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Case Title: NHAI v. Suresh Chandra, FAO No. 179 of 2019

Date: 02.06.2023

Counsel for the Appellant: Mr. Sudhir Nandrajog, Sr. Advocate with Mr. Balendu Shekhar, Mr. Krishna Chaitanya, Mr. Sriansh Prakarsh, and Mr. Rajkumar Maurya, Advocates.

Counsel for the Respondent: Mr. Swastik Singh and Mr. Himanshu Dagar, Advocates

Introduction

Justice Manoj Kumar Ohri ruled that a force majeure occurrence entails a total closure of the route owing to floods, not only a decrease in traffic on a specific road.

The Court set aside an arbitration award against NHAI on the grounds that the Arbitral Tribunal’s interpretation was contrary to the parties’ intent; thus, the award could be susceptible to review for being contrary to the agreements and would fall inside the scope of Section 34(2)(b)(ii) (conditions for setting aside of the arbitration award by the court) of the Act.

Facts of the Case

The parties came to an agreement on March 21, 2014, under which the other party was hired to collect the User Fee at a toll plaza for a period of 12 months. The contract called for arbitration for dispute resolution. 

Clause 9 of the contract dealt with traffic reduction and banned any claim for it. It stated that while submitting a proposal for the project, the contractor should consider the possibility of reduced traffic owing to diversions or degradation in the physical state of the roads.

 The agreement’s clause 25 addressed force majeure scenarios. It permitted the contractor to seek reimbursement for a decrease in the collection if the road was completely blocked owing to any of the events specified therein. This was contingent on the employee providing notification right away before seeking compensation.

A disagreement erupted between the parties as a result of excessive rains and flooding. There was a vehicle restriction/partial closure on a neighboring route, resulting in less traffic going through the toll plaza. The appellant further assessed liquidated damages against the respondent for failing to collect the bare minimum stipulated in the agreement.

 Due to these incidents, the respondent claimed a drop in weekly collections as well as further reimbursements. The NHAI project director also proposed this, but the Regional Director rejected it on the grounds that the decreases are not in accordance with Clause 25 of the agreement. The responder, enraged by this, sought arbitration. The arbitral panel ruled in favor of the respondent. Dissatisfied, the petitioner filed a complaint under the provisions of section 34 of the legislation.

Courts Analysis and Decision

The Court interpreted both clauses and determined that the situation covered by Clause 25, i.e., force majeure, only applies to the complete closure of the roads leading to the toll plaza and that any slight decrease or diverting of traffic is completely addressed by Clause 9 of the agreement.

The Court determined that, while the case does not include a total blockage of the roadways, it does involve a partial reduction in traffic and, as a result, a loss in toll user fee collection as a result of a remote incident of flooding and partial closure of neighboring roads/highways.

The Court ruled that an interim decrease in traffic caused by a distant occurrence such as a flood does not constitute an emergency event. Flood considers a whole road closure, not just a constraint in traffic on a specific route.

The Court of Appeal set aside an arbitration award against NHAI on the grounds that the Arbitral Tribunal’s interpretation was contrary to the parties’ intent, and thus the verdict would be susceptible to challenge for being in contradiction to the agreement and would fall within the purview of Section 34(2)(b)(ii) of the Act.

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Judgement

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Written by- Anushka Satwani