Delhi High Court Sets Aside Arbitral Tribunal's Award Against NHAI in Highway Project Delay Case [Read Judgment]

NEW DELHI: The Delhi High Court has set aside a single judge order which has rejected a plea by the National Highways Authority of India against Arbitral Tribunal's award of Rs 252.251 Cr, along with interest in favour of IRB Pathankot Amritsar Toll Road Ltd over delay in the project for four laning of section between Amritsar to Pathankot.

A bench of Justices Vibhu Bakhru and Amit Mahajan found merit in the contention of senior advocate A K Verma and advocate Nikhil Mehta on behalf of the NHAI that the Arbitral Tribunal has not adjudicated the essential dispute – whether NHAI was in material default of the concession agreement, which was necessary for deciding the issue whether IRB was entitled to any compensation and extension.

The court noted that the IRB had acknowledged that it had given up its claims relating to the delay of 518 days and the grant of extension of time for completion of the project is not synonymous to accepting the claim for compensation or that NHAI was in material breach of the agreement.

"The Arbitral Tribunal has entertained the claim for compensation of the expenditure and for extension of the concession period, which was raised for the first time after a lapse of four years after the same were given up by IRB in an agreement in writing without any averment in the pleadings explaining the delay in raising such claim," the court noted.

The IRB had not raised any objection regarding execution of the undertaking and the Supplementary Agreement under coercion till the filing of the Statement of Claims, it said.

"We are unable to accept the Arbitral Tribunal’s finding, that IRB had raised its first protest against the Supplementary Agreement by its letter dated 19.06.2017. The said letter neither mentions any undertaking nor the Supplementary Agreement....This reasoning is incomprehensible. The finding of the Arbitral Tribunal in this regard is wholly perverse and unreasonable as tested on the anvil of the Wednesbury principle," the bench said.

It also noted that the Arbitral Tribunal proceeded on the premise that the IE (Independent Engineer) had recommended EoT (extension of time) of 518 days on account of delay attributable to NHAI. However, none of the letters of the IE, as referred to by the Arbitral Tribunal in the impugned award attribute the delay of 518 days on account of any material breach of the CA (Concession Agreement dated 16.11.2009 with IRB for executing the work of design, engineering, finance, construction) on the part of NHAI.

"We are of the view that the Arbitral Tribunal had committed a fundamental error in essentially not addressing the real dispute –whether NHAI was in material default of the CA," the bench said.

The court also pointed out NHAI had contended that IRB was responsible for obtaining all permissions and part of the delay was admittedly on account of delay in obtaining such permissions and therefore, IRB was not entitled to the compensation as awarded.

"The dispute raised by NHAI is a substantial one, but it is not apposite for this Court to decide this dispute. The said dispute was required to be addressed by the Arbitral Tribunal. Since the Arbitral has failed to consider the same, the impugned award is liable to be set aside," the bench said.

The court held that the impugned award is vitiated by patent illegality on the face of the record. As is apparent the illegality is fundamental and strikes at the root of the matter, it added.

The bench also found substance in NHAI counsel senior advocate Verma’s contention that IRB’s plea that Supplementary Agreement was signed under coercion and duress ought not have been accepted without any cogent material.

Advocates Vinod Mehta and Varun Sharma also appeared for the NHAI. The respondents were represented by senior advocates Mukul Rohatgi, Saurabh Kirpal, Dr Rajeshwar Singh, Saket Sikri, Apoorv Agarwal, Sarthak Sachdev, Ms T R Daulat, Mohnish Patkar, Hemant Sharma and Ms Shabhavi Singh.

[Read Judgment]