award in contravention of section 31(3) of  the  Act,  such  award  will  be
liable to be set aside.

42.3(c) Equally, the  third  sub-head  of  patent  illegality  is  really  a
contravention of Section 28 (3) of  the  Arbitration  Act,  which  reads  as
under:
“28. Rules applicable to substance of dispute.-

(1) -- (2)   *       *       *

(3) In all case, the arbitral tribunal shall decide in accordance  with  the
terms of the contract and shall take into account the usages  of  the  trade
applicable to the transaction.”

This last contravention must  be  understood  with  a  caveat.  An  arbitral
tribunal must decide in accordance with the terms of the  contract,  but  if
an arbitrator construes a term of the contract in a  reasonable  manner,  it
will not mean that the award can be set aside on this  ground.  Construction
of the terms of a contract is primarily for an arbitrator to  decide  unless
the arbitrator construes the contract in such a way that it  could  be  said
to be something that no fair minded or reasonable person could do.

20.   It is thus well settled that construction of the terms of  a  contract
is primarily for an arbitrator to decide. He is entitled to  take  the  view
which he holds to be the correct one after considering the  material  before
him and after interpreting the provisions of the contract.  The court  while
considering challenge to an arbitral award does not sit in appeal  over  the
findings and decisions unless the arbitrator construes the contract in  such
a way that no fair minded or reasonable person could do.

21.   We now turn to the reasoning given by the Arbitral Tribunal  in  paras
21 to 23 of the award, as quoted above. The award considers  the  impact  of
sub-clauses 70.1 to 70.7 and agrees with the contention that  the  provision
for cost escalation based on the agreed price adjustment formulae  falls  in
one compartment while the compensation for additional cost resulting from  a
subsequent legislation falls in a separate category.  In  other  words,  the
contention that stands accepted was, that the escalation in  price  premised
on fluctuation in market value of the inputs stands on  one  footing,  while
the additional cost resulting  form  the  impact  of  any  statute,  decree,
ordinance, law etc as referred to in sub-clause 70.8 stands  on  the  other.
Resultantly the governing clauses in the instant case were held  not  to  be
sub-clauses 70.1 to 70.7 but the substantive part of  sub-clause  70.8.  The
award also considered whether minor minerals in question were  or  were  not
included in the basket of materials whose  cost  variation  was  taken  into
account as an input while arriving at WPI.  It also considered that the  WPI
is an  index applicable uniformly  in  all  states  while  the  increase  in
Seigniorage Fee would vary from state to state.  It further dealt  with  the
aspect that NHAI itself was of the opinion that the additional impact  as  a
result of subsequent legislation was admissible separately, as signified  by
the letter dated 03.09.2003 to the Economic Advisor. In the backdrop of  the
law laid down by this court, the construction of the terms of  the  contract
by the Arbitral Tribunal is completely consistent with the  principles  laid
down by this court.  Upon construing the terms and the  material  on  record
it concluded that the instant matter would be covered  by  substantive  part
of Sub-Clause 70.8 of COPA.  It also noted that  NHAI  itself  was  of  such
opinion.   The view so taken by the Arbitral Tribunal after considering  the
material on record and the terms of the contract  is  certainly  a  possible
view, to say the least.    We do not see  any  reason  to  interfere.    The
Division Bench in our considered view, was completely  right  and  justified
in dismissing the challenge.

22.   We, therefore, dismiss Civil Appeal No. 9799 of  2010.   The  decretal
amount which stands deposited be made over to the respondent along with  the
interest accrued thereon. No order as to costs.

Civil Appeal Nos. 9908/2011,  9909/2011,  2488/2012,  7066/2011,  3150/2012,
4069/2013, 5162/2012 and 5661/2014, 658/2013, 10586/14, Civil Appeal @  from
SLP © 10014/2013 and Civil Appeal @ from SLP © 10701 of 2013:


23.   In all these matters  National  Highway  Authority  of  India  is  the
appellant which had entered into contacts with respondents  in  each  appeal
and the issue involved is identical that is to say the  entitlement  of  the
concerned respondents to the  additional  amount  payable  as  a  result  of
upward revision in royalty payable in respect of minor minerals pursuant  to
subsequent legislation. The clauses in question are  identical  and  in  all
these matters the High Court, whose orders are appealed against, had  relied
upon the judgment of the Division Bench of the High Court of  Delhi  in  FAO
(OS) No.216 OF 2007, which was under appeal in the lead  matter  i.e.  Civil
Appeal No. 9799 of 2010

24.         Consequently, all these  appeals  are  dismissed.  The  decretal
amount, if deposited, be made over to the respondents along  with   interest
accrued thereon. In some  cases,  money  so  deposited  was  allowed  to  be
withdrawn   on  furnishing  of  Bank  Guarantees.  The  Bank  guarantees  so
furnished stand discharged. No order as to costs.


B.    CIVIL APPEAL NO. 7373 OF 2012:

25.        This appeal challenges the judgment and  order  dated  27.04.2012
passed by the High Court of Delhi at New Delhi in OMP 497  of  2006.  Unlike
all the aforesaid cases, the clauses  in  question  are  not  identical  and
hence this matter is being dealt with separately.

      The appellant awarded contract dated 30.08.2001 to the respondent  for
the work of six laning of NH-7 from KM  539  to  KM  556  in  the  State  of
Karnataka, Contract Package  No.  NS-24/KN.  Clause  13.3  of  the  contract
pertained to Taxes and Other Levies which  is set out hereinbelow :
13.3 All duties, taxes and other levies payable by the contractor under  the
contract, or for any other cause shall be included in the rates, prices  and
total Bid Price submitted by the bidder.

Clause 13.4 of the contract pertained to price adjustment  and  is  set  out
hereinbelow:
13.4 The rates and prices quoted by the bidder  are  subject  to  adjustment
during the performance of the Contract in accordance with the provisions  of
Clause 47 of the Conditions of Contract.

Clause 32.1 of the contract pertaining to Early Warning was as under:
32.1 The contractor is to warn the Engineer at the earliest  opportunity  of
specific likely events  or  circumstances  that  may  adversely  affect  the
quality of work, increase the Contract  Price  or  delay  the  execution  of
works. The Engineer may require the Contractor to  provide  an  estimate  of
the expected effect of the future  even  or  circumstance  on  the  Contract
Price and Completion Date. The estimate is to be provided by the  Contractor
as soon as reasonable possible.

32.2 The  Contractor  shall  cooperate  with  the  Engineer  in  making  and
considering proposals for how the effect of such an  event  or  circumstance
can be avoided or reduced by anyone involved in the  work  and  in  carrying
out any resulting instructions of the Engineer.

Clause 45 of the Contract pertaining to Tax was as follows:
45.1 The rates quoted by the Contractor shall be deemed to be  inclusive  of
the sales and the other taxes the  Contractor  will  have  to  pay  for  the
performance of this Contract. The  Employer  will  perform  such  duties  in
regard to the deduction of such taxes at sources as per applicable law.

Clause 47 of the contract pertained to  Price  Adjustment  and  is  set  out
hereinbelow:
Price Adjustment

This clause is applicable only for those projects with completion period  of
more that one year.

47.1 Contract Price shall be adjusted for increase or decrease in rates  and
prices of labour, materials, fuels and lubricants  in  accordance  with  the
following principles and procedures and as per  the  formula  given  in  the
contract data:

a) The price adjustment shall apply for the work done from  the  start  date
given in the contract data upto the end of the initial  intended  completion
date or extensions granted by the Engineer and shall not apply to  the  work
carried out beyond the stipulated  time  for  reasons  attributable  to  the
contractor.

b)….

c) Following expressions and meanings are assigned to the work  done  during
each month:

R= Total value of work done during the month. It would include the value  of
materials on which secured advance has been granted,  if  any,  during   the
month less the value of materials in respect of which  the  secured  advance
has been recovered, if any during the  month.  It  will  exclude  value  for
works executed under variations for which price adjustment  will  be  worked
separately based on the terms mutually agreed.

47.2 To the extent that full compensation for any rise or fall in  costs  to
the contractor is not covered by the provisions of this or other clauses  in
the contract, the unit rates and prices included in the  contract  shall  be
deemed to include amounts to cover the contingency of such other  rise  fall
in costs.


27.      In this case the disputes which have  arisen  between  the  parties
were:
      (i) With  respect  to  a  claim  for  reimbursement  as  a  result  of
imposition of fresh “Cess”  with  effect  from  29.01.2004  i.e.  after  the
formal agreement was executed in 2001.  The  claim  was  subject  matter  of
Arbitral Award dated 13.11.2006 which  was  affirmed  by  Single  Judge  and
later by the  Division   Bench  of  the  High  Court  vide  judgments  dated
02.07.2008 and 17.08.2009 respectively. The decision was  accepted  and  the
appellant paid to the respondent sum of Rs. 28,49,503 of 28.07.2010. We  are
not concerned with this issue.
(ii)  We are concerned with the claim for reimbursement arising out  of  the
enhancement of royalty payable in respect  of  minor  minerals  with  effect
from 02.06.2003 pursuant to amendment in the  Karnataka  Mine  and  Minerals
Concession Rules,  1994.  It  was  contended  by  the  respondent  that  the
increase in royalty charges by the legislation during the  pendency  of  the
contract could not have been anticipated or foreseen and therefore the  same
falls within the ambit of Clause  32.1  of  the  contract.    The  appellant
submitted that in terms of express provision  in  sub-clause  45.1,  it  was
incumbent upon the contractor to cover any such eventuality  in  respect  of
increase in taxes in the contract price  itself  at  the  time  of  bidding.
Further, there being no subsequent legislation clause in the  contract,  the
parties were clear that no additional cost would be awarded in case of  rise
of royalty due to change in legislation.  The  Arbitral  Tribunal  by  award
dated 18.06.2006, accepting the  claim,  awarded  a  sum  of  Rs.40,95,881/-
towards royalty upto  27.02.2006  with  interest  @  12%.   This  award  was
challenged by the Appellant by  filing  OMP  No.  497  of  2006,  which  was
dismissed by a Single Judge  of  the  High  Court  on  27.04.2012  and  that
judgment is presently under challenge.

28.   The award accepted that revision in royalty rates in respect of  minor
minerals by Government of Karnataka being subsequent to the  contract  would
be covered under the expression ‘future events’  in  clause  32.1  entitling
the respondent to raise a claim.  It was observed that there was no  dispute
between the parties that royalty was not included in WPI and that  in  other
contracts the reimbursement towards additional costs incurred  as  a  result
of subsequent legislation was granted by  relying  on  Sub  Clause  70.8  or
similar clauses. The High Court while affirming the  view  of  the  Arbitral
Tribunal  additionally  relied  upon  the  fact  that   claim   as   regards
reimbursement on account  of  ‘cess’  was  accepted  by  a  separate   award
relying on very same submission, which view was affirmed by the  High  Court
as stated hereinabove.

29.   We have gone through the  record  and  considered  rival  submissions.
The view that as a result of  upward  variation  in  the  rates  of  royalty
pursuant to subsequent legislation, the matter would be  covered  by  clause
32.1 is certainly a plausible view. While  quoting  the  initial  rates  and
prices, it would not have been  in  contemplation  of  a  party  as  to  the
framework of any revision in rates of royalty at a future date. Clause  32.1
can be said to have covered such eventualities.  We, therefore, see  no  any
error in the assessment and approach of the  Arbitral  Tribunal.   The  High
Court, in our view, was right in dismissing  the  challenge.   Consequently,
this appeal fails and is  dismissed.   The  decretal  amount  deposited  and
invested in a fixed deposit, pursuant to orders of this Court,  was  ordered
to be released on furnishing of a bank guarantee  by  the  respondent.   The
bank guarantee shall stand discharged.  No order as to costs.




Civil Appeal No.6158 of 2013


This appeal is directed against the  judgment  and  order  dated  13.02.2013
passed by the Division Bench of  the  High  Court  of  Delhi  at  New  Delhi
dismissing FAO (OS) No.302 of 2012.


31.   On 22.03.1999 the appellant awarded contract  to  the  respondent  for
the  work  of  four  laning  of  NH24  from  KM  27.643  to  KM  48.638  and
construction of  Hapur  Bypass  at  Ghaziabad,  U.P.   Clause  28.2  of  the
contract entered into between the parties pertained to royalties, which  was
as under:-
Royalties 28.2  Except where otherwise stated, the Contractor shall pay  all
tonnage and other royalties, rent and other  payments  or  compensation,  if
any, for getting stone, sand, gravel, clay or other materials  required  for
Works.

      Clauses 70.1, 70.2 and 70.8 of Conditions  of  Particular  Application
(COPA) were identical as found in Civil  Appeal  979  of  2010,  dealt  with
earlier and as such they are not repeated here.

32.   According to the respondent after the commencement  of  work,  it  was
called upon vide letter dated 15.12.1999 by the District Authorities  asking
for payment of royalty on ordinary earth at the rate  of  Rs.4/-  per  cubic
meter. Though it tried to convince them that ordinary earth was not a  minor
mineral and not liable to attract royalty, the Authorities insisted on  such
payment therefore the respondent deposited the requisite sum  and  wrote  to
the appellant to give appropriate benefit. The Government of India  declared
ordinary earth as minor mineral by issuing Notification dated 03.02.2000  as
per Section 3 of 1957 Act.

33.    The disputes between  the  parties  were  referred  to  the  Arbitral
Tribunal.  We are concerned in the present appeal with Claim No.8 which  was
for refund of Royalty on ordinary earth amounting  to  Rs.70,65,039/-  which
was claimed on the ground that it was covered by Sub Clause  70.8  COPA.  It
was observed by the Arbitral Tribunal that after the  commencement  of  1957
Act it was not within the powers of UP State Government to  have  framed  UP
State Rules of 1963 and consequently such Rules  were  not  binding  on  the
Contractor. In its view, the imposition of royalty by the Government  of  UP
vide notification dated 20.03.2001, being  after  the  Central  Government’s
notification  dated  03.02.2000,  for  the  first  time  validly  created  a
liability to pay royalty. Any levy and collection prior  to  03.02.2000  was
without any legal sanction and therefore liable to be disregarded and  since
the liability was validly created after the contract was entered  into,  the
matter was covered under Clause 70.8 of COPA.

34.   The award dated 09.01.2012 thus accepted Claim No.8 in  its  entirety.
This award was challenged by the appellant by filing OMP No.480 of  2012  in
the High Court of Delhi, which was dismissed by a Single Judge of  the  High
Court vide his order dated 18.05.2012.    The matter was carried  in  appeal
by the appellant by filing FAO (OS)  No.302  of  2012  before  the  Division
Bench which   was  dismissed  vide  judgment  and  order  dated  13.02.2013.
While granting special leave to appeal this Court  confined  the  matter  to
Claim No.8 alone and directed the appellant to  furnish  bank  guarantee  in
the sum of Rs.70,65,039/-.  The bank  guarantee  was  accordingly  furnished
and is kept alive.

35.   In support of the appeal, Ms. Indu Malhotra, learned  Senior  Advocate
submitted that the royalty, at the time  the contract was entered into,  was
payable at the rate of Rs. 4 per cent and the notification dated  20.03.2001
of the Government of UP maintained the same rate. The reasoning  that  prior
to 03.02.2000 the State Government  lacked  competence  and  as  such  valid
impact  occurred for the first time vide notification dated  20.03.2001,  in
her submission was flawed and beyond the scope of the  jurisdiction  of  the
Arbitral Tribunal. On the other hand, it was  submitted  by  the  respondent
that a demand letter from the District Collector was without the support  of
law and that the impost  pursuant to notification  of  20.3.2001  alone  was
valid and legal and as such it being after the contract  was  entered  into,
must qualify to be ‘subsequent legislation’.

36.   The question, therefore, is whether Claim No.8 is  covered  by  Clause
No.70.8 of COPA.  In clause No.13.4 of  the  Invitation  to  Tender  it  was
clearly stipulated in the contract that all duties, taxes and  other  levies
payable by the contractor under the contract as of the date 28th days  prior
to the deadline for submission of bid shall be included  in  the  rates  and
prices and the  total  bid  price  submitted  by  the  bidder.    The  State
Government, as a matter of fact, was levying royalty on ordinary  earth  and
this situation was obtaining on such date.   If the State Government  lacked
power to levy and collect such  royalty  prior  to  the  notification  dated
03.02.2000 whereby ordinary earth was brought under the definition of  minor
mineral, such  ground  may  certainly  entitle  a  party  to  lay  requisite
challenge before an appropriate forum.  However, for  the  purposes  of  the
contract such levy being an existing levy must be deemed to have  been  part
of the rates or prices quoted. By notification dated  20.03.2001,  the  same
rate was maintained and as such there was  no  change  arising  due  to  any
subsequent legislation. In our view  the  matter  was  therefore  completely
outside the scope of Sub Clause 70.8 of COPA.  The Arbitral  Tribunal  ought
to have confined itself to the terms of the Contract and see  if  there  was
any variation for the purposes of Sub-Clause 70.8 of COPA.  It  went  beyond
its powers in holding that the existing levy as on  the  date  the  contract
was entered  into  was  without  any  authority  in  law  and  as  such  the
imposition by notification dated 20.03.2001 created liability for the  first
time.

37.   In our view, the Arbitral  Tribunal  went  beyond  the  scope  of  the
contract and it clearly  exceeded  its  jurisdiction.   We,  therefore,  set
aside the award insofar as it allows Claim No. 8.  Consequently, the  appeal
stands  allowed.   At  the  interim  stage,  this  Court  had  directed  the
Appellant to  deposit  a  sum  of  Rs.70,65,039/-  which  upon  deposit  was
withdrawn by the Respondent on furnishing a bank guarantee.   The  appellant
is entitled to encash that bank  guarantee  to  recover  the  sum  that  was
deposited.  No order as to costs.

.……………………….J
                                  (Dipak Misra)


                 ………………………..J.
                                  (Uday Umesh Lalit)
New Delhi,
April 24, 2015



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[1]    (2006) 11 SCC 181
[2]    (2014) 9 SCC 263
[3]    (2003) 5 SCC 705
[4]   (2012) 5 SCC 306

[5]   (2010) 11 SCC 296
[6]    (2015) 3 SCC 49


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