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Case Title : National Highways Authority Of India vs GMR Hyderabad Vijayawada Expressways Ltd. 

 Case no :(i) + FAO(OS) (COMM) 108/2020 & CM APPL. 21850/2020

                 (ii) + FAO(OS) (COMM) 109/2020 & CM APPL. 21853/2020 

                 (iii) + FAO(OS) (COMM) 110/2020 & CM APPL. 21856/2020

 Order no : 7th May, 2024

 Quorum : Hon’ble Justice Suresh Kumar Kait and Hon’ble Justice Neena Bansal Krishna 

 FACTS OF THE CASE

In December 2007 the National Highway Authority of India (NHAI) issued a tender for design, construction, development, finance, operation and maintenance of 4/6 laning of Hyderabad Vijayawada Section from KM 40.000 to KM 221.500 on NH-9 in the State of Andhra Pradesh. The Tender was in two stages: technical and financial bid stage.

19 bidders submitted their bids, after examining those GMR Infrastructure Ltd./Punj Lloyd Ltd. (JV) were found technically eligible. Later on the Central Government intervened and re-examined the bids and declared GMR Infrastructure as ineligible. The parties took the matter to the Supreme Court and later on it was decided by the court that 8 bidders were allowed to contest in the second stage of bidding i.e, financial bidding. Eventually GMR Infrastructure was awarded the project. 

According to NHAI the respondents GMR Infrastructure would pay a premium of 32.60% according to the concession agreement starting from Commercial Operation Date (COD). The respondents reached the COD and started the operation but later on stopped paying the premium. NHAI demanded outstanding premium and claimed that the respondents violated the interim order. The respondents claimed adverse financial consequences due to the bifurcation of Andhra Pradesh and change in laws. NHAI claimed that the respondent’s claims showed lack of grievance.

Later the matter was taken up to the Arbitral Tribunal where the Appellant claimed saying the respondent was delaying the proceedings on purpose and the matter was taken up in the Supreme Court. Dissatisfied with the result both the parties took up the contention again in the Arbitral Tribunal and the contention of allowing NHAI to decide the claims in accordance with the majority Award was challenged by the appellant.

ISSUE

whether the learned Single Judge, in proceedings under Section34 of the Act, exceeded his jurisdiction by upholding the minority Award of the Arbitral Tribunal, which resulted in the appellant being denied the opportunity to take a fresh decision, and instead appointed a sole Arbitrator to adjudicate the claim of the respondent and whether the learned Single Judge was justified in doing so.

LEGAL PROVISIONS

1. Section 34 of the Arbitration and Conciliation Act, 1996 : Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with subsection (2) and sub-section (3). (ii) the arbitral award is in conflict with the public policy of India. (iii) it is in conflict with the most basic notions of morality or justice.
2. Section 9 of the Arbitration and Conciliation Act, 1996 : parties can approach the Court under section 9 of the Act to seek interim reliefs before, or during the arbitral proceedings, or at any time after the passing of the award but before it is enforced.

CONTENTION OF THE APPELLANT

The learned counsel for the Appellants contended that the learned Judge and the Tribunal failed to consider Clause 41.1 of the Agreement which only covers cases of increased costs due to change in law and not all kinds of revenue losses due to reduced traffic. The appellant further contends that subordinate legislation was not intended to be included in the definition of Change in Law unless expressly mentioned. Next the Appellant’s Learned Counsel submitted that the respondents action regarding the payment of the premium breaches the contractual terms and the successive section 17 were filed to prevent the appellant from recovering the premium.

The appellant challenges the integrity of the Halcrow project and discrepancies in traffic projections which were ignored by the Tribunal.NATIONAL HIGHWAYS AUTHORITY OF INDIA The Learned Counsel of the appellant finally submitted that the Learned Single Judge Bench erred in substituting the majority award with the minority award without proper authority. 

 CONTENTION OF THE RESPONDENT

The Learned counsel for the Respondents stated that the challenges arose due to bifurcation of the two states and changes in the traffic patterns. The respondents disputed the claims of the appellants regarding clause 41.3 of the agreement regarding the financial model was binding as per contractual obligations.

The Learned Counsel for respondents rejected allegations regarding the  traffic studies and opposed the appellants claims about clause 41.3. The counsel finally submitted that the conclusions reached by the Tribunal and the Single Judge were based on the thorough examination of legal provisions, evidence and arguments thus the appeal must be dismissed. 

COURT’S ANALYSIS AND JUDGMENT

The Arbitral Tribunal in both the majority and the minority awards agreed that the change in ‘sand mining’ policy constituted a ‘change in law’ under the agreement. As there were disagreements the Single Judge appointed an arbitrator to resolve the issue but the appellant disagreed with the appointment and stated that the courts cannot modify arbitral awards but can set them aside and the decision was based on the principle of severability. 

The whole issue revolves around ‘change in law’ as per the agreement and its clauses. The court disagreed with the way of the appellant challenging the issue by section 34 of Arbitration Act. The court upheld the decision of the tribunal and rejected the request for the appellant to introduce new contentions. The court found no basis to discredit the Halcrow report and the financial model. The court upheld the decision of appointing an arbitrator to assess respondents’ claim and rejected the appellant appeals against the Award and the  Single Judge.

 

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JUDGMENT REVIEWED BY – Nagashree N M