National Highway Authority of India v. M/S T.K. Toll Private Limited

13. Primarily the learned senior counsel for the petitioner has argued on four issues a) plea of coercion not being taken; b) limitation; c) expert advice and d) quantum report.

14. I have heard the arguments of the learned senior counsel for the petitioner and have looked into the documents on record. Admittedly, at this stage, the Court need not go into the merits as if is deciding an appeal against an award dated 01.10.2022. Admittedly, it is not the case of the petitioner the award is a fraudulent award or is wholly perversed and be not looked into.

15. On the issues so raised by the learned senior counsel for the petitioner, let me see how the learned arbitrators have dealt with these issues. On issue (a) viz. the respondent never objected to the supplementary agreement dated 14.11.2013 and rather had initiated the execution of such agreement itself by sending three drafts to the agreement, now cannot urge there was any coercion on the part of the petitioner herein.

16. The learned arbitral tribunal had dealt with this issue and had held since there was major delay of handing over of the land on the part of the petitioner hence the claimant wrote a letter dated 03.05.2012 requesting the respondent for further extension of the scheduled project completion date till 17.03.2014 and also requested for extension of the concession period for the entire period of delay of 1343 days. In this letter the status of delay in acquisition of land at seven locations was given in one chart. In the next chart a summary of the schedule of handing over of land was given to show that even by 31.03.2012 only 87% of the total stretch for the project highway had been handed over in separate phases. The details of hindrances at nine locations as on 31.03.2012 was provided in one table and in another the details of pending approvals of estimates for utility shifting was mentioned. This letter also highlights delay on account of approval of certain other proposals and in acquisition of land for the same, delay in shifting of bunds/canal, delay in finalization of alignment from Km 156 to Km 158, delay due to change of scopes and certain force majeure events were taken into consideration by the learned Arbitral Tribunal. Rather the award noted as follows: “44.As already noted, earlier Respondent issued a policy contained in circular dated 17/24.01.2013 which approved execution of Supplementary Agreement in the given circumstances but with a mandate that such agreement must include an undertaking by the Concessionaire to forego any claims against the NHAI under any Clause of the CA, for delay in handing over the affected stretch. This document is on record and has also been marked as Exhibit RW1/C[1].

45. On 28/03/2013 (CD-297) the Claimant wrote to the IC, its sixth interim application for extension of time and the concession period. The approval of extension was kept pending by NHAI as usual. On 08/08/2013 (Annexure 129 to SOD) the Claimant circulated second draft for Supplementary Agreement. In this letter the Concessionaire referred to the various letters relating to Fee notification and Supplementary Agreement and to the policy decision of the Executive Committee of NHAI and wrote that on account of requirement of compliance, the draft Fee notification and the Supplementary Agreement were modified (emphasis added). The draft did not provide for extension of the concession period by the actual period of delay and the Concessionaire agreed that there shall be no claim from both the parties for delay. On 16/10/2013 (CD-309) the Claimant circulated another Supplementary Agreement signed and executed, said to be third version, whereby the Claimant deleted Clause 7 of the second draft SA relating to waiver of claims. Some other changes were also incorporated in this copy of the SA.

46. On behalf of Claimant contents of letter dated 21/10/2013 (Annexure 130 to SOD) written by NHAI, Chennai to NHAI, HQ have been highlighted. The letter mentions that while signing the draft Supplementary Agreement the Concessionaire deleted certain para’s from the draft SA submitted by the Chennai office to Headquarters. The deleted part included: a) “Para D- As such it is not possible to quantify the delays attributable to NHAI and Concessionaire separately due to over lapping reciprocal obligations”. b) “Para 7- However, there shall be no extension in the concession period on account of this extension i.e., it shall remain as thirty years from the Appointed date i.e., 15/01/2008”. c) “Para 9- That there shall be no claim from both the parties for this delay and extension of scheduled construction period. Concessionaire shall not claim any loss on account of delays in completion of the project and NHAI will not levy any penalties for the same on Concessionaire.” Some further changes made by the Concessionaire in the Supplementary Agreement were pointed out along with comments on such changes. Thereafter in paragraph 4 (i) the Chief General Manager, Chennai wrote thus: “Though efforts were made to obtain the concurrence of the Concessionaire to the draft supplementary agreement proposed by this office, there are certain clause / conditions on which the Concessionaire has raised objections / disagreement. Hence the Supplementary Agreement has been modified by this office, keeping in view the prevailing conditions at site and also to avoid possible claims from the Concessionaire in future. However, it is suggested that the draft supplementary agreement may be finalizes in consultation with the Concessionaire and the Legal Division so as to ensure that the interest of NHAI is protected against any possible financial implication to NHAI on account of any claim from the Concessionaire”.

47. The contents of Supplementary Agreement dated 14/11/2013 (CD-134) have already been noticed earlier in detail. In the Supplementary Agreement the Concessionaire has accepted to forego all its claims in terms of the CA and it has forgone the stand taken in the third version of SA circulated on 18/10/2013. In paragraph 25.82 and 25.83 of the SOC the Claimant has referred to its letter dated 28/05/2016 addressed to the respondent and the IC and another letter to the IC dated 11/04/2016 (CD- 132 to 133). The Claimant has pleaded that it had explained the situation under which the Supplementary Agreement dated 14/11/2013 was signed and had justified why the said SA would not affect the contractually available right of the Claimant to claim compensation for delays not attributable to it. For this purpose, Claimant has referred to and relied upon another letter dated 20/10/2016 (CD-135) addressed to the IC.

48. After the Claimant explained the reasons for delay in completing the punch list items of work through letter dated 02/09/2014 (CD-406), Provisional Completion Certificate was issued along with letter dated 22/02/2014 (Annexure 55 to SOD). The Claimant has relied heavily upon letter dated 20/10/2016 (CD-135) to show that it had protested against the Supplementary Agreement and raised request before the IC for compensation. In this letter the Concessionaire clearly stated that the Concessionaire signed the SA fearing further delay in COD and thus it was signed under Coercion. For this purpose reference was made to its earlier letter dated 19/08/2016 Reliance has also been placed upon deposition of Respondent’s witnesses to show that during cross examination it has been admitted that there is no document to show that request for SA had come from the Claimant and that the Claimant would not have recouped any part of its investment unless it was given PCC and right to collect tolls. It has also come during crossexamination of RW[2] that if the SA was not signed, PCC and extension of time would not have been granted. He has also accepted that the Project could not have been completed until handing over of land even for the Trichy Bypass which was subsequently descoped. It was emphasized that in the pleading of the Respondents, in para c) of the SOD it has been pleaded that “had the Claimant not given an undertaking not to make any claims against the answering Respondent, the answering Respondent would not have executed the Supplementary Agreement”. Of course, It has also been pleaded in the same para that the Supplementary Agreement was signed by the Claimant voluntarily.

52. The above judgments are on similar lines and hence need not be dealt with separately. Because of a clear illustration of a case of duress, compulsion and coercion in the judgment of the Supreme Court in the case of National Insurance Co. Ltd. Vs. Boghara Polyfab Pvt. Ltd., it is deemed necessary and relevant to refer to one of the illustrations given in paragraph 52(iv). The said illustration was in the context of as to when claims remain arbitrable even when discharge of contract by accord and satisfaction is pleaded as a defense. Illustration (iv) is as follows: - “ An insured makes a claim for loss suffered. The claim is neither admitted nor rejected. But the insured is informed during discussions that unless the Claimant gives a full and final voucher for a specified amount (far lesser than the amount claimed by the insured), the entire claim will be rejected. Being in financial difficulties, the Claimant agrees to the demand and issues and undated discharge voucher in full and final settlement. Only a few days thereafter, the admitted amount mentioned in the voucher is paid. The accord and satisfaction in such a case is not voluntary but under duress, compulsion and coercion. The coercion is subtle, but very much real. The “accord” is not by free consent. The arbitration agreement can thus be invoked to refer the disputes to arbitration.”

53. In the judgement of Hon’ble Delhi High Court in the case of NHAI vs. Ms. Madhucon Project Ltd. in OMP(COMM) 292/2017, there was a Supplementary Agreement having some similarity with the SA in the present case in as much as the contractor agreed to make no claim on one count because of some grant made by NHAI. The contractor agreed to withdraw the claim on that head. However, before the Arbitral Tribunal Respondent of that case claimed his legitimate dues with the allegation that those were wrongly withheld by the NHAI. The objection of NHAI based on Supplementary Agreement was not accepted and the tribunal gave an Award in favor of the contractor. The High Court rejected the challenge of NHAI by holding that the Award was correct and that a government enterprise cannot be allowed to take undue advantage and seen indulging in arm twisting of a contractor. In that case also soon after execution of the Supplementary Agreement, the NHAI made payments to the contractor. In the other judgment between the same parties the appeal of NHAI bearing no. 17/2018 was dismissed by the Division Bench of the High Court consisting of Hon’ble Judges S. Ravindra Bhatt and A.K. Chawla. The above judgements leave no manner of doubt that an unfair Clause of waiver introduced by a stronger party and thrust upon a weaker party by coercion and taking advantage of economic duress can be disregarded by Court regardless of other Clauses in the same agreement. Courts grant relief by ignoring forced waiver or discharge certificate and grant whatever relief the victim party is found entitled to under law and the relevant facts.

57. As far as the issue of coercion and economic duress is concerned, the relevant facts and circumstances on the basis of submission of learned counsel for the parties have already been noted. On facts, the case of the Claimant that the waiver clause in the Supplementary Agreement was accepted and the claimant signed the Supplementary Agreement with such a clause on account of coercion and economic duress is found to be more probable and convincing. The nature of the contract has an important bearing on this issue. It was not an ordinary building or construction contract where the work done is regularly measured and part payments are released. In this case, the Claimant as a Concessionaire had to arrange for the finances on an understanding that the land etc. will be made available as per promise within the stipulated time and the project will be completed as per scheduled completion date and the cost incurred shall start coming back with timely completion certificate and toll collection. In such a scenario the Concessionaire cannot gain financially by delaying the project. The escalation clauses are of no help except to ensure that the escalation in prices is compensated. The correspondences, particularly various letters of the Independent Consultant (IC) show that the project completion was delayed for reasons beyond the control of the Claimant and its request to find out remedies for the hardship caused by delay was kept pending for decision for unnecessary prolonged period. The materials on record, mostly the letters of the IC also show the financial stress of the Claimant. Even then before signing the final draft of the Supplementary Agreement, the Claimant protested and suggested a different draft, but the suggestions were brushed aside. When the Executive Committee of the Respondent also took a hard stand by coming out with a policy circular against the request of the Claimant, it had, in practical terms no option but to accept the waiver clause in the Supplementary Agreement or else to face financial ruin and legal death. The coercive attitude of the Respondent appears also from the fact that it did not act upon the recommendations of the IC in the matter of extension of period of completion as well as the period of Concession although the recommendations were binding because admittedly no dispute was raised against such recommendations.

58. So far as the element of delay on the part of Claimant in raising a formal protest against the waiver clause is concerned, such behavior is understandable to a large extent when the completion certificate was provisional and some part of the Project Highway remained to be completed along with some Punch List items. The correspondences made by the Claimant informing the reasons for delay in completion of the Punch List items and attributing the same to the Respondent are available on record. Even in such a situation and even before the Trichy Bypass was descoped, the Claimant in 2016 raised claims as per the CA based on delay etc. by taking the plea that the waiver Clause in the Supplementary Agreement was forced upon it due to coercion and economic duress. Till then the project works were under progress and the right to raise claims under the CA had not ended. Even the period of limitation for raising the claims could have legally commenced only on completion of the project works. Cleary, the claims raised by assailing the waiver clause was not an attempt to revive a dead agreement after final settlement between the parties. In the facts of the case the element of delay by itself cannot be accepted as fatal to the plea of coercion and cannot defeat the claims if they are ultimately found to have merits. The plea taken by the Claimant that the waiver clause in the Supplementary Agreement be ignored because it was signed under economic duress and under coercion is found to have merits. This issue is decided in favor of the Claimant and against the Respondent.”

17. Qua expert evidence and delay on quantum report the learned Arbitral Tribunal held: “70.In this matter the Claimant has led evidence of an expert, Mr. Rohit Singhal. In his affidavit evidence Mr. Singhal has stated that he is the Chief Executive Officer of the company Masin Projects Pvt. Ltd. which was engaged to analyze the delay events and prepare a report. He has claimed that he and his team evaluated the pleadings and documents on record of this Arbitral Tribunal and prepared a report enclosed with his affidavit evidence. That report with the first affidavit evidence is describe as Expert Delay Report by Mr. Rohit Singhal. He has also filed an evidence affidavit with Expert Quantum Report which is in three parts, Part-A, Part-B, and Part-C. He has referred to the said reports in his examination-in-chief. These affidavits of evidence along with Delay report and Quantum report in three volumes have been taken on record and marked as Exhibit CW/1, CW/2, CW/3 and CW/4. After referring to the salient features of CA and major milestones, the expert witness has deposed that as per his Expert Delay Report the total delay attributable to the Respondent is 1668 days and delay attributable to the Claimant is 300 days. He has explained that he used Impacted as Planned Method of delay analysis which is an internationally accepted method following international guidelines of Society of Construction Law Delay Protocol. according to him, in a construction delay dispute it is important to identify critical delays from all the pleaded delays and to assess the impact of the said critical delays on the completion date of the project. He has claimed to have considered all the pleaded delays of both the parties and assessed them for criticality and the effect of critical delays on the completion date using the agreed schedule for the project.

71. CW/1, Mr. Rohit Singhal has stated in his examination-in-chief that as per his Quantum Report, the total value of the claim of the Claimant comes to INR 662.89 crores (approx.) excluding interest. He has further deposed that he has verified the actual losses suffered by the Claimant because of the alleged defaults of the Respondent and that the losses are assessed on the basis of documentary evidence which are part of the records. The quantified loss to which the Claimant has been found entitled by the expert is Rs. 628.[5] crores (approx.) excluding interest.

80. Adverting to the Quantum Report on Claimant’s claim, learned counsel for the Claimant has referred to Part 2.[5] which deals with actual execution of the Project. It was noted that PCC was issued on 24-02-2014 against the Scheduled Completion Date of 14-07-2010, and the delay was of more than 43 months. In para 26 further claim of the Claimant for additional compensation due to overstay of the construction resources till April 2016 has been noted in respect of the work that was finally descoped. In the overall assessment to the Claimant’s claims covered in Part 3.3, against the total outstanding amount excluding interest claimed as Rs. 662.89crores approximately, the Quantum Report has allowed Rs. 628.[5] crores approximately. As per assessment of the expert, this amount covers all the various claims except claim for Rs. 2.95 crores as detailed in appendix I because this claim was subsequently withdrawn. The above amounts are inclusive of compensation for delay in payment of grants and claim for reimbursement of damages said to be wrong fully recovered from the Claimant towards alleged delay in completion of Punch List items. The claim for interest for the period subsequent to 01-04-2019 till the actual date of realization has also been excluded from assessment by the expert.

83. Learned Counsel for the Claimant has submitted that although CW 1, the expert witness has been cross examined on three dates but nothing of substance has been elicited to discredit the witness. On the other hand, Learned Counsel for the Respondent has argued that the Claimant has led no proof in support of its pleading made for claims under category I. According to him there is no proof led by examination of a witness that plants and machinery had to overstay leading to burden of additional cost on the Claimant. This defense is in addition to the stand that Claimant was itself responsible for delay. The delay aspect has already been examine under a separate issue. As far as proof is concerned, oral evidence on behalf of Claimant is only of an expert who has examined the pleading and documents of the parties available on record for assessing the delay and quantum of compensation. The documents as already noted, include correspondence from the Independent Consultant (IC). The documentary evidence including the assessment made by an expert on the basis of such evidence cannot be described as no proof or no evidence. Unfortunately, the Respondent has not examined its own expert, nor it has given a counter version on quantum.

84. During cross examination of CW 1, there is no specific challenge to figures arrived by the expert in his assessment of various claims for analyzing and determining the quantum. The various aspect highlighted during crossexamination have already been noticed earlier. The expert has claimed that he has analyzed all facts and considered all documents available on record. During cross-examination, such claim has not been challenged effectively by pointing out omission of any relevant fact or document. There is no cross-examination on the methodology or calculations appearing in the reports of the expert.

85. On behalf of Claimant there is a strong rebuttal to the submission that there is no proof or evidence in support of petitioners claim no. I. Paragraph 1.[5] of the Quantum Report and paragraph 1.[6] of the Delay Report describe the documents relied upon in the report and they include Monthly Progress Reports (MPR). Learned Counsel for the Claimant had shown that in paragraph 14.[1] of the SUR rejoinder the Respondent has itself referred to and relied upon MPR’s. He has further shown that RW 1, Mr. T. Sivakumar in reply to question nos. 186 to 189 has admitted the significance of MPR’s for various purposes including as evidence of the resources mobilized for the construction of the Project.

86. On the issue of delay and quantum the Respondent’s witnesses RW 1 and RW 2 have not stated anything which may discredit the Expert witness, CW 1. These witnesses have not assailed or contradicted the views and opinion of IC on the matter relating to extension of the scheduled date of construction and issuance of PCC.

87. In view of discussion made above, the assessment by the expert in the Quantum Report for the outstanding amount but excluding interest with regard to various items of Claim(s) cannot be faulted on the grounds urged on behalf of the Respondent. However, an independent scrutiny by this Tribunal of the reasonableness of the assessed amount needs to be undertaken in the interest of justice. Besides such exercise, the issue of interest at the rate agreed in the CA for the pre arbitration period and also for the later period needs to be decided for claims I, II and III along with claim no. IV and V which have also been excluded by the expert from his assessment.”

18. On limitation the learned Arbitral Tribunal held as under:

19. The learned Arbitral Tribunal had noted the respondent had issued a policy contained in circular dated 17/24.01.2013 which approved execution of Supplementary Agreement in the given circumstances but with a mandate such agreement must include an undertaking by the Concessionaire to forego any claims against the NHAI under any Clause of the CA, for delay in handing over the affected stretch.

20. As per report of Mr.Rohit Singhal, an expert, the total delay attributable to the respondent was 1668 days and delay attributable to the claimant was only 300 days, hence the learned tribunal held such a delay on the part of the petitioner could not have been condoned by respondent but only upon the pressure being exerted to execute such supplementary agreement. This fact further gets supports from the testimony of respondent’s witnesses, who during cross examination admitted there is no document to show the request for supplementary agreement had come from the claimant or the claimant could have recouped any part of its investment unless it was given PCC and right to collect tolls.

21. The RW[2] in his cross examination had stated if the supplementary agreement was not signed, PCC and extension of time would not have been granted. Even in the pleadings of the respondent in para C of the SOD, it was pleaded had the clamant not given an undertaking not to make any claims against the answering respondent, the answering respondent would not have executed the supplementary agreement. Thus, non execution of the supplementary agreement would have put the respondent to tremendous loss and there was no other alternative for respondent except to execute and sign such supplementary agreement.

22. The learned arbitral tribunal also noted the drafts of S.A. were amended twice and did not provide for extension of construction period and the petitioner also asserted there shall be no claim from both the parties for delay and further claims were waived off.

23. The award also noted of a letter of Chief General Manager, Chennai wherein he had categorically stated supplementary agreement has been modified by his office keeping in view the prevailing conditions at site and also to avoid possible claims from the Concessionaire in future and efforts was being made to ensure interest of NHAI is protected against any possible financial implication to NHAI on account of any claim from the Concessionaire. Thus, the facts do show efforts were being made to protect the petitioner from possible financial implications on account of claims from the respondent on major delays.

24. Admittedly, the appointed date was 15.01.2008 and the completion date was 14.07.2010, but the fact shows delay of 1668 days on the part of the NHAI to hand over land and scheduled handing over of the land show even by 31.03.2012 i.e. much after the date of the completion only 87% of the total stretch of the highway project was handed over in separate phases. Hence, in these circumstances coupled with the fact the petitioner did not act upon the recommendations of the IC in the matter of extension of period of completion as well as the period of concession, although such recommendations were binding, hence it was noted there appear to be coercion exercised upon the respondent to make it enter into supplementary agreement. Prima facie these observations cannot be said to be perverse.

25. Further, qua limitation the learned arbitral tribunal rightly held there was no rejection of any claim made by the claimant through any letter issued by NHAI and the amount due to the claimant could be finally assessed only after completion of the construction work and till the expiry of extended period.

26. In the present case, it was held this stage continued till Trichy Bypass was descoped and thus, work came to be completed on 20.09.2018 and hence the limitation would commence only thereafter, per Article 18 of the Limitation Act.

27. Though, the petitioner has relied upon National Insurance (supra), but the learned arbitral tribunal has already dealt with this decision in para No.52 of the award dated 01.10.2022 and has relied upon to illustration (iv) of this decision and thus, has applied its mind to this decision.

28. In Sugam Construction (supra) the plea of coercion was taken only at the stage of rejoinder whereas in the present case the complainant had protested even before and after the execution of the supplementary agreement. The witness of the respondent rather had stated there was no request ever made by the petitioner for execution of the supplementary agreement, thus the facts of the case are distinguishable from Sugam Construction (supra).

29. Thus, considering the settled law viz. the grounds for interference in an arbitral award being extremely narrow and an existence of a glaring error which goes to the root of the award and apparent on the face of the award, has not been shown. This court, admittedly, cannot sit in appeal over such award and cannot interfere in finding of law and fact by the learned arbitral tribunal, thus, prima facie gives no ground to stay the award at this stage. Consequently, the application is dismissed. EX.APPL.(OS)Nos.345/2023, 755/2023 in OMP (ENF.) (COMM.) 3/2023

30. Since a huge amount is awarded, hence, it would be appropriate to direct the NHAI to deposit 50% of the due amount along with upto date interest within four weeks from today and the remaining 50% within four weeks thereafter. The amount so deposited by the NHAI be released to respondent subject to its filing of Bank Guarantee to the satisfaction of the learned Registrar General of this Court and with an undertaking that in case petition under Section 34 of the Arbitration and Conciliation Act, 1996 is allowed the said bank guarantee be encashed. O.M.P. (COMM) 24/2023 & OMP (ENF.) (COMM.) 3/2023

31. Reply be filed by the respondent within four weeks from today with an advance copy to learned counsel for the petitioner. Rejoinder, if any, be filed within two weeks thereafter.

32. List on 19.10.2023.

YOGESH KHANNA, J. AUGUST 09, 2023