TMI Blog2011 (7) TMI 1136X X X X Extracts X X X X X X X X Extracts X X X X ..... in Civil Misc. Appeal No.1581 of 2006 under Section 37(1)(A) of the Arbitration and Conciliation Act, 1996 (hereinafter called Act 1996 ) against the order dated 17.1.2006 passed by the District Judge, Jaipur City, Jaipur in Arbitration Case No.89/2004 whereby the application filed by the State of Rajasthan under Section 34 of the Act 1996 for setting aside the arbitral award dated 1.12.2003 had been allowed. 2. Facts and circumstances giving rise to these appeals are: A. The Public Works Department of the State of Rajasthan (hereinafter called PWD ) decided in September 1997 to construct the Bharatpur bye-pass for the road from Bharatpur to Mathura, which passed through a busy market of the city of Bharatpur. For the aforesaid work, tenders were invited with a stipulation that the work would be executed on the basis of Build Operate and Transfer (BOT). The total extent of the road had been 10.850 k.ms. out of which 9.6 k.ms. was new construction and 1.25 k.ms. was improvement, i.e. widening and strengthening of the existing portion of Bharatpur-Deeg Road. B. After having pre-bid conference/meeting and completing the required formalities it was agreed between the tendere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bharatpur-Deeg part of the road . The State of Rajasthan was directed to pay a sum of ₹ 990.52 lacs to MSK-appellant as loss due upto 31.12.2003 with 18% interest from 31.12.2003 onwards. The Tribunal further gave various other directions to the State in this regard. F. Being aggrieved, the State of Rajasthan filed objections under Section 34 of the Act 1996 and while deciding the same, the District Judge vide order dated 17.1.2006 set aside the Arbitral Award on the grounds that there was no clause in the agreement to issue notification barring the entry of vehicles in the city of Bharatpur; and the Tribunal erred in taking 1997 survey as basis for calculating the loss suffered by MSK-appellant. It held that MSK-appellant was not entitled to any monetary compensation under clause 10 of the concession agreement, but only entitled to extension of concession period, and the rate of interest was reduced from 18% to 10%. G. Being aggrieved, MSK-appellant preferred an appeal before the High Court wherein the High Court vide impugned judgment and order dated 24.4.2007 held that Bharatpur-Deeg section was part of the project and the contractor could collect the toll fee from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant shall not collect any toll fee on the Bharatpur-Deeg patch and to that extent the Tribunal and the courts below committed an error. It has further been submitted that the total contract had been for a sum of ₹ 13.25 crores including interest. The project was to be executed in two phases. The second phase for a sum of ₹ 3.24 crores had never been executed by the private appellant. The contractor could collect the compensation only on the basis of investment made by it. The concept of toll fee is of compensatory in nature wherein the State which has spent huge amount on construction of roads/bridges etc. has a right to get the said amount reimbursed, and therefore, in such a contract the concept of profit which prevails in other forms of contract cannot be the relevant component. 5. We have considered the rival submissions made on behalf of the parties and perused the record. In the appeal filed by the private contractor, MSK Projects, two issues are involved; namely, whether it was mandatory/necessary in view of the agreement/contract or on the basis of pre-bid understanding that the State had to issue the notification barring the vehicles through the marke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in such cases, be resolved by admitting extrinsic evidence. The rationale of this rule is that the nature of the dispute is something which has to be determined outside and independent of what appears in the award. Such a jurisdictional error needs to be proved by evidence extrinsic to the award. (See: Gobardhan Das v. Lachhmi Ram Ors., AIR 1954 SC 689; Seth Thawardas Pherumal v. The Union of India, AIR 1955 SC 468; Union of India v. Kishorilal Gupta Bros., AIR 1959 SC 1362; Alopi Parshad Sons. Ltd. v. Union of India, AIR 1960 SC 588; Jivarajbhai Ujamshi Sheth Ors. v. Chintamanrao Balaji Ors., AIR 1965 SC 214; and Renusagar Power Co. Ltd. v. General Electric Company Anr., AIR 1985 SC 1156). 9. In Kishore Kumar Khaitan Anr. v. Praveen Kumar Singh, (2006) 3 SCC 312, this Court held that when a court asks itself a wrong question or approaches the question in an improper manner, even if it comes to a finding of fact, the said finding of fact cannot be said to be one rendered with jurisdiction. The failure to render the necessary findings to support its order would also be a jurisdictional error liable to correction. (See also: Williams v. Lourdusamy Anr., (2008) 5 SC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . As a consequence of issue 1 2, which party breached the contract? 4. Whether the claimant is entitled to claim interest on its any due claim amount as per decision of issue 1 2? If so, from what date and at what rate of simple/compound interest? 5. Whether claimant or respondent is entitled for cost of arbitration incurred and claimed by, each party? If so, what amount and to which party? 6. Any other if any demanded by any party during proceedings. 14. The Tribunal considered the relevant agreement provisions as well as land lease deed, total package documents, minutes of pre-bid meetings and deed authorising collection of toll fee etc., and proceeded with the arbitration proceedings. The State of Rajasthan had not taken the defence that it was not agreed between the parties to issue the notification barring the traffic through the markets of Bharatpur city. The only issue remained as to whether there was delay in issuance of notification and implementation thereof. In such a fact-situation and considering the settled legal propositions, we are of the view that the District Judge as well as the High Court fell in error considering the issue which was not taken by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18% for the pre-arbitration period, for the pendente lite period and future interest be reduced to 9%. 18. In H.U.D.A v. Raj Singh Rana, AIR 2008 SC 3035, this Court considered various earlier judgments of this Court including Ghaziabad Development Authority v. Balbir Singh, AIR 2004 SC 2141; Bihar State Housing Board v. Arun Dakshy, (2005) 7 SCC 103; Haryana Urban Development Authority v. Manoj Kumar Anr., (2005) 9 SCC 541; H.U.D.A v. Prem Kumar Agarwal Anr., JT 2008 (1) SC 590 and came to the conclusion: .......the rate of interest is to be fixed in the circumstances of each case and it should not be imposed at a uniform rate without looking into the circumstances leading to a situation where compensation was required to be paid. 19. Be that as it may, the High Court while dealing with the rate of interest has relied upon the judgment of this Court in Krishna Bhagya Jala Nigam Ltd. (supra) and thus, there is no scope for us to interfere with the rate of interest fixed by the courts below. 20. The issue raised by the State before this Court in its appeal as to whether the Bharatpur-Deeg patch was an integral or composite part of the project and the private appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be permitted to use the collection of toll fee as augmenting the State revenues. In State of U.P. Ors. v. Devi Dayal Singh, AIR 2000 SC 961, this Court defined 'toll' as a sum of money taken in respect of a benefit arising out of the temporary use of land. It implies some consideration moving to the public either in the form of a liberty, privilege or service. In other words, for the valid imposition of a toll, there must be a corresponding benefit. The Court further held: Although the section has empowered the State Government to levy rates of tolls as it thinks fit , having regard to the compensatory nature of the levy, the rate of toll must bear a reasonable relationship to the providing of benefit. No doubt, by virtue of Section 8 of the Act, the tolls collected are part of the public revenue and may be absorbed in the general revenue of the State, nevertheless by definition a toll cannot be used for otherwise augmenting the State's revenue. (Emphasis added) 26. In fact, the toll fee under the Tolls Act, 1851 is of compensatory in nature wherein the Government can reimburse itself the amount which it had spent on construction of road/bridge etc. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... damages, court should make a broad evaluation instead of going into minute details. It was specifically held that where in the works contract, the party entrusting the work committed breach of contract, the contractor is entitled to claim the damages for loss of profit which he expected to earn by undertaking the works contract. Claim of expected profits is legally admissible on proof of the breach of contract by the erring party. It was further observed that what would be the measure of profit would depend upon facts and circumstances of each case. But that there shall be a reasonable expectation of profit is implicit in a works contract and its loss has to be compensated by way of damages if the other party to the contract is guilty of breach of contract cannot be gainsaid. 31. In B.S.N.L v. Reliance Communication Ltd., (2011) 1 SCC 394, this court held as under: 53. Lastly, it may be noted that liquidated damages serve the useful purpose of avoiding litigation and promoting commercial certainty and, therefore, the court should not be astute to categorise as penalties the clauses described as liquidated damages. 32. This Court further stated in Oil Natural Gas Corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l figure i.e. the toll fee recovered has not been disclosed. So far as the second phase is concerned, admittedly, the amount of ₹ 354.75 lacs has not been spent by the private appellant. This issue has been agitated by the State of Rajasthan before this Court in its Counter Affidavit wherein it is stated as under: It is respectfully submitted that as per the terms of the Agreement, petitioner was required to complete the project in two phases. In the first phase investment of ₹ 1045 lacs and after 5 years in the second phase ₹ 354.75 lacs was to be made by the petitioner. However, the petitioner has not abided by the terms of the agreement and has not made any investment for the second phase and, therefore, it has breached the terms of the contract and, therefore, it is respectfully submitted that the contention of the petitioner that he is entitled to recover its investment, is erroneous and petitioner is trying to give wrong picture about investment made and has not come to this Hon'ble Court with clean hands and, therefore, the present Special Leave Petition is liable to be dismissed by the Hon'ble Court. The concession period has come to an end. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss on the traffic survey of 1997 for commercial vehicles only as ₹ 26.34 lacs from 12/4/2000 to 30/9/2000. As the notification had been issued, and it was not the responsibility of the State to establish a police chowki etc. to implement the notification, there was no occasion for the tribunal to proceed further. Therefore, any award in favour of the private appellant in that respect for non-issuance of notification beyond the date of the notification, cannot be held to be justified and the same is liable to be set aside. 38. The State authority has decided to establish a toll road as it was not having sufficient funds. In case the claim of the private appellant is allowed and as the State is not in a position to grant further facility to collect the toll fee at such a belated stage, the purpose of establishing the toll road itself stands frustrated. More so, the toll fee cannot be collected to recover the amount never spent by the contractor. It is evident from the discourse in pre-bid meetings of the parties that it had been decided that compensation would be worked out on the basis of investment made by concerned contractor. More so, the statutory notification ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
