IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN, JAIPUR BENCH, JAIPUR S. B. CIVIL MISC. APPEAL NO. 1581/2006 M/s. MSK Projects (I)(JV) Ltd. V State of Rajasthan & Anr. Date of Judgment: 24th April 2007 Hon’ble Mr. Justice R. S. Chauhan Mr. Paras Kuhad with Mr. Pancham Surana and Ms. Suhashini Rao, for the Appellant. Mr. S.N. Gupta, for the Respondents. (Per Court): REPORTABLE This appeal arises out of order dated 17.1.2006 passed by the District Judge, Jaipur City, Jaipur, whereby the objections raised by the respondents under Section 34 of the Arbitration and Conciliation Act, 1996 (‘the Act’, for short) has been allowed and the award dated 1-12-2003, passed in favor of the appellant, by the learned Arbitral Tribunal has been set aside. The brief facts of the case are that by 1997, in Bharatpur the road going from Bharatpur to Mathura passed through a highly congested area of the city. Therefore, the Public Works Department (henceforth to be referred as the respondents) were satisfied that a Bharatpur Bye-pass (‘the project’, for short) needs to be constructed. According to respondents, the project would consist of the Bye-pass from Bharatpur to Mathura (Km. 4/553) to Bharatpur-Jaipur Road, National Highway 11 (Km 59/800). The length of the Bye-pass would be 10.850 Kms. The project would also include the Bhartpur- Deeg Road. The Bharatpur-Deeg Road covered only 1.25 Kms of the total project of 10.850 Kms. (This is essential to spell out at this juncture as one of the two controversies in this case revolves around the Bharatpur-Deeg segment of the project). Since due to financial constraint, the respondents were unable to construct the said project on their own, they invited tenders for the project. The project was to be done on the basis of Build, Operate and Transfer (‘BOT’, for short). In response thereto, the appellant filed their tender on 26.9.1997 and quoted the cost of the project as Rs.1, 325 lacs with a total concession period as 111 months (9 years and 3 months), i. e. from 7-1-1999 to 6-4-2008, from the date of handing over the land till the handing over the facility to the respondents. However, prior to the finalization of the bid, on 4.9.1997, a Pre-Bid Conference took place where the respondents gave clarifications sought by the various bidders, including the levy and collection of toll on the Bharatpur-Deeg Section of the Bye-pass. Since the Bharatpur-Deeg Section of the Bye-pass was a short one, as pointed out above, doubts were raised whether the bidders will be allowed to levy and collect toll on this Section or not. During the Conference, the respondents agreed that toll would be levied and collected for this Section as well. It was also clarified by the respondents that in breach of contract, the amount of compensation would have to be worked out keeping in view the investments made by the entrepreneur. On 5-2-1998, the financial bid was opened; on 25-7-1998 the respondents sent the letter of acceptance to the appellant. The appellant was called upon to furnish performance security deposit, which they did. Thereafter, on 19-8-1998, the appellant and the respondent entered into a Concession Agreement--agreement for authorizing collection fee (Toll) by the concessionaire. According to the said agreement, the appellant was to recover the investment through levy of fees toll on all the users on the basis of fix tariff rate as prescribed by the Government published in the official gazette. The land was handed over by the respondents to the appellant on 7.1.1999. Therefore, the total concession period including the construction was from 7.1.1999 to 6.4.2008. However, the appellant completed the project on 10.4.2000 itself. The said Bharatpur Bye-pass constructed by the appellant, was inaugurated on 12.4.2000. However, while inaugurating the said project, the then Chief Minister announced that no toll would be levied on vehicle plying over the Bharatpur-Deeg Section of the Bye-pass. Since the respondents had represented to the appellant that they would be permitted to levy toll on all the vehicles utilizing the Bharatpur-Deeg Section of the Bye-pass, the announcement by the then Chief Minister took the appellant by surprise. Immediately, the appellant wrote to the respondents about the exorbitant loss that they would suffer if the announcement with regard to the Bharatpur-Deeg Section were implemented. Considering the loss that the appellant would suffer, the Government permitted the appellant to collect the toll on the said Section from 28.4.2000. However, due to severe agitation by the public, due to local pressures, the Collector, Bharatpur restrained the appellant from collecting the toll from the vehicles plying on the Bharatpur-Deeg Section from 13.5.2000. Since the appellant was suffering huge losses, a meeting was held in the Chamber of the PWD Secretary wherein a decision was taken that a joint survey would be made in order to assess the extent of loss suffered by the appellant. Consequently, a joint survey of the traffic passing through the Bharatpur-Deeg Segment was carried on by the Executive Engineer, PWD, the Sub-Divisional Magistrate, Bharatpur and the appellant from 3.7.2001 to 10.7.2001 (henceforth to be referred to as ‘the 2001 Survey’, for short); the losses incurred by the appellant came to be assessed and quantified on the basis of the said Survey. The bar on collection of toll from the Bharatpur-Deeg section was one of the disputes, which erupted between the appellant and the respondents. Another grievance that arose from the appellant’s side related to the fact that the toll collection depended on the quantity of traffic passing through the Bharatpur Bye-pass. In case the traffic was not prohibited to pass through Bharatpur, the vehicles would continue to use the old route through Bhartpur and would thereby avoid using the Bharatpur Bye- pass. Hence, such traffic would avoid paying the toll. Thus, according to the appellant, the Government was duty bound to issue such notification as would restrict the traffic passing through the Bharatpur town, which was avoiding the payment of the toll. Despite the various representations made by the appellant to the respondents for preventing the traffic from circumventing the Bye-pass, the Government failed to issue the notification within a reasonable time: although the Bye- pass was inaugurated on 12-4-2000, the notification was not issued till 1-9-2000 and was not made applicable till 1-10- 2000. Thus, the appellant continued to suffer losses on this account also. Therefore, vide letter dated 11.10.2001, the appellant invoked the Arbitration clause and prayed for appointment of an Arbitral Tribunal in accordance with Clause 18 of the Bid Document. According to Clause-18, an Arbitral Tribunal of three Arbitrators was to be appointed: one by the entrepreneur, one by the Government and third through mutual consent of both the Arbitrators so appointed by the parties. The appellant appointed Mr. A.P. Dalvi as the Arbitrator from their side and requested the respondents to appoint an Arbitrator from their side. However, the respondents did not pay any heed to the appellant’s request. Hence, the appellant filed an arbitration application before this court. Vide order dated 12.4.2002, this court appointed one Mr. N.P. Mathur as the Arbitrator. Subsequently, Mr. Dalvi and Mr. Mathur appointed Mr. S.M. Duggar as the third Arbitrator. Hence, the Arbitral Tribunal of three Arbitrators was duly constituted. On 23.9.2002, the appellant filed their statement of claim; on 7.12.2002, the respondents filed their reply; on 21.12.2002, the appellant filed their rejoinder. Considering the pleadings of the parties, the learned Tribunal framed the following issues: 1. (a) Whether the claimant, as per agreement is entitled to collect toll on Bharatpur-Deeg road both ways or not? (b) As an effect of it, is claimant entitled to recover its amount of claim of Rs. 453. 69 lacs up to 31-12-2002 and onwards or not? 2. (a) Whether there was delay on the part of the State in issuing a Notification for restriction of traffic through the town, which has effected the toll tax or not? If so, how much delay and delay in full rate of safe implementation as on date, or not? (b) By virtue of it, is the claimant entitled to recover its claim of Rs. 292.17 lacs up to 31-12-2002 and thereafter or not? Or merely by concession period as averred by the Respondent-State? 3. As a consequence of issue Nos. 1 & 2 which party breached the contract? Whether claimant or Respondent-State? 4. Whether the claimant is entitled to claim interest on its 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 the claimant or Respondent- State is entitled for cost of Arbitration incurred and claimed by each party? If so, at what amount and to which party? 6. Any other if any demanded by any party during proceedings. After considering the entire evidence, the learned Tribunal adjudicated each and every issue extensively and after giving findings on all issues, passed a detailed speaking Award in favour of the appellant on 1.12.2003. The Arbitral Tribunal directed the respondents as under:- (i) Pay a sum of Rs.990.52 Lacs (Rupees Nine Hundred Ninety, and Fifty-two Lacs only) towards actual loss under Issue No.1 and above, due up to 31.12.2003 under this award. (ii) The respondent must also pay 18% simple interest on amount of Rs.990.52 Lacs to the claimant from 31.12.2002 up till it is actually paid to the claimant. (iii) Relief 1 and 2 above are consequential effects of breach of contract by Respondent up to 31.12.2003 only. In order to plug such breach in totality so as to avoid its re-occurrences thereafter following directives to the Respondent are further awarded: (a) As per agreement Claimant must be allowed to re-start toll collection on Bharatpur-Deeg Section of Bye-pass from 1.1.2004 so that performance of contract by both parties in right sanctity, is resorted. (b) The respondent must issue appropriate order in this regard to restore the rights of the claimant for toll collection on Bharatpur-Deeg section of the bypass. (c) A police chowki be established near the tollbooth on Bharatpur-Deeg section of the Bye- pass to prevent any untowardly incidents as had occurred in the past and total cost in this regard shall be met with the claimant. The duration of this Police chowki is to be decided by both parties to the contract for maintaining law and order and smooth collection of toll by the claimant. (d) The Tribunal directs respondent to permit claimant for relocation of tollbooth on existing highway i.e. on Jaipur-Bharatpur Road NH-11 and Mathura-Bharatpur Road just before the start of the by-pass. It further directs respondent that Police Chowkies shall be established at both the ends of the Bye-pass, the cost of which will be borne by the claimant for such period as both parties may feel its necessary. In case, somehow the relocation of the tollbooth on existing highways, i.e. Jaipur-Bharatpur Road NH-11 and Mathura-Bharatpur Road SH No.14 just before the start of the Bye-pass is not implemented, then respondent shall have to reimburse quarterly the claimant’s loss in the toll revenue as calculated in Table T-5 up to the end of concession period. This reimbursement shall have to be made timely at the end of each quarter on the first day of the next quarter otherwise for delay additional liability of 18% p.a. simple interest will have to be paid by the respondent for such delay. (e) In case the respondent (the State Govt.) somehow cannot implement (a), (b) and (c) referred above, then it shall have to reimburse quarterly, the claimant’s loss in the toll revenue as calculated in the Annexure-Table T-3 up to end of concession period. This reimbursement shall have to be made timely at the end of each quarter on the 1st day of the next quarter otherwise for any delay additional liability of @ 18% p.a. simple interest will be on the respondent for such delayed period. (iv) Both the parties must meet their own cost of arbitration. No further relief of any kind has been awarded by the Tribunal to any party. Since the said Award aggrieved the respondents, they filed objections under Section 34 of the Act before the learned Judge. The respondents raised the following objections: A) the learned Tribunal was bound by the contract entered into by the parties. The learned Tribunal has nowhere concluded that the respondents had committed breach of contract. Yet, still the learned Tribunal has awarded a huge compensation of Rs. 990.52 lacs in favor of the appellants. Since the offer was made on the basis of survey of traffic flow carried out on 14-4-94 and 15-4-94 (henceforth referred to as ‘the 1994 Survey’, for short), the learned Tribunal should have relied upon the said Survey for calculating the alleged loss suffered by the appellant. However, while assessing the loss caused to the appellant, the learned Tribunal has relied upon a survey carried out in 1997. Hence, the basis of calculation is misplaced. B) According to Clause 15 (a) of the Bid Document, no financial liability could be imposed upon the State. At best, the State could be asked to increase the concession period. Yet, the learned Tribunal has placed a financial burden of Rs. 990.52 lacs on the State. C) Without any evidence, the learned Tribunal has concluded that the then Chief Minister had announced that no toll would be realized on the Bharatpur-Deeg Section of the Bye-pass. Therefore, the award deserves to be set aside. D) According to Clause 7 of the Concession Agreement, it was specifically stated that vehicles plying on ‘service road’ would be exempted from toll. The Bharatpur-Deeg section is a ‘service road’. Therefore, under Clause 7, the traffic is exempted from paying any toll. Hence, the appellant does not have the right to collect such toll on the said segment. E) According to Clause 10 of the Concession Agreement, in case the toll rate is reduced, then the appellant can only seek extension of the concession period, but they could not seek monetary compensation. F) No duty was cast on the respondents to prohibit the traffic from entering into Bharatpur and to ensure the said traffic is diverted to the Bye-pass either in the Bid Document, or in the Concession Agreement,. Despite the non-existence of such a duty, the learned Tribunal has held that the respondents have failed to issue the necessary notification within a reasonable time. Therefore, they have awarded compensation on this account also. Thus, the learned Tribunal has traveled beyond the contract between the parties. For these reasons, the learned Tribunal has committed misconduct. Vide order dated 17-1-2006, the learned Judge set aside the said Award. Although the learned Judge accepts the contention of the appellant that the respondents had breached the condition with regard to the collection of the toll on the Bharatpur-Deeg section, the learned Judge sets aside the award on the following grounds: firstly, the learned Tribunal has erred in taking the 2001 Survey as the basis for calculating the loss suffered by the appellant. According to the learned Judge, the 1994 Survey should have formed the basis of such calculation and not the 2001 Survey. Secondly, the learned Judge has relied upon Condition No. 10 of the Concession Agreement to hold that the appellant was not entitled to any monetary compensation. Under Clause 10 of the Concession Agreement, the appellant was entitled only to extension of the concession period but no financial burden could be placed on the respondent. Hence, according to the learned Judge, the learned Tribunal has committed misconduct when it granted a compensation of Rs. 990.52 lacs to the appellant. For, thereby the learned Tribunal has placed ‘a financial burden’ on the respondent. Thirdly, the learned Tribunal was not justified in imposing a simple interest of 18% per annum on the compensation amount. The learned Judge, therefore, reduced the interest rate from 18 % to 10 % per annum. Hence, the learned Judge quashed and set aside the award of the learned Tribunal as far as it related to Issue No. 1-B, 2-B and Issue No. 4. For the rest of the remaining award, the learned Judge directed that the remaining amount should be paid along with a simple interest of 10% per annum. Hence, this appeal before this court. Mr. Paras Kuhad, the learned counsel for the appellant, has raised a plethora of arguments: firstly, the scope of judicial review of an arbitral award is limited; the learned Judge has traveled beyond the judicial limits. Secondly, the counsel has taken this court through the relevant clauses of the Bid document, the minutes of the Pre- Bid Conference and the Concession Agreement to argue that the respondent had represented to the appellant that they would be able to collect the toll on the Bharatpur-Deeg section of the Bharatpur Bye-pass. However, subsequently, the respondent had breached this condition. Thirdly, according to the Bid document, the survey of 1994 was not the base mark as held by the learned Judge. In fact, the contract between the parties left it to the appellant to carry out their own survey of the traffic flow and to calculate the future prospect for increase in the traffic flow on the basis of their own survey. Fourthly, in order to assess the extent of loss suffered by the appellant, the latest flow of traffic had to be calculated. This was done through the joint survey of the appellant and the officers of the respondent department in the form of 2001 Survey. The learned Tribunal has not relied on the survey conducted in 1997 as claimed by the respondents. In fact, the learned Tribunal had validly relied on the 2001 Survey to assess the loss suffered by the appellant. Therefore, the learned Tribunal has not gone beyond the contract while taking the 2001 Survey as the basis for the assessment of loss. Fifthly, the learned Judge has misread Clause No. 10 of the Concession Agreement. Clause No. 10 deals with the situation when the government reduces the toll rates chargeable by the appellant. It does not deal with the situation when the government has placed a total embargo on the appellant and has prevented them from collecting even a single penny from the toll on the Bharatpur-Deeg Section. In fact, according to Clauses-15 and 17 of the Bid Document, the compensation to be paid for breach of contract is to be based on the amount of investment made by the appellant and the losses suffered by them. Sixthly, it was obvious to the parties that the appellant was making a huge investment in the project. The investment had to be realized as soon as possible. But, the investment could be realized only when the respondent ensured that vehicles are prevented from using the old route and are diverted to use the Bharatpur Bye-pass. Hence, it was an implied condition of the contract that the respondent would issue the necessary notification preventing the people from using the old route and diverting them to the newly built Bharatpur Bye-pass. However, the respondent failed to issue the required notification within a reasonable time. Therefore, the appellant suffered losses from 12.4.2000 to 31.12.2003. Thus, the learned Tribunal was justified in awarding compensation to the appellant under this head also. But, the learned Judge has committed a mistake in not reading the implied condition of the contract and in denying the compensation to the appellant under this head. Seventhly, the learned Arbitral Tribunal had correctly relied on Sections 73 and 74 of the Contract Act, 1872 to grant the compensation to the appellant for the losses suffered by them. Lastly, the learned Judge has incorrectly relied on the case of M/s B. L. Gupta Construction (P) Ltd. v Bharat Co- operative Group Housing Society Ltd. (AIR 2004 SC 319) for reducing the interest rate granted by the learned Tribunal. The facts of the said case are inapplicable to the present case. On the other hand, Mr. S. N. Gupta, the learned counsel for the State, has argued firstly, the appellant is not entitled to collect the toll on the Bharatpur-Deeg section as the said section falls under the definition of “service lane”. According to Clause-7 of the Concession Agreement, no toll could be realized from vehicles plying on the ‘service lane’. Secondly, the learned counsel has feebly argued that according to the Bid document, the survey of 1994 was to form the basis of assessing the loss suffered by either party in case of breach of contract. However, he has conceded and according to us fairly that Clause 10 of the Concession Agreement is not applicable to the present case. Thus, according to him, the respondent is liable to compensate the appellant for the losses suffered by them. Thirdly, he has contended that there is no explicit requirement contained in the agreement, which requires the respondent to issue the notification prohibiting the people from using the old route and to take the Bharatpur Bye-pass. In the absence of such a legal requirement, the learned Judge was justified in quashing the impugned award. Fourthly, the learned Judge was justified in reducing the interest rate from 18% to 10% per annum. Lastly, the scope of judicial review of an arbitral award is a vast one. He has, thus, supported the impugned order in a piece-meal fashion. We have heard the learned counsels for the parties, have perused the impugned order and have examined the record that has been submitted before this court. In order to understand the controversy, it is imperative to first consider the relevant clauses of the Bid Document, the Minutes of the Pre-Bid Conference held on 4-9-1997 and the Concession Agreement dated 19-8-1998. For, it is these documents, along with few others, which would be noted at the appropriate place, that throw light on the obligations and the liabilities between the parties. Hence, they are relevant for resolving the issues before this court. According to the Concession Agreement, “the following documents shall be deemed to form and be read and construed as part of this agreement viz. a) This form of Agreement. b) The letter of acceptance dated 25-7-1998. c) The Bid document along with the Project Report (Terms and conditions of BOT for highway). d) Form A-5 (Financial Bid) e) Agreement for authorizing collection of Fee (Toll) by Concessioner. f) The drawings. g) Letters dated 17-12-1998, 20-1-98, 19-3-98, 22- 4-98 from Chief Engineer (Road-I) and Government letter dated 29-4-98 and letter dated 11-5-98 from Chief Engineer (Road-I). h) Letters dated 17-12-97, 5-2-98, 27-3-98, 23-4- 98 and 13-5-98 of the firm M/s MSK Projects (India) Ltd., (Joint Venture) Baroda extending the validity period up to 25-7-98. i) Letter dated 25-7-1998 of M/s MSK Projects (India) Ltd., (Joint Venture) Baroda. According to the Bid Document, the location of the project also includes the Bhartpur-Deeg Section. The Bid Document also contains the data collected on the flow of traffic on 14th and 15th of April 1994. This data also includes the traffic flow on the Bharatpur-Deeg Section. Thus, clearly the Bharatpur-Deeg Section was considered to be an essential part of the project. Moreover, the minutes of the Pre-Bid Conference also show that “the entrepreneurs wanted a clarification if the traffic plying between Bharatpur & Deeg or Deeg & Bharatpur would also be liable to pay the toll fee since this traffic would be using a very small portion of the Bye pass. It was clarified that this traffic would also be required to pay the toll fee.” Thus, at the Pre-Bid Conference the respondent had made a representation to the bidders that the users of the Bharatpur-Deeg Section, in both the directions, would be required to pay the toll fees. Hence, the right to realize the toll on the said Section was granted to the bidders. Once this representation was made, once the said Section was included in the project, the respondent is estopped from disclaiming the inclusion of the said Section in the project. It is further estopped from claiming that the appellant is not entitled to collect the toll