Case: National Highways Authority Of India Vs. M/S Jsc Centrodostroy

2. Contract No.TNHP/2, Construction Packagefor a contract price of Rs.295.53 crores for executing the work ofand strengthening of the existing 2 lanes sections between km 38 to km 115 on Nationalin Uttar Pradesh was awarded to the Respondent on 12.03.2001.Disputes having arisen between the parties, the matter was referred to the Arbitral Tribunal. Two claims were raised by the respondent namely:?(i) Dispute No. 1Compensation for additional cost on account of increase in Service Tax on the Insurance Premium under the Insurance Policy for the Project.(ii) Dispute No. 2Compensation for additional cost on account of Service Tax on the Bank Guarantee charges.?5. It was submitted by thethat in terms of Clause 21.1 of General Conditions of contract, for the works awarded under the contract, an insurance policy was required to be taken w.e.f. 1.4.2001 initially for a period to 13.09.2006 which was later extended to 30.09.2009. It was submitted that General Insurance Policies including insurance for works were subject to levy of service tax which would be collected by the Insurance Company along with premium chargeable. There being revisions in the rate of service tax from 5% to 10.30%, over a period of time, according to the claimant service tax paid in excess of 5% was reimbursible by the appellant under Clause 70.8 of COPA. Similarly, in terms of the Clause 10.1 of COPA, thewas required to furnish Bank Guarantee for due execution of the contract by way of performance security. Service tax in relation to the Bank Guarantee as collected by the Bank had risen from 5% to 10.30% during the course of the contract and as such according to theit was entitled to be reimbursed by virtue of Clause 70.8 of COPA. The Arbitral Tribunal by its unanimous award dated 28.2.2013 accepted the aforesaid claims and directed that theshall be paid following sums in relation to disputeThe Claimant shall be paid by the Respondent an amount of Rs. 11,34,877/on account of Service Tax paid by him at rates in excess of 5% of the premium paid.6.2 The Claimant shall also be paid by the Respondent a sum of Rs. 11,22,811 towards interest on the above amount for period upto the date of this award i.e. 28.02.2013.6.3 Post award interest shall be payable in addition, on the principal sum awarded of Rs. 11,34,877/at the rate of 12% per annum from 01.03.2013 to the actual date of payment of amounts under pars 6.16.2 above. No post award interest shall however be payable in case the above sums are payable within 90 days of the date of award.?Similarly the Arbitral Tribunal awarded to thefollowing sums under dispute No.The Claimant shall be paid by the Respondent an amount of Rs. 63,58,368/on account of additional cost incurred on the Bank Guarantees furnished to the Respondent in terms of the Contract.10.2 The Claimant shall also be paid by the Respondent a sum of Rs. 43,84,987/towards interest on the above amount for period upto the date of this award i.e. 28.02.2013.10.3 Post award interest shall be payable in addition on the awarded sum of Rs. 63,58,368/at the rate of 12% per annum (simple) from the date of award to the actual date of payment of the said sum. No post award interest may, however, be paid in case the sums awarded under 10.1 and 10.2 above are paid within 90 days of the date of the award.?6. The award passed by the Arbitral Tribunal proceeds on the ground that the additional costs as a result of revision in service tax which thewas required to bear, were covered under Clause 70.8 of COPA. It was observed that service tax was not an input to the indices used in Prices Adjustment Formulae in Clause 70.3. It concluded asclaim in question is for reimbursement of additional costs resulting from change in Central Law which came into effect after the base date as defined in70.8. In terms of thesuch costs are not payable separately if the same have already been taken into account in indexing of the inputs in Price Adjustment Formulae under70.3. The Claimant has placed on record a letter dated 24.01.2008 from the Economic Advisor, Ministry of Commerce and Industry, confirming that Service Tax was not an input into indexing of Whole Sale Price Indices, used in India.?7. The award passed by the Arbitral Tribunal was challenged by the appellant by filing OMP No.623 of 2013 under Section 34 of the Arbitration and Conciliation Act, 1966 before the High Court of Delhi. By order dated 21.10.2013 Single Judge of the High Court dismissed said petition. In an appeal arising therefrom i.e. in FAO(OS)588 of 2013, the Division Bench of the High Court by its judgment and order dated 20.12.2013, which is presently under challenge, affirmed the view taken by Single Judge and dismissed the appeal.

Reasoning:
11. Having considered rival submissions, we are of the view that the assessment made by the Arbitral Tribunal in the instant case as affirmed by the High Court was definitely within its jurisdiction. It has consistently been laid down by this Court that construction of the terms of a Contract is primarily for an Arbitrator or Arbitral Tribunal to decide and unless the Arbitrator or Arbitral Tribunal construes the contract in such a way that no fair minded or reasonable person could do, no interference by Court is called for. Viewed thus, we do not see any reason or justification to interfere in the matter. The view that the increase in rates of service tax in respect of bank guarantee and insurance premium is directly relatable to terms of the contract and performance under the Contract is certainly a possible view.