TMI Blog2021 (2) TMI 479X X X X Extracts X X X X X X X X Extracts X X X X ..... t agreement if it was unwilling to bear the consequences of the GST regime also proceeds on the presumption that the respondent had the ability to predict the adverse impact of this decision on consumer behaviour with respect to utilization of national highways. This line of argument also fails to account for the fact that by 28-6-2017, the day when the Government of India announced its intention to implement this regime, the parties were already bound contractually owing to the LoA issued by the petitioner on 21-6-2017, which aspect had been elucidated by the Learned Arbitrator - there are no merit in the petitioner s contention that the respondent s consent to execute the contract agreement on 30-6-2017 ought to be construed as an acquiescence on its part to bear the consequences of the implementation of GST. Whether the implementation of the GST regime qualified as any change in law which has a material adverse effect on the obligation of the parties hereto. as envisaged in the force majeure Clause, i.e. Clause 25(b) of the contract agreement? - HELD THAT:- The respondent observed the then prevailing traffic volume statistics and immediately sent notices to the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 713 of 2020 - - - Dated:- 29-9-2020 - Rekha Palli, J. Shri Balendu Shekhar with Vipul Singh and Rajkumar Maurya, Advocates , for the Petitioner. Shri Neeraj Kishan Kaul, Senior Advocate with Rakesh Sinha, Pawan Kumar and Ramchandra Madan, Advocates, for the Respondent. ORDER IA Nos. 8712/2020 8715/2020 : Allowed, subject to all just exceptions. 2. The application stands disposed of. IA No. 8714/2020 : 3. This is an application seeking condonation of delay in refiling the petition. In the light of the fact that the delay occasioned is only of 2 days, the application is allowed. 4. The application stands disposed of. O.M.P. (COMM) No. 486/2020 IA No. 8713/2020 : 5. This petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act ), filed by National Highways Authority of India (NHAI), which was the respondent in arbitration, assails the award dated 20-11-2019 passed by the sole arbitrator. Under the impugned award, the Learned Arbitrator has held the petitioner liable to pay the respondent a sum of INR 1,40,60,784 along with future interest @ 9% per annum by way of compensation on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and it tried to plead its case with the petitioner in order to revisit their agreement pertaining to toll collections or seek grant of leniency. In fact, as early as on 5-7-2017, the respondent issued a notice in terms of clause 25(c)(i)(l) of the contract agreement informing the petitioner about this shortfall in traffic volume and toll collection due to implementation of GST and requested the petitioner to conduct a three-day traffic survey on the Plaza to assess the actual fall in traffic volume for itself. The respondent even offered to bear the costs of the traffic survey. Subsequently, on 10-7-2017, the respondent, citing implementation of GST as a force majeure event covered under clause 25(b)(v) of the contract agreement, submitted a statement of the losses suffered by it until 9-7-2017. 9. The petitioner, in turn, vide its response dated 11-7-2017, refused to accept the petitioner s claims and denied that the implementation of GST was a force majeure event. Rather, the petitioner claimed that since the GST was originally proposed to be implemented w.e.f. 1-4-2017, instead of 1-7-2017, much before execution of the contract agreement on 30-6-2017, the fact of implementat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and held that notwithstanding the respondent s prior knowledge regarding the implementation of the GST Act originally scheduled to begin from 1-4-2017, which was subsequently suspended, it could not possibly have known the next scheduled date. Even the petitioner s argument that the respondent s act of executing the contract agreement on 30-6-2017, despite being aware of the implementation of the GST w.e.f. 1-7-2017, disentitled it from claiming force majeure was rejected. The Learned Arbitrator reasoned that the respondent could not possibly withdraw from the contract agreement considering the fact that this would have triggered Clause 33 of the contract agreement which would have entitled the petitioner to invoke the security deposited by the respondent on 28-6-2017. However, the arbitrator held that the implementation of the GST was indeed a force majeure event in the light of the petitioner s circular dated 16-3-2018 whereunder it accepted GST w.e.f. 1-7-2017 as a change in law falling under the ambit of force majeure as envisaged in the contract agreement. Aggrieved by these findings, the petitioner has filed the present petition. 13. Assailing the award, Mr. Balendu She ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tandard for evoking the force majeure clause. Even if the circular came with a caveat that the application of force majeure clause on account of implementation of GST would be decided on a case by case basis, then the fact that the Learned Arbitrator has already appreciated the evidence on record to conclude that force majeure clause is applicable in the present case, resolves the petitioner s complaint. Therefore, the Learned Arbitrator has rightly qualified the Government s decision to implement GST as a force majeure event in terms of clause 25(b)(v) of the contract agreement. He further submits that once the Learned Arbitrator has perused the material placed on record and confirmed that there was a shortfall in traffic on the Bamanbore-Garanore section of NH-8A for the period between 2-7-2017 and 10-9-2017, this Court cannot be asked to re-examine this issue at this stage in a petition under Section 34 of the Act. For these reasons, he submits that there is no infirmity in the impugned award and prays for dismissal of the present petition. 15. Before I deal with the rival contentions of the parties, it may be useful to note the limited scope of interference by this Court whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the said policy would be implemented. The Learned Arbitrator has rightly held that once the earlier date of 1-4-2017 was postponed by the Government of India, the next date of implementation was not known or could not be speculated by anybody. The petitioner s assertion that the respondent ought to have refrained from executing the contract agreement if it was unwilling to bear the consequences of the GST regime also proceeds on the presumption that the respondent had the ability to predict the adverse impact of this decision on consumer behaviour with respect to utilization of national highways. This line of argument also fails to account for the fact that by 28-6-2017, the day when the Government of India announced its intention to implement this regime, the parties were already bound contractually owing to the LoA issued by the petitioner on 21-6-2017, which aspect had been elucidated by the Learned Arbitrator. This implied that on 30-6-2017, had the respondent decided to refrain from executing the agreement based on the notification dated 28-6-2017 issued by the Government of India, it would have had to forfeit the securities it had furnished in favour of the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effects of GST on transportation. Therefore claimant would also not be in a position to assess/forecast the immediate effects of GST on the business risk as it was covered under force majeure clause. (iv) Notwithstanding the contents of para (ii) supra, claimant having deposited the performance security and given bank guarantee, was not in a position to withdraw the offer as it would have attracted the clause 33 wherein the respondent can forfeit the performance security and adjust any dues or claim damages without prejudice to its other rights. (v) Claimant had quoted the tender after going through the provisions of the contract. Claimant was aware about the provisions of force majeure Clause in the contract. Provisions of Clause 25(b) (c)(l) etc. are being quoted below 25(b) force majeure Event : Except as stated in Clause (a) above force majeure Event means an event or circumstances or a combination of events and circumstances referred to in this clause which are beyond the reasonable control of the Party or Parties to this Contract and which party could not have prevented or reasonably overcome with the exercise of its reasonable skill and care in relation t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ward dip of highway traffic and toll collections at that point of time. The respondent even requested the petitioner to carry out its own traffic assessment to verify the respondent s claims, but the petitioner refused. It is against this backdrop that the petitioner issued the circular dated 16-3-2018, specifically for the benefit of its toll collection contractors, which stipulated that while the implementation of the GST Act constituted a change in law , but whether this change invited application of the force majeure clause in a contract would be determined in the facts of each case by the respondent s representatives. It may be useful to refer to the contents of the petitioner s circular dated 16-3-2018 in extenso : NHAI/13013/CO/17-18/CB/GST/114535 Date : 16-3-2018 To All ROs. Subject : Relief to User fee Collection Contractors on Public Funded Projects at the toll plazas on NHs on account of implementation of GST. Sir, Various representations have been received from various Toll Contractors at Public Funded plazas regarding loss in traffic and its impact on toll revenue collection, if any, due to implementation of Goods and Services Tax (GST) by Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder in Paragraph 4.3.7 of the impugned award : 4.3.7 Having decided/adjudicated in para 4.3.5 supra, that the GST notification is applicable under force majeure in the present agreement, it is desirable to examine the quantification of the claim due to reduction in traffic volume on account of GST. Let me examine the volume of traffic stated by claimant respondent as below : (a) Respondent in paras 4.2.1(vii) 4.2.3 has compared the volume of traffic of May, June and July, 2017 and as per respondent s record, it is revealed - as 1,00,679, 98,115 and 1,31,860 vehicles respectively. As per respondent, the traffic volume of July, 2017, after implementation of GST, has increased to 1,31,860 vehicles. (b) Claimant in para 4.1.22 supra has however stated that the respondent s above statement is incorrect since the Respondent has placed on record only tollable traffic and no exempted category of vehicles are mentioned. The volume of traffic for July, 2017 submitted by the Claimant includes the exempted category of vehicles with the tollable traffic. Respondent has therefore portrayed a completely misleading picture. In fact, during July, 2017, 42,895 exempted cat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Arbitrator not only delved into the specifics of the respondent s claims, but also meticulously combed through the specific project inputs provided by the respondent to conclude that it had suffered material losses in toll revenue owing to the implementation of GST. The Learned Arbitrator conducted a thorough examination of the data pertaining to traffic volume and toll collections placed before it and arrived upon a sound decision to extend the benefit of the petitioner s circular dated 16-3-2018 to the contract agreement executed between the parties on 30-6-2017, for the purpose of upholding the invocation of Clause 25 of the contract agreement, i.e., force majeure Clause. There is, thus, no infirmity in the award dated 20-11-2019 even on this ground. 22. In the light of the aforesaid discussion, I find absolutely no reason to interfere with the well-considered findings of the Learned Arbitrator. In fact I am of the view that the conclusion of the Learned Arbitrator is, in the facts of the present case, the only possible one in law. 23. For the aforesaid reasons, there is absolutely no ground made out to interfere with the impugned arbitral award passed by the Learned Arb ..... X X X X Extracts X X X X X X X X Extracts X X X X
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