LAW FOR ALL

Saturday, April 25, 2015

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 At the interim stage, this Court had directed the Appellant to deposit a sum of Rs.70,65,039/- which upon deposit was withdrawn by the Respondent on furnishing a bank guarantee.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

-----------------------
[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

-----------------------

43

We find that there are five stab injuries at different parts of the body i.e. near right axilla, below the right axilla, over right hypochoncriam at mid clavicular line, over the border of right scapula and over mid spinal region at the level of 4th and 5th lumbar vertebra. The evidence on record shows that the deceased was assaulted as he was a witness in Velongini Raja’s murder case wherein the accused-appellant, A-1, was an accused. There are cases where this Court has converted offence from 302 IPC to 304 Part I IPC, regard being had to the genesis of occurrence or the nature of injuries. It is because one of the relevant factors to gather the intention is the nature of injury inflicted on the deceased. In the instant case, considering the nature of injuries and the previous animosity, we are of the considered opinion that it is not a fit case where the offence under Section 302 IPC should be converted to Section 304 Part I IPC.

IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO. 2047 OF 2008

Vutukuru Lakshmaiah ... Appellant
Versus
State of Andhra Pradesh ... Respondent

WITH
CRIMINAL APPEAL NO. 2052 OF 2008
CRIMINAL APPEAL NO. 205O OF 2008

J U D G M E N T

Dipak Misra, J.

The present appeals are directed against the judgment and order dated
22.03.2007 passed by the High Court of Andhra Pradesh in Criminal Appeal
No. 517 of 2005, whereby it has confirmed the judgment of conviction and
order of sentence passed by the learned Additional Sessions Judge, Nellore
in Sessions Case No. 365 of 1998 whereunder he had found the appellants
guilty of the offence under Sections 302 and 148 of the Indian Penal Code
(IPC) and sentenced each of them to suffer rigorous imprisonment for life
on the first score and imposed separate sentence under Section 148 IPC
with the default clause stipulating that all the sentences shall be
concurrent. Be it stated, the High Court has acquitted three of the
convicted persons.
2. Filtering the unnecessary details, the prosecution case is that the
deceased, Patrangi Ramanaiah, was a supporter of the Telugu Desam Party,
while accused Vutukuru Lakshmaiah, A-1, was the Councilor for Ward No. 16
of Nellore Municipality and belonged to the Congress Party. One Patrangi
Velongini Raja of Telugu Desam Party was allegedly murdered by accused, A-
1, and his brother and in the said prosecution the deceased and PW-1 were
witnesses.
3. On 14.05.1996 about 9.30 p.m., Pamula Ramanaiah, PW-1, and the
deceased were travelling on their scooter towards Akuthota Harijanawada,
and when they reached a sweet meat shop, Meriga Yedukondalu, A-4, and
Utukuru Seenaiah, A-6 (since deceased) attacked them as a result of which,
PW1, who was driving the scooter lost control of the scooter and both of
them fell down. As the prosecution story proceeds, Vutukuru Lakshmaiah, A-
1, Rayapu Srinivasulu, A-2, Rayapu Sivaiah, A-3, Meriga Ramaiah, A-5, and
Meriga Penchlaiah, A-7, stabbed the deceased multiple times with knives,
while A-4 and A-6 beat him with iron rods. A-2 then tried to stab PW-1 but
missed. Thereafter A-3 stabbed PW-1 with a knife on his left arm, but he
managed to escape and hid in the PWD office situated nearby.
4. As the prosecution case further unfurls, Pantrangi Venkateswarlu, PW-
2, and Ragutu Sreenivasulu, PW-3, who were returning from their work
witnessed the incident and after the assailants left the scene of crime,
they took the deceased to the Government Head Quarters Hospital, Nellore.
Being informed about the incident, the police immediately reached the scene
of incident where they found injured PW-1 who had returned to the scene of
occurrence and took him to the hospital, where Md. Kareemula, Head
Constable, PW-20, recorded the statement of PW-1, Ex. P-1, and it was
handed over to G. Srinivasa Rao, Sub-Inspector of Police, PW-21. Based on
the statement, Crime No. 57 of 1996 U/s. 147, 148, 324, 307 r/w 149 IPC was
registered and the investigation commenced. The deceased was subsequently
shifted to Apollo Hospital, Madras for better treatment. Meanwhile the II
Additional Judicial First Class Magistrate, Nellore, PW-18, recorded the
dying declaration of the deceased at the General Head Quarter Hospital,
which has been brought on record as Ex. P-13. On 15.05.1996, PW-21, visited
the scene of offence, prepared the panchanama, Ex. P-7, the rough sketch,
Ex. P-18, and recorded statements of PWs 1, 2, 3, 5, 6, 8, 12, 17. After
the receipt of intimation of death of the deceased on 18.05.1996, there was
alteration of the offence to Section 302 IPC and the investigation was
taken over by K. Veera Reddy, PW-22, the Inspector of police, who visited
the Apollo hospital, Madras and held inquest over the dead body of the
deceased in presence of G. Pulla Reddy, PW-18, and sent a requisition to
Dr. C. Manohar, PW-19, Assistant Professor, Forensic Medicine at Kilbank
Medical College, Chennai for postmortem examination who carried out the
autopsy over the dead body of the deceased on 18.05.1996 and opined vide
Ex.16, the postmortem report, that the cause of death was due to multiple
stab injuries. PW-22, the Investigating Officer, arrested A-2 to A-7 and
A9 on 28.05.1996 and at the instance of the arrested persons, except A-9,
the investigating agency recovered four knives and two iron rods. After
completion of the investigation, the chargesheet was placed before the
competent court and eventually the matter was tried by learned Additional
Sessions Judge. The accused persons took the plea of false implication and
the A-1, additionally took the plea of alibi.
5. The principal witnesses are, Pamula Ramanaiah, PW-1, Pantrangi
Venkateswarlu, PW-2, Ragutu Sreenivasulu, PW-3, II Additional Judicial
First Class Magistrate, Nellore, PW-18, and Dr. C. Manohar, PW-19. The
defence in support of its plea, examined 7 witnesses i.e. DW-1 to DW-7.
The learned trial Judge, after appreciating the entire evidence, both oral
and documentary, on record, especially the evidence of PW-1 to PW-3, and
the dying declaration, Ex.P-13, convicted A-1 to A-5 and A-7 to A-9 for the
offences punishable under Sections 148 and 302 IPC for causing death of
deceased Patrangi Ramanaiah, convicted A-2 to A-4 for the offence
punishable under Section 324 IPC and A5 for the offences punishable under
Sections 324 read with 149 IPC for causing injuries to PW-1.
6. Being aggrieved by the judgment of the trial Court, all the accused
persons preferred Criminal Appeal no. 517 of 2005 wherein the High Court,
after re-appreciating the evidence in entirety, affirmed the conviction and
sentence passed by the trial court in respect of the present appellants and
partly allowed the appeal thereby acquitting A4, A8 and A9 giving them the
benefit of doubt.
7. We have heard Mr. Nagendra Rai, learned senior counsel for the
appellants and Ms. June Chaudhary, learned senior counsel for the State.
8. Criticizing the judgment of conviction, it is submitted by Mr.
Nagendra Rai, learned senior counsel for the appellants that the evidence
adduced by the prosecution witnesses should have been discarded inasmuch as
their testimony is replete with contradictions and as the occurrence had
taken place during the night about 9.30 p.m. and there was no electric
supply and hence, it could not have been possible on the part of the
witnesses to see the accused-appellants by lighting the earthen mud lamp
with a match stick. Learned counsel would contend that they are chance
witnesses and their evidence really do not inspire confidence and, in fact,
when cautiously scrutinized, they deserve to be totally discarded. It is
urged by him that the dying declaration, Ex. P-13, does not inspire
confidence inasmuch as the allegations are omnibus in character and no
specific overt acts have been attributed to any of these appellants. It is
contended by him that when the High Court has found that A-4, A-8 and A-9
have been falsely implicated, it would have been appropriate on the part of
the High Court to hold that the present appellants also had been falsely
implicated in the case. It is canvassed by him that the appellant no. 1
was attending the Water Committee meeting on the date of occurrence and the
same had been established by bringing acceptable evidence on record by
citing witnesses and also by filing documents Ex. D-3 to D-8 which are
documents maintained by Nellore Municipality. It is his further submission
that learned trial Judge as well as the High Court has not given any
justifiable reason to disregard the evidence of DW-1 to DW-7. It is also
urged by him that the appellants could not have been convicted in aid of
Section 149 IPC as the charge framed against them was simplicitor Section
302 IPC; and even if Section 149 IPC can be resorted to, in the absence of
specific charge, the Court is required to see the circumstances, what is
the nature of offence committed. Alternatively, it is submitted by him
that even if the assault on the deceased is accepted, regard being had to
the absence of intention and the nature of injury suffered by the deceased
and death having taken place after three days, they may be liable for
conviction under Section 304 Part II IPC and not under Section 302 IPC. To
buttress the said submission, he has drawn inspiration from decisions in
State of Orissa v. Dibakar Naik[1], Sunder Lal v. State of Rajasthan[2] and
Marimuthu v. State of Tamil Nadu[3].
9. Ms. June Chaudhary, learned senior counsel appearing for State,
resisting the aforesaid arguments, contended that there is no reason to
discard the dying declaration as there is no infirmity in the same. It is
further urged by her that the testimony of all the witnesses are credible
and the contention that PW-2 and PW-3 are chance witnesses does not deserve
any acceptance. Learned senior counsel for the State would further submit
that though the charge has not been framed under Section 149 of the IPC,
there is no bar, regard being had to the evidence on record, to convict the
accused-appellants with the aid of the said provision. It is canvassed by
her that it is not a case for conversion of the offence, for it is squarely
a case under Section 302 IPC and not under Section 304 Part I or Part II of
the IPC.
10. First, we shall advert to the issue of non-framing of charge under
Section 149 IPC. While dealing with the said issue, in Willie (William)
Slaney v. State of M.P.[4] Vivian Bose, J., observed that every reasonable
presumption must be made in favour of the accused person; he must be given
the benefit of every reasonable doubt. The same broad principles of
justice and fair play must be brought to bear when determining a matter of
prejudice as in adjudging guilt. The learned Judge proceeded to state that
all said and done, the Court is required to see whether the accused had a
fair trial, whether he knew what he was being tried for, whether the main
facts sought to be established against him were explained to him fairly and
whether he was given a full and fair chance to defend himself. Thereafter,
Bose, J. proceeded to observe thus:-
“In adjudging the question of prejudice the fact that the absence of a
charge, or a substantial mistake in it, is a serious lacuna will
naturally operate to the benefit of the accused and if there is any
reasonable and substantial doubt about whether he was, or was
reasonably likely to have been, misled in the circumstances of any
particular case, he is as much entitled to the benefit of it here as
elsewhere; but if, on a careful consideration of all the facts,
prejudice, or a reasonable and substantial likelihood of it, is not
disclosed the conviction must stand; also it will always be material
to consider whether objection to the nature of the charge, or a total
want of one, was taken at an early stage.
If it was not, and particularly where the accused is defended by
counsel (Atta Mohammad v. King-Emperor[5]) it may in a given case be
proper to conclude that the accused was satisfied and knew just what
he was being tried for and knew what was being alleged against him and
wanted no further particulars, provided it is always borne in mind
that “no serious defect in the mode of conducting a criminal trial can
be justified or cured by the consent of the advocate of the accused”
(Abdul Rahman v. King-Emperor[6]).
But these are matters of fact which will be special to each
different case and no conclusion on these questions of fact in any one
case can ever be regarded as a precedent or a guide for a conclusion
of fact in another, because the facts can never be alike in any two
cases “however” alike they may seem. There is no such thing as a
judicial precedent on facts though counsel, and even Judges, are
sometimes prone to argue and to act as if there were.”

Chandrasekhara Aiyar, J., in his concurring opinion stated thus:-
“A case of complete absence of a charge is covered by Section 535,
whereas an error or omission in a charge is dealt with by Section 537.
The consequences seem to be slightly different. Where there is no
charge, it is for the court to determine whether there is any failure
of justice. But in the latter, where there is mere error or omission
in the charge, the court is also bound to have regard to the fact
whether the objection could and should have been raised at an earlier
stage in the proceedings.”

After so stating, the learned Judge opined that generally in cases of
omission to frame a charge is not per se fatal. Eventually, he ruled
thus:-
“Sections 34, 114 and 149 of the Indian Penal Code provide for
criminal liability viewed from different angles as regards actual
participants, accessories and men actuated by a common object or a
common intention; and the charge is a rolled-up one involving the
direct liability and the constructive liability without specifying who
are directly liable and who are sought to be made constructively
liable.
In such a situation, the absence of a charge under one or other
of the various heads of criminal liability for the offence cannot be
said to be fatal by itself, and before a conviction for the
substantive offence, without a charge can be set aside, prejudice will
have to be made out. In most of the cases of this kind, evidence is
normally given from the outset as to who was primarily responsible for
the act which brought about the offence and such evidence is of course
relevant.”

11. After 1973 Code came into existence, two-Judge Bench in Annareddy
Sambasiva Reddy v. State of A.P.[7], relying on the principles enunciated
in Willie (William) Slaney (supra), has opined that the legal position
stated by the larger Bench would hold good after enactment of Code of
Criminal Procedure, 1973 as well in the light of Sections 215, 216, 218,
221 and 464 contained therein. Proceeding further, the Court has ruled:-
“Is non-mentioning of Section 149 in Charge 4 and Charge 5 a
fundamental defect of an incurable illegality that may warrant setting
aside the conviction and sentence of the appellants? We do not think
so. Non-framing of a charge under Section 149 IPC, on the face of the
charges framed against the appellants would not vitiate their
conviction; more so when the accused have failed to show any prejudice
in this regard. The present case is a case where there is mere
omission to mention Section 149 in Charges 4 and 5 which at the
highest may be considered as an irregularity and since the appellants
have failed to show any prejudice, their conviction and sentence is
not at all affected. Tenor of cross-examination of PW 1 and PW 3 by
the defence also rules out any prejudice to them.”

12. Keeping in view the aforesaid exposition of law, we are required to
see whether in the present case, the tests are satisfied. On a perusal of
the evidence on record, we find the facts and circumstances clearly bring
out that there was an unlawful assembly. Each of the accused person was
very well aware that they are tried for being a part of the assembly which
was armed with weapons and hence, it was unlawful. On a close scrutiny of
the evidence on record, it is difficult to hold that any prejudice has been
caused to the accused appellants. Thus, the said submission pales into
insignificance.
13. The next contention of the learned senior counsel for the appellants
is that the prosecution witnesses are chance witnesses, for there is no
occasion on their part to be at the scene of crime. Dealing with the
concept of chance witness, a two-Judge Bench in Rana Pratap and others v.
State of Haryana[8], has observed that:-
“We do not understand the expression “chance witnesses”. Murders are
not committed with previous notice to witnesses, soliciting their
presence. If murder is committed in a dwelling house, the inmates of
the house are natural witnesses. If murder is committed in a brothel,
prostitutes and paramours are natural witnesses. If murder is
committed on a street, only passersby will be witnesses. Their
evidence cannot be brushed aside or viewed with suspicion on the
ground that they are mere “chance witnesses”. The expression “chance
witnesses” is borrowed from countries where every man’s home is
considered his castle and every one must have an explanation for his
presence elsewhere or in another man’s castle. It is a most unsuitable
expression in a country whose people are less formal and more casual.
To discard the evidence of street hawkers and street vendors on the
ground that they are “chance witnesses”, even where murder is
committed in a street, is to abandon good sense and take too shallow a
view of the evidence.”

14. In Jarnail Singh v. State of Punjab[9], a two-Judge Bench opined that
the evidence of a chance witness requires a very cautious and close
scrutiny and as such a witness must adequately explain his presence at the
place of occurrence and if his presence at the place of incident remains
doubtful, then his version should be discarded.
15. In the case at hand, the prosecution has been able to establish the
presence of the witnesses at the place of occurrence. The plea that there
was no electricity and, therefore, it would not have been possible on the
part of the witnesses to see the accused-appellants by lighting the earthen
mud lamp does not deserve commendation, for the witnesses have
categorically deposed that they were able to see the accused persons and
the participation of the accused-appellants. Thus, despite the keen
scrutiny of their evidence, we are unable to put them in the category of so-
called ‘chance witnesses’ as has been nomenclatured by the learned senior
counsel for the appellants.
16. The next limb of submission of the learned senior counsel for the
appellants relates to acceptability and reliability of the dying
declaration recorded vide Ex. P-13. The criticism is advanced on the
foundation that it is absolutely vague. It is urged by him that the dying
declaration being absolutely infirm, it cannot be placed reliance upon and
once the dying declaration is discarded, a serious dent is created in the
prosecution story. To appreciate the said submission, we have carefully
scrutinized the contents of the dying declaration contained in Ex. P-13,
which has been recorded by the Additional Judicial Magistrate, First Class,
PW-18. In his testimony, he has categorically stated every aspect in
detail and nothing has been elicited in the cross-examination. At the time
of recording of the dying declaration, as the material would show, the
declarant was absolutely in a conscious state and there is an endorsement
in that regard by the treating doctor. The submission that the dying
declaration is eminently vague is neither correct nor is it based on any
material on record. On the scanning of the dying declaration, we find that
he has named Vutukuru Laxmaiah, A-1, Rayapu Sreenivasalu, A-2, Rayapu
Subbaiah, A-3, Meriga Ramanaiah, A-5, Amburi Raja, A-8, Rayapu Ravi, A-9,
and Rapayu Siddaiah. Thus, in the absence of any kind of infirmity or
inherent contradiction or inconsistency or any facet that would create a
serious doubt on the dying declaration, we are not inclined to discard it.
It is well settled in law that conviction undisputedly can be based on
dying declaration, if it is found totally reliable. In Mehiboobsab
Abbasabi Nadaf v. State of Karnataka[10], while discarding multiple dying
declaration, the Court held thus:-
“Conviction can indisputably be based on a dying declaration. But,
before it can be acted upon, the same must be held to have been
rendered voluntarily and truthfully. Consistency in the dying
declaration is the relevant factor for placing full reliance
thereupon. In this case, the deceased herself had taken contradictory
and inconsistent stand in different dying declarations. They,
therefore, should not be accepted on their face value. Caution, in
this behalf, is required to be applied.”

In Kashi Vishwanath v. State of Karnataka[11], a two-Judge Bench did
not place reliance on the dying declaration as there were three dying
declarations and they showed certain glaring contradictions.
17. At this juncture, it is worthy to note that the High Court has
acquitted A-4, A-8 and A-9 on the foundation that they have been falsely
implicated. Learned senior counsel for the appellants has contended that
when the appellate court had acquitted the said accused persons, there was
no warrant to sustain the conviction of other accused persons. On a
perusal of the judgment of appellate court, we find that the judgment of
acquittal has been reversed on the score that the names of A-8 and A-9 do
not find mention in the evidence of PWs 1 to 3. On similar basis, A-4 has
been acquitted. Suffice to mention here because the High Court has
acquitted A-4, A-8 and A-9, that would not be a ground to discard the
otherwise reliable dying declaration, for the evidence in entirety vividly
show the involvement of the accused-appellants.
18. The next plank of submission of the learned counsel for the
appellant, Vutukuru Lakshmaiah, appellant in Criminal Appeal No. 2047 of
2008, pertains to non-acceptance of plea of alibi. As is manifest, both
the Courts have elaborately dealt with it. As the judgment of the High
Court would reveal, a finding has been returned that there is no evidence
to the effect what is the distance between municipal office where the
Committee meeting was held and the place where the offence had been
committed; nothing has been brought on record to show that it was
impossible for one to reach the place of offence; that the authenticity of
the minutes book prepared under the signatures obtained have not been
maintained in discharge of public function because the Water Committee
constituted is not a statutory Committee. That apart, the law clearly
stipulates how a plea of alibi is to be established. In this context, we
may profitably reproduce a few passages from Binay Kumar Singh V. State of
Bihar[12]:-
“22. We must bear in mind that an alibi is not an exception (special
or general) envisaged in the Indian Penal Code or any other law. It is
only a rule of evidence recognised in Section 11 of the Evidence Act
that facts which are inconsistent with the fact in issue are relevant.
Illustration (a) given under the provision is worth reproducing in
this context:

“The question is whether A committed a crime at Calcutta on a
certain date; the fact that on that date, A was at Lahore is
relevant.”

23. The Latin word alibi means “elsewhere” and that word is used for
convenience when an accused takes recourse to a defence line that when
the occurrence took place he was so far away from the place of
occurrence that it is extremely improbable that he would have
participated in the crime. It is a basic law that in a criminal case,
in which the accused is alleged to have inflicted physical injury to
another person, the burden is on the prosecution to prove that the
accused was present at the scene and has participated in the crime.
The burden would not be lessened by the mere fact that the accused has
adopted the defence of alibi. The plea of the accused in such cases
need be considered only when the burden has been discharged by the
prosecution satisfactorily. But once the prosecution succeeds in
discharging the burden it is incumbent on the accused, who adopts the
plea of alibi, to prove it with absolute certainty so as to exclude
the possibility of his presence at the place of occurrence. When the
presence of the accused at the scene of occurrence has been
established satisfactorily by the prosecution through reliable
evidence, normally the court would be slow to believe any counter-
evidence to the effect that he was elsewhere when the occurrence
happened. But if the evidence adduced by the accused is of such a
quality and of such a standard that the court may entertain some
reasonable doubt regarding his presence at the scene when the
occurrence took place, the accused would, no doubt, be entitled to the
benefit of that reasonable doubt. For that purpose, it would be a
sound proposition to be laid down that, in such circumstances, the
burden on the accused is rather heavy. It follows, therefore, that
strict proof is required for establishing the plea of alibi.
[Emphasis supplied]

The said principle has been reiterated in Gurpreet Singh v. State of
Haryana[13], S.K. Sattar v. State of Maharashtra[14] and Jitender Kumar v.
State of Haryana[15].
19. In the instant case, the prosecution has been able to clearly
establish the presence of the accused-appellant A-1, appellant in Criminal
appeal No. 2047 of 2008, at the scene of occurrence. The initial onus put
on the prosecution having been discharged, the burden shifts to the accused
to establish the plea of alibi with certainty. As is evident from the
analysis made by the High Court that the plea of alibi of the accused-
appellant, A-1, could not be accepted as his presence has been proven. We
find the said opinion of the High Court is based on the material brought on
record and hence, there is no reason to differ with the same.
20. The last plank of submission of the learned senior counsel for the
appellants is that the appellants had no intention to commit the murder of
the deceased. It is also submitted by him that when death has occurred
three days after the incident, it is demonstrable that there was no
intention on the part of the accused-appellants to kill him. To appreciate
the said submission, we have perused the injury report. We find that there
are five stab injuries at different parts of the body i.e. near right
axilla, below the right axilla, over right hypochoncriam at mid clavicular
line, over the border of right scapula and over mid spinal region at the
level of 4th and 5th lumbar vertebra. The evidence on record shows that
the deceased was assaulted as he was a witness in Velongini Raja’s murder
case wherein the accused-appellant, A-1, was an accused. There are cases
where this Court has converted offence from 302 IPC to 304 Part I IPC,
regard being had to the genesis of occurrence or the nature of injuries.
It is because one of the relevant factors to gather the intention is the
nature of injury inflicted on the deceased. In the instant case,
considering the nature of injuries and the previous animosity, we are of
the considered opinion that it is not a fit case where the offence under
Section 302 IPC should be converted to Section 304 Part I IPC.
21. Consequently, we do not perceive any merit in these appeals and
accordingly, the same stand dismissed.

.............................J.
[Dipak Misra]

............................J.
[N.V. Ramana]
New Delhi
April 24, 2015
-----------------------
[1] (2002) 5 SCC 323
[2] (2007) 10 SCC 371
[3] (2008) 3 SCC 205
[4] AIR 1956 SC 116
[5] AIR 1930 PC 57
[6] AIR 1927 PC 44
[7] (2009) 12 SCC 546
[8] (1983) 3 SCC 327
[9] (2009) 9 SCC 719
[10] (2007) 13 SCC 112
[11] (2013) 7 SCC 162
[12] (1997) 1 SCC 283
[13] (2002) 8 SCC 18
[14] (2010) 8 SCC 430
[15] (2012) 6 SCC 204

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Saturday, April 25, 2015