National Highways Authority of India v. Mapex Infrastructure Private Limited; National Highways Authority of India v. Emas Expressway Private Limited

(iii) The witness CW-1 of the Respondents have been specifically put questions on this aspect which establishes that the quantification was done on hypothetical basis and no efforts were made by the Respondents to produce proper evidence to show the quantity of diesel/ HSD actually consumed, and taxes paid thereon. Reliance is placed on the findings given by the Ld. Tribunal in paragraph No. 18.29, which reads as under: - “18.29 It is of significance that in respect of diesel purchased and consumed by the Concessionaire itself has been verified by the Respondent's Auditors. Once the quantum of diesel purchased is linked with the consumption in transportation, it is a matter of calculation. Significantly, the Respondent's witness, RW-2 agreed in response to Question No.24 that hypothetically once the quantum of diesel is known, the increase in taxes and cess etc. can be verified and derived on the basis of notification issued by the Government from time to time.” ANALYSIS

5. The Court has considered the afore-noted submissions; however, no good ground is found to interfere with the afore-said findings rendered by the Ld. Tribunal. There is no dispute that the quantification of the claim towards taxes on diesel/ HSD consumed in transportation by the sub-contractors/ transporters was done on a hypothetical/ notional basis. This perhaps was necessary, having regard to the peculiar facts of this case. The Ld. Arbitral Tribunal was also completely conscious of this fact, which is evident from the findings given by them in paragraph Nos. 18.32 to 18.37, which reads as under: - “18.32 On considering the rival stands, it is seen that the basic objection of the Respondent is that the diesel does not directly purchased by the Claimant and, therefore, it cannot claim the cost incurred by the independent transporters. It is stated that in the previous arbitration between the parties, the Arbitral Tribunal had granted additional costs incurred by the Claimant directly and not the cost incurred by the EPC / sub-contractors on the ground that there was no proof of the same having been passed on to the Claimant and thus having been incurred by the Claimant.

18.33 It is seen that the expression 'Additional Costs' is defined to mean "the additional capital expenditure and / or the additional operating costs or additional taxes or both as the case may be, which the Concessionaire has or would be required to incur and which has arisen as a result of Change of Scope or Change in Law". The Contract for transportation relates to transportation of three materials i.e. Bitumen, Aggregate/ Stone Chips and BC Hot Mix. Both the Claimant and the NHAI's Auditors have referred to a Contract with M/s Road King Enterprise dated 15.02.2014. The materials on record show that undisputedly for the purpose of transportation, the transporter has to buy diesel at various points of transportation. It is not in dispute that the purchase price paid by the transporter includes the latest cess, sales-tax, excise duty etc. When there is no dispute that the Claimant has performed its obligations under the Concession Agreement and has incurred costs/ additional costs by making payment to the transporters for the transportation costs, it is not in dispute further that the transporters have been paid by the Claimant inevitably the payments made include that element of additional costs on account of variation of the cess etc.

18.34 One point highlighted by the parties was the concept of Privity of Contract. As noted above, a reading of Article 1.[1] and 5.S(a) makes the provision clear that Claimant is permitted to hire Contractors, subcontractors for performing the operation and maintenance requirements of the Project with the Claimant being responsible for all acts required for meeting O&M requirements. The requirement clearly was for the Claimant to make payments to Contractors/ sub-contractors engaged by it in performance of its obligations.

18.35 So far as the decision in the earlier Award is concerned, that was rendered on the basis that no evidence was placed to show that the Claimant had indemnified the EPC Contractor. The position is factually different here.

18.36 In the present case, the report of the Independent Auditors, M/s S.K. Mehta & Company, Chartered Accountants dated 08.01.2019 and the affidavit of evidence dated 05.02.2019 of Mr. Rohit Mehta, Partner of the said firm clearly show that they had verified the documents and the details relating to diesel consumption in transportation. The said witness was offered to be examined the Respondent did not do it. On the other hand, the evidence of RW-2, NHAI's Auditors to a great extent show the veracity of the Claimant's claim. Reference can be made to the answers given in respect of Question Nos.18 to 21, 25 to 27 (RW-2) and answers given by RW-1 in respect of Question Nos. 46 to 48.

18.37 It is of significance that in the previous Award which was challenged before the Hon'ble High Court, the disallowance was not on the ground that amounts relating to diesel claimed to have been purchased by the subcontractor / transporter is not allowable, but on the ground that no evidence was led. In the present matter, the situation is different as evidence is on record, the acceptability of which have been discussed supra. The Tribunal is of the view that the claim made by the Claimant in respect of diesel purchased by the transporters / sub-contractors is to be allowed to the extent of the agreements with various transporters e.g. one dated 15.02.2014. The date would be suitably changed according to the date of respective agreements. It is decided accordingly.”

6. The afore-noted extracted portion of the impugned Award clearly brings out the reasoning supplied by the Ld. Arbitral Tribunal in allowing this claim. The Ld. Tribunal took note of the fact that the Respondents have performed its obligations and incurred additional costs by making payments to the sub-contractors/ transporters qua the transportation cost incurred by it. The amount paid to the sub-contractors/ transporters includes the element of additional amount on account of variation of cess, etc. Once having arrived at this finding, the Ld. Tribunal proceeded to consider the quantification done by the Respondents. This quantification was supported by the witness RW-1. Further, the Ld. Tribunal also took note of the report furnished by the independent Auditor viz. M/s. S.K. Mehta & Company, Chartered Accountants and the Affidavit of Evidence dated 05th February, 2019 of Mr. Rohit Mehta, Partner of the said firm. There was no cross-examination of the said witness by NHAI. In absence of any challenge to the said testimony, the Ld. Tribunal thus, upheld the quantification done by the Respondents.

7. In view of the foregoing and having regard to the limited scope of interference under Section 34 of the Act, no ground is made out to interfere with the impugned Award on this aspect and the said claim is thus, rejected.

II. RE: CLAIM TOWARDS BASIC EXCISE DUTY [“BED”]

8. On this aspect, Mr. Bishnoi’s challenge is primarily on the ground that the said claim was barred by limitation. The arguments advanced by him are as under: -

(i) The Respondents did not raise this claim at the relevant point of time in respect of the accounting years and it was raised for the first time on 29th January, 2019. The Ld. Tribunal erroneously allowed the said claim that was introduced by way of an amendment and was contrary to the express provision contained in the CA. At the stage of allowing the amendment, the Ld. Tribunal passed the procedural Order dated 13th March, 2019 and left the question on merits of the said claim open. The relevant portion of the said procedural Order reads as follows: - “An application for amendment of the Statement of Claim has been filed along with the amended Statement of Claim. The reply thereto has been fi led along with the amended Statement of Defence. The Rejoinder thereto has also been filed. The amended Statement of Claim and amended Statement of Defence are taken on record. It is made clear that the question of relevance and / or the contentions of the parties qua the statements made therein shall be considered at an appropriate stage.”

(ii) Despite keeping the question of limitation open, to be considered at the stage of final stage of adjudication, the Ld. Tribunal erred in allowing the said claim and proceeded to decide the same as though the Order dated 13th March, 2019 had allowed the Respondents to make the claim regarding BED.

ANALYSIS

9. In the opinion of the Court, Mr. Bishnoi’s interpretation of the aforesaid procedural Order is not correct. The contentions of the parties qua the claims had been left open, as is evident from the order itself. However, at the stage, when the question of limitation was adjudicated – the Ld. Tribunal rejected the contention of NHAI as it found the amended claim to be relating back to the date of filing of the original claim; therefore, it is not as if the Ld. Tribunal did not go into the question of limitation at all. This is evident from the observations made in paragraph No. 18.25, which reads as follows: - “18.25 The issue as to when an amendment relating to a time barred date can be allowed has been considered by the Hon'ble Supreme Court in several cases. It has been held that when there is a bonafide omission, the Court can say that it can be held to be applicable from the date of original claim. This is the basic concept of Doctrine of Relation Back. The Court can, considering the background facts, direct that it will not relate back. As the order passed by the Tribunal clearly shows that there was no rider about the date of operation of the Tribunal's order allowing the amendment. It was stated in clear terms that the question of relevance shall be dealt with at an appropriate stage. On facts it is seen that the claim of Excise Duty had been made on 26.03.2018. When the Independent Auditor appointed by the Claimant mentioned about the omission in their Report dated 08.0 1.2019, the Claimant realized the omission and sought to amend the claim and make a further claim relating to Basic Excise Duty. It is of significance that the Respondent had raised a plea of limitation only relating to the Financial Year 2014-15 and not other years. Therefore, the claim made by the Claimant relating to Basic Excise Duty on purchase of diesel directly by the Claimant is allowed. The question of the admissibility of the claim relating to purchase of diesel by the sub-contractors / transporter shall be separately dealt with. On the question of limitation, the Arbitral Tribunal is clear to the effect that the relevance and / or contentions of the parties qua the statements made therein (meaning the application for amendment and the objections of the Respondent in its amended Statement of Defence and the Rejoinder). The order passed by the Tribunal does not specifically say that it will operate from the date of the order. What the Tribunal only stated was the relevance and the contentions raised by the parties in the amended Statement of Claim / Statement of Defence / Rejoinder. Therefore, in the absence of such specification, the Tribunal is of the view that once the application for amendment was not restricted and there was no rejection of the application for amendment, the amendment is to be treated as having been allowed without restriction.”

10. The Ld. Tribunal has relied upon the ‘Doctrine of Relation Back’ and found that the amended claim was inadvertently omitted at the initial stage and therefore, the plea of limitation urged by NHAI was found to be devoid of merit.

11. In the above context, the Court finds the reasoning given by the Ld. Tribunal, as extracted above, to be appropriate, reasonable and calls for no interference of this Court under Section 34 of the Act.

III. RE: CLAIM TOWARDS MINIMUM WAGES

The Respondents claimed minimum wages of unskilled labour, skilled labour, etc. and security staff payable under the Minimum Wages Act,

1948. The Ld. Tribunal allowed the said claim relying on the computation done by the Chartered Accountant of the Petitioner/ NHAI.

12. Mr. Bishnoi makes the following averments challenging the aforesaid claim: -

(i) The findings contained in the impugned Award qua the said claim are patently illegal since the revision in minimum wages occurred on account of inflation and the wages were thus revised in order to offset the effects of inflation on the wages prescribed.

(ii) The Respondents failed to plead – much less prove – that the estimated projections affected in the manner and to the extent as claimed overand-above the projected cost. Since the said claim is notional and presumptive, no amount can be awarded qua minimum wages. The aforesaid claim is deficient in proof of payment of minimum wages at the stipulated rate.

(iii) The Respondents was not entitled to the said claim since it had not factored in the financial model stipulated under Schedule K (cash flow projections) that made provisions for inflationary measures.

ANALYSIS

13. The relevant findings of the Ld. Arbitral Tribunal qua the afore-said claim are given as under: - “18.49 It would be apt to first deal with the aspect as to whether the revision of minimum wages are not in the nature of taxes to attract Article 11 of the Concession Agreement.

18.50 Article 11.[1] (b) states as follows: "Change in Law means the occurrence or coming into force of any of the following, after the date of this agreement the repeal, modification or reenactment of any existing Indian Law".

18.51 Article 1.2(b) states that "in this agreement, unless the context otherwise requires, references to applicable law shall include all laws, acts, ordinances, rules, regulations, notifications, guidelines or bye-laws which have the force of law in any State or Union Territory forming part of the Union of India". Therefore, Article 11 does not restrict the claim due to Change in Law to taxes only. It also provides for modification of an existing Indian Law. There has been change in the levy of minimum wages earlier also.

18.52 The other point highlighted by the Respondent is that minimum wages formed part of inflation. It needs to be noted that revision in the rate of minimum wages is on the basis of power given to the Government under Section 3 of the Minimum Wages Act read with Section 5. There is a delegation of the power to the Government and the procedure is stipulated in Section 5. It has been stated by the Hon'ble Supreme Court in Express Newspapers Ltd v Union of India, AIR 1958 SC 578 that the notification issued under the Minimum Wages Act is a token of the approval by the Appropriate Government of the recommendations of the Committees and invests them with legal sanction. In Tourist Hotel v State of Andhra Pradesh, (1975) 1 LLJ 221, the Hon'ble Andhra Pradesh High Court held that exercise of power under Section 5 of the Minimum Wages Act is a legislative function delegated by the Parliament to the Government under Section 5 of the Act. The Govt Order fixing rate of minimum wages is legislative in character.

18.53 Therefore, in the aforesaid background, it has to be held that minimum wages paid are covered by Article 11 of the Concession Agreement. It can also be seen that in Schedule K of the Concession Agreement, there is provision for 6% by annual increase on minimum wages as an increment. The amount claimed by the Claimant on the ground that it has been actually spent is more than 6%. It is also to be seen that the Claimant has taken a plea that bonus@ 8.33% on minimum wages and incremental labour welfare cess have not been claimed by the Claimant. That, however, does not throw any light on the point under consideration. It can only be noted that inflation is not a factor for discounting additional cost due to change of law scenario.

18.54 As noted supra, the Claimant has stated that cost incurred towards minimum wages do not exceed the mandate of minimum wages. The inclusion of provident fund, house rent etc. have been highlighted. It is also stated that in the earlier arbitration between Claimant-Emas and the Respondent, the amounts claimed on account of realization of minimum wages were allowed. They were upheld by both Hon'ble Delhi High Court (Single Bench & Division Bench) and Hon'ble Supreme Court of India.”

14. On this aspect, the Ld. Tribunal examined and interpreted the terms of the CA and held that Change in Law under Article 11 of CA does not restrict the claim to taxes only. The minimum wages paid were also covered under the terms of the CA. This interpretation of the CA, as reproduced above, falls under the exclusive domain of the Ld. Arbitrator, and is not found to be unreasonable in any manner and therefore, the challenge on this account also cannot be sustained.

15. In view of the foregoing, the Court does not find any merit in the present petitions and accordingly, the same are dismissed along with pending applications.