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2023 DIGILAW 928 (PNJ)

Rohan Rajdeep Tollways Ltd. v. State of Punjab

2023-03-01

AUGUSTINE GEORGE MASIH, VIKRAM AGGARWAL

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JUDGMENT Vikram Aggarwal, J. The appellant challenges the order dated 08.12.2022 passed by the Commercial Court, Chandigarh vide which the petition filed by the appellant under section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the 1996 Act') was dismissed. 2. The facts, as emanating from the pleadings are that the appellant claims itself to be a professional organization of Civil Contractors, Builders and Developers with more than 20 years' experience. It was awarded the contract for up-gradation, operation and maintenance of Patiala-Patran Road on B.O.T. basis in the Public Private Partnership (PPP) mode. Notice of award dated 01.09.2005 (Annexure P-2) was issued to the appellant company. Concession agreement (Annexure P-3) was executed on 06.12.2005. It was for a period of sixteen and a half years (up-till 19.08.2022) which included the construction period of 24 months for upgrading, widening and strengthening of the existing road. As per the appellant, the construction work commenced on 20.02.2006 and was completed on 27.02.2007. The collection of fee/toll commenced w.e.f. 06.03.2007 at the approved rates. In March 2020, the COVID-19 pandemic hit the nation, as a result of which, a country wide lockdown was imposed. As a result of the same, the volume of vehicular traffic on the project road was affected. Collection of toll was stopped. Vide communication dated 20.04.2020, the appellant reported the occurrence of COVID-19 as a 'Political Force Majeure Event' to the Government of Punjab, which the Government of Punjab termed as 'Non-Political'. On account of the pandemic, contracts were extended by the Government. Various terms and conditions were laid down and some concessions were also granted. In October 2020, farmers from all across the State of Punjab started blocking the toll plazas and forcibly allowed the vehicles to cross the toll points without paying the toll charges. This protest lasted till December 2021. This was also notified by the appellant as a 'Political Force Majeure Event' and extension of the concession period in terms of Clause 15.5(c) of the agreement was sought. Various meetings were held by the respondents with the concessionaires. Further extensions were granted by Government of India to various concessionaires. This protest lasted till December 2021. This was also notified by the appellant as a 'Political Force Majeure Event' and extension of the concession period in terms of Clause 15.5(c) of the agreement was sought. Various meetings were held by the respondents with the concessionaires. Further extensions were granted by Government of India to various concessionaires. In September/October 2020, the Government of Punjab decided not to grant any extension for the Force Majeure periods and after few concessionaires were dislodged by the Government, the appellant preferred CWP No.22617-2022 before this Court which was disposed of on 29.09.2022 with a direction to the respondents to decide the representation of the appellant after affording an opportunity of hearing (Annexure P-17). In compliance of the directions passed by this Court, speaking order dated 20.10.2022 (Annexure P-19) was passed laying down certain conditions to which the appellant submitted its response dated 21.10.2022 (Annexure P-20). A response was given by the respondents on 22.10.2022 (Annexure P-20) asking the appellant to either deposit the amount of Rs.753.82 lakhs or give an undertaking that the revenue collected would be deposited in the Escrow Account. Having been left with no other alternative, the appellant submitted an undertaking on 23.10.2022 under protest. However, the said undertaking was not accepted and vide email dated 23.10.2022 (Annexure P-21), the respondents stated that the agreement had lapsed and the appellant was asked to hand over the vacant possession of the toll plaza at the earliest. The appellant, therefore, submitted an amended undertaking on 24.10.2022 (Annexure P-22). The respondents illegally en-cashed bank guarantee for an amount of Rs.49.04 lakhs and also marked a lien on the Escrow Account thereby withholding payments of Rs.2.97 crores. 3. In view of the above, the appellant preferred a petition under Section 9 of the 1996 Act seeking various reliefs. 4. The petition was opposed by the respondents on the ground of persistent default by the appellant. Various instances of default were mentioned in the petition. 5. By way of the impugned order, the petition under Section 9 of the 1996 Act was dismissed by the Commercial Court, Chandigarh and it was held that none of the ingredients for the grant of injunction had been established. 6. Aggrieved by the same, the present appeal has been preferred. 7. We have heard the learned senior counsel representing the appellant and learned counsel representing the respondents-caveators. 8. 6. Aggrieved by the same, the present appeal has been preferred. 7. We have heard the learned senior counsel representing the appellant and learned counsel representing the respondents-caveators. 8. Learned senior counsel representing the appellant has vehemently submitted that the impugned order is not sustainable. It has been contended that the undertakings were obtained from the appellant under duress and arbitrary conditions were imposed by way of the speaking order. Learned counsel has referred to various documents on record and has contended that the Commercial Court, Chandigarh failed to examine the matter from the correct perspective. Learned senior counsel has stated that a petition under Section 11 of the 1996 Act had already been filed by the appellant and notice in the said petition i.e. ARB-80-2023 had been issued for 21.04.2023. Learned counsel has submitted that the appellant has every intention of initiating arbitral proceedings and is, therefore, entitled to certain interim measures at this stage. It has been contended that the respondents are acting in an unfair manner. Learned senior counsel has specifically referred to Clauses 15.2, 15.3, 15.4 and 15.5 of the Concession Agreement. Stress has been laid upon the Force Majeure Event Clause and Clause relating to allocation of costs during subsistence of Fore Majeure Event (Clause 15.5 and 15.6). It has been contended that the entire issue arose on account of the COVID-19 pandemic and subsequently on account of the farmers agitation and, therefore, the appellant was not to be blamed for the delay in execution of the projects. Learned senior counsel has submitted that the petition filed by the appellant deserves to be allowed and the interim reliefs being sought by the appellant deserve to be granted. In support of her contentions, learned senior counsel has referred to the following judgments:- Civil Appeal Nos. 6726-6729 of 2019 arising out of SLP (C) Nos.1436-1439 of 2019 titled as 'M/s. Tulsi Narayan Garg, Sarawagi Mohalla, Sheopur through its Proprietor Tulsi Narayan Garg v. The M.P. Road Development Authority, Bhopal' decided on 30.08.2019 and Civil Appeal No.3303 of 2019 arising out of SLP (C) No.6312 of 2018 tided as (Union of India v. Parmar Construction Company' decided on 29.03.2019. Reliance has also been placed upon the judgment of this Court in CWP No.13285-2012 tided as 'SECL Industries Limited (Formerly known as Singla Engineers and Contractors Pvt Ltd.) v. The State of Haryana and others' decided on 09.10.2012. 9. Reliance has also been placed upon the judgment of this Court in CWP No.13285-2012 tided as 'SECL Industries Limited (Formerly known as Singla Engineers and Contractors Pvt Ltd.) v. The State of Haryana and others' decided on 09.10.2012. 9. On the other hand, learned counsel for the respondents-caveators has opposed the prayer made by learned senior counsel and has submitted that the order passed by the Commercial Court, Chandigarh is legal and valid. Reference has been made to the delays caused by the appellant in the execution of the projects. It has also been submitted that despite giving undertakings and seeking time and extensions, the appellant had not paid the dues to the Government. It has been submitted that since it is the State which is one of the parties, it would pay back the amounts, if so, found due to the appellant after the arbitral proceedings. Learned counsel has referred to the various documents on record and has submitted that there is no illegality in the order passed by the Commercial Court, Chandigarh. 10. Rebutting the arguments, learned senior counsel has submitted that no notice had ever been issued for liquidated damages and the same had never been quantified. Learned senior counsel has submitted that the total project cost was Rs.48.5 crores and at best 5% liquidated damages could have been imposed whereas, the respondents imposed liquidated damages of Rs.8 crores which also is illegal and arbitrary. 11. We have considered the submissions made by the learned counsel for the parties and have not found any illegality in the impugned order. The facts regarding the appellant having been granted the contract, agreement having been entered into between the parties, work having been undertaken by the appellant initially, COVID-19 having struck the nation, farmers agitation, extension of contracts for the relevant periods etc. are not disputed. The issue is with regard to denial of further extension to the appellant, imposition of liquidated damages etc. It is also an admitted fact that arbitration proceedings have been initiated and a petition under Section 11 for the appointment of an Arbitrator has been filed by the appellant. The question would be whether the appellant deserves to be granted the interim relief as prayed for by it. It is also an admitted fact that arbitration proceedings have been initiated and a petition under Section 11 for the appointment of an Arbitrator has been filed by the appellant. The question would be whether the appellant deserves to be granted the interim relief as prayed for by it. Since the appellant and the respondents were not on the same page, the appellant knocked the doors of this Court by way of CWP No.22617-2022 which, as per the appellant was disposed of on 29.09.2022 directing the respondents to decide the representation filed by the petitioner after giving an opportunity of hearing. The appellant has not chosen to annexe the said order with the appeal. Be that as it may, the speaking order dated 20.10.2022 (Annexure P-7) mentions about the same. 12. Both sides were heard by the competent authority. The authority noted that the first issue regarding the delay in overlay by the concessionaire arose on 17.09.2012. It was reported that the appellant had not taken any steps to start the work of overlay. As a result of the same, liquidity damages at the rate of Rs.1.21 lakhs per day were imposed from 04.10.2012 to 31.12.2012 on account of inadequate maintenance which amounted to a total of Rs.106.48 lakhs which was not deposited by the appellant even after reminders. With regard to the second renewal coat also, there was a delay and despite extensions, the same was not done. It was observed that the appellant was breaching the agreement conditions at its free will, as a result of which, liquidity damages were again imposed at the rate of Rs.1.21 lakhs per day total amounting to Rs.239.58 lakhs. However, the same was also not deposited. The interest imposed upon the liquidity damages amounting to Rs.523.30 lakhs was also not deposited. The total amount on account of the liquidity damages and interest came to Rs.869.36 lakhs which was not deposited by the appellant. Bank guarantee of Rs.49.04 lakhs was, therefore, got en-cashed leaving to a total recoverable amount of Rs.820.32 lakhs. The interest imposed upon the liquidity damages amounting to Rs.523.30 lakhs was also not deposited. The total amount on account of the liquidity damages and interest came to Rs.869.36 lakhs which was not deposited by the appellant. Bank guarantee of Rs.49.04 lakhs was, therefore, got en-cashed leaving to a total recoverable amount of Rs.820.32 lakhs. However, after due deliberation, the Government decided that the appellant would be permitted to operate and maintain the road till 11.02.2024 subject to certain conditions which were as under: - "(a) The Concessionaire shall be bound to deposit Liquidated Damages or any other pending recoveries along with interest before the extension in time in running of O&M of the road granted w.e.f 23.10.2022. (b) The Concessionaire shall fulfil all contractual obligations including laying of renewal coat, wherever applicable. (c) The Concessionaire shall rectify Black Spots as per Concession Agreement, carry out repair works on the said roads and rectify all other deficiencies strictly as per the conditions of Concession Agreement. (d) The Concessionaire shall neither make any claim with regard to the ongoing period up-till 23.10.2022 nor shall make any claim for cost escalation on account of such extension." Even these conditions were not complied with by the appellant despite giving undertakings which the appellant now states were given under duress. This U-turn by the appellant also appears to be aimed at avoiding the payment of the amounts due. 13. The Commercial Court took note of all these facts and rightly came to the conclusion that neither the appellant had been able to make out a prima-facie case, nor was the balance of convenience in its favour and it had also not been able to show that it would suffer an irreparable loss if the interim reliefs were not granted. It was rightly held that if the appellant succeeded in the arbitral proceedings, it would be entitled for the monetary benefits with interest and its money would be secured since the party on the other side is the Government. 14. It is apparent that the appellant remained in persistent default. No doubt, there were certain intervening circumstances like the COVID-19 pandemic, farmers agitation etc. which did hold up many projects and many businesses suffered losses. However, the record shows that the respondents also fully cooperated with the appellant by granting extensions from time to time but the appellant remained in persistent default. No doubt, there were certain intervening circumstances like the COVID-19 pandemic, farmers agitation etc. which did hold up many projects and many businesses suffered losses. However, the record shows that the respondents also fully cooperated with the appellant by granting extensions from time to time but the appellant remained in persistent default. In any case, the matter shall finally be decided by the Arbitrator in arbitral proceedings which have been initiated and all recoveries being made by the respondents shall be subject to the final decision of the Arbitrator. The Commercial Court, therefore, did not commit any illegality in dismissing the petition filed by the appellant under Section 9 of the 1996 Act. 15. We have gone through the judgments relied upon by learned counsel for the appellant but find that they are not at all applicable in the present case. Reliance on specific parts of these judgments would not help the appellant as the judgments relied upon were on different facts altogether. In view of the aforementioned facts and circumstances, we do not find any merit in the present appeal and the same is, hereby, dismissed. CM-18-FCARB-2023 Since the appeal stands decided, no order is required to be passed in this application and the same is disposed of as having been rendered in-fructuous.