Paragraph numbers below are the court’s original numbering, recovered from the source text.
14. The Tribunal considered the relevant agreement provisions as well as land lease deed, total package documents, minutes of pre-bid meetings and deed authorising collection of toll fee etc., and proceeded with. the arbitration proceedings. The State of Rajasthan had not taken the defence E that it was not agreed between the parties to issue the notification barring the traffic through the markets of Bharatpur city. The only issue remained as to whether there was delay in issuance of notification and implementation thereof. In such a fact-situation and considering the settled legal propositions, we F are of the view that the District Judge as well as the High Court fell in error considering the issue which was not taken by the State before the Tribunal during the arbitration proceedings.
15. Furthermore, it is a settled legal proposition that the G arbitrator is competent to award interest for the period commencing with the date of award to the date of decree or date of realisation, whichever is earlier. This is also quite logical for, while award of interest for the period prior to an arbitrator entering upon the reference is a matter of substantive law, the grant of interest for the post-award period is a matter H of procedure. MSK PROJECTS (I) (JV) LTD v. STATE OF RAJASTHAN & ANR. [DR. B.S. CHAUHAN, J.] (Vide: Seth Thawardas Pherumal (Supra); Union of . A India v. Bungo Steel Furniture Pvt. Ltd., AIR 1967 SC 1032; Executive Engineer, Irrigation, Galimala & Ors. v. Abnaduta Jena, AIR 1988 SC 1520; Gujarat Water Supply & Sewerage Board v. Unique Erectors (Gujarat) (P) Ltd. & Anr., AIR 1989 SC 973; Secretary, Irrigation Department, Govt. of Orissa & B Ors. v. G.C. Roy, AIR 1992 SC 732; Hindustan Construction Co. Ltd. v. State of Jammu & Kashmir, AIR 1992 SC 2192; Executive Engineer, Dhenkanal Minor Irrigation Division, Orissa v. N.C. Budharaj (Dead) by Lrs., AIR 2001 SC 626; Bhagawati Oxygen Ltd. v. Hindustan Copper Ltd., AIR 2005 c SC 2071; and Indian Hume Pipe Co. Ltd. v. State of Rajasthan, (2009) 10 SCC 187).
16. So far as the rate of interest is concerned, it may be necessary to refer to the provisions of Section 3 of the Interest Act 1978, relevant part of which reads as under: "(1) In any proceedings for the recovery of any debt or damages or in any proceedings in which a claim for interest in respect of any debt or damages already paid. is made, the court may, if it thinks fit, allow interest to the person entitled to the debt or damages or to the person making such claim, as the case may be, at a rate not exceeding the current rate of interest … ." (Emphasis add~d) Thus, it is evident that the aforesaid provisions empower the Court to award interest at the rate prevailing in the banking transactions. Thus, impliedly, the court has a power to vary the rate of interest agreed by the parties.
17. This Court in Krishna Bhagya Jala Nigam Ltd. v. G. Harischandra Reddy & Anr., AIR 2007 SC 817, while dealing with the similar issue held as under: • … after economic reforms in our country the interest regime has changed and the rates have substantially reduced and, therefore, we are of the view that the interest awarded by the arbitrator at 18% for the pre-arbitration period, for the pendente lite period and future interest be reduced to 9%."
18. In H.U.D.A v. Raj Singh Rana, AIR 2008 SC 3035, i . B this Court considered various earlier judgments of this Court including Ghaziabad Development Authority v. Balbir Singh, AIR 2004 SC 2141; Bihar State Housing Board v. Arun Dakshy, (2005) 7 SCC 103; Haryana Urban Development c Authority v. Manoj Kumar & Anr., (2005) 9 SCC 541; H. U.D.A v. Prem Kumar Agarwal & Anr., JT 2008 (1) SC 590 and came to the conclusion: " ……. the rate of interest is to be fixed in the circumstances of each case and it should not be imposed at a uniform rate without looking into the circumstances leading to a situation where compensation was required to be paid."
19. Be that as it may, the High Court while dealing with the rate of interest has relied upon the judgment of this Court E in Krishna Bhagya Jala Nigam Ltd. (supra) and thus, there is no scope for us to interfere with the rate of interest fixed by the courts below. ·
20. The issue raised by the State before this Court in its appeal as to whether the Bharatpur-Deeg patch was an integral F or composite part of the project and the private appellant could collect the toll fee on that part also stands concluded by the High Court after considering the entire evidence on record.
21. It is evident from the record as well as the judgments G of the courts below that bid documents contained data collected on the flow of traffic on 14th and 15th April, 1994 to find out the viability and requirement of the establishment of Bharatput bye-pass and it included the traffic flow on the Bharatpur-Deeg section also which indicates that this particular patch had also H been an integral part of the project. MSK PROJECTS (I) (JV) LTD v. STATE OF RAJASTHAN & ANR. [DR. B.S. CHAUHAN, J.]
22. In pre-bid conference the interveners wanted a clarification as to whether the persons using this particular patch of road between Bharatpur-Deeg could be liable to pay toll fee. It was clarified by the respondent-State authorities that the users of this patch would be required to pay the toll fee.
23. Clause 5 of the Concession agreement also provided that Government would levy and charge the fee from all persons using the project facilities. The project was not in parts rather it was a composite and integrated project which included the Bharatpur-Deeg section also. Hence, it was not permissible for the respondent-State to take the plea that persons using such section of the road were not liable to pay the toll fee. We do not find any force in the submission made by Dr. Manish Singhvi, learned counsel for the State that it was not a newly constructed road. However, he is not in a position to deny that the said portion of road had been widened and strengthened by the private appellant and could not be termed as service road which could be used free of charge in view of clause 7 of. the concession agreement as service road has been defined as any road constructed temporarily for use of traffic for short period during construction of the main road. Such a facility had to be provided in order to maintain the free flow of traffic during the construction of the road.
24. Thus, in view of the above, the issue raised by the State that Bharatpur-Deeg section of the road was out of the project and the private appellant was not entitled to collect the toll fee on that part of the road, stands settled in favour of the private appellant.
25. Determination of the aforesaid three issues brings us to the entitlement of the private appellant. The Court is not oblivious to the fact that the State authorities cannot be permitted to use the collection of toll fee as augmenting the State revenues. In State of U.P. & Ors. v. Devi Dayal Singh, AIR 2000 SC 961, this Court defined 'toll' A as a sum of money taken in respect of a benefit arising out of the temporary use of land. It implies some consideration moving to the public either in the form of a liberty, privilege or service. In other words, for the valid imposition of a toll, there must be a corresponding benefit. The Court furtner held: "Although the section has empowered the State Government to levy rates of tolls "as it thinks fit", having regard to the compensatory nature of the levy, the rate of toll must bear a reasonable relationship to the providing c of benefit. No doubt, by virtue of Section 8 of the Act, the tolls collected are part of the public revenue and may be absorbed in the general revenue of the State, nevertheless by definition a toll cannot be used for otherwise augmenting the State's revenue." (Emphasis added)
26. In fact, the toll fee under the Tolls Act, 1851 is of compensatory in nature wherein the Government can reimburse itself the amount which it had spent on construction of road/ E bridge etc. Clause IV(a) of the statutory notification dated 10.2.1997 which entitled the government to give present road on toll is reproduced below: "IV(a). The toll of any of the aforesaid facilities/ constructions shall be levied only for so long as the total cost of its construction and maintenance including interest thereupon, and the total expenditure in realisation of toll has not been realised in full or for a period of 30 years." (Emphasis added) It is evident that Clause IV(a) of the Notification dated 10.02.1997 envisages that toll can only be collected as long H as total cost of construction and maintenance including interest MSK PROJECTS (I) (JV) LTD v. STATE OF RAJASTHAN & ANR. [DR. B.S. CHAUHAN, J.] thereupon is recovered. A person is debarred by law and statutory inhibition as conta.ined in Clause IV(a) of the notification from collection of toll beyond the recovery of cost of construction.
27. Thus, from the above referred provisions, it is evident that toll fee is compensatory in nature and can be collected by the State to reimburse itself the amount it has spent on construction of the road/bridge etc. The State is competent to levy/collect the toll fee only for the period stipulated under the Statute or till the actual cost of the project with interest etc. is c recovered. However, it cannot be a source of revenue for the State.
28. In common parlance, "reimbursement" means and · implies restoration of an equivalent for something paid or expanded. Similarly, "Compensation" means anything given to D make the equivalent. (See: State of Gujarat v. Shanti/a/ Manga/das & Ors., AIR 1969 SC 634; Tata Iron & Steel Co. Ltd. v. Union of India & Ors., AIR 2000 SC 3706; Ghaziabad Development Authority (Supra); and H.U.D.A v. Raj Singh Rana, (Supra).
29. However, in Dwaraka Das v. State of Madhya Pradesh & Anr., AIR 1999 SC 1031, it was held that a claim by a contractor for recovery of amount as damages as expected profit out of contract cannot be disallowed on ground that there was no proof that he suffered actual loss to the extent of amount claimed on account of breach of contract.
30. In Mis. A. T. Brij Paul Singh & Ors. v. State of Gujarat, j. AIR 1984 SC 1703, while interpreting the provisions of Section 73 of the Indian Contract Act, 1972, this Court held that damages can be claimed by a contractor where the government is proved to have committed breach by improperly rescinding the contract and for estimating the amount of damages, court should make a broad evaluation instead of going into minute details. It was specifically held that A where in the works contract, the party entrusting the work committed breach of contract, the contractor is entitled to claim the damages for loss of profit which he expected to earn by undertaking the works contract. Claim of expected profits is legally admissible on proof of the breach of contract by the B erring party. It was further observed that what would be the f . measure of profit would depend upon facts and circumstances of each case. But that there shall be a reasonable expectation of profit is implicit in a works contract and its loss has to be compensated by way of damages if the other party to the c contract is guilty of breach of contract cannot be gainsaid.
31. In B.S.N.L v. Reliance Communication Ltd., (2011) 1 sec 394, this court held as under: "53. Lastly, it may be noted that liquidated damages serve the useful purpose of avoiding litigation and promoting commercial certainty and, therefore, the court should not be astute to categorise as penalties the clauses described as liquidated damages."
32. This Court further stated in Oil & Natural Gas Corporation Ltd. v. SAW Pipes Ltd. (Supra): "64 …. This section is to be read with Section 74, which deals with penalty stipulated in the contract, inter alia (relevant for the present case) provides that when a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, the party complaining of breach is entitled, whether or not actual loss is proved to have been caused, thereby to receive from the party who has broken the contract reasonable . compensation not exceeding fhe amount so named. Section 74 emphasizes that in case of breach of contract, the party complaining of the breach is entitled to receive reasonable compensation whether or not actual loss is proved to have been caused by such breach …. "
33. Thus, the case requires consideration in the light of the MSK PROJECTS (I) (JV) LTD v. STATE OF RAJASTHAN & ANR. [DR. B.S. CHAUHAN, J.] 'I aforesaid settled legal principles. Undoubtedly, the total construction was for Rs. 13.25 crores. It is evident from the Bid-documents filed by the private appellant that the work was to be executed in two phases and the relevant part thereof reads as under: PHASE -1 Year Const Super- Total lnte- Total Upto Cost vision rest inves- date Charges @20% tment inves- @ 10% of Strs tment (in (in (in lacs) lacs) lacs) 1998-99 6/98 7.5 82.50 4.12 86.62 86.62 9/98 8.0 88.00 8.52 92.52 183.14 12/98 8.0 88.00 12.92 100.92 284.06 3/99 8.0 88.00 17.32 105.32 389.32 Total 31.5 346.50 42.88 389.38 389.88 . 1999-2000 6/99 11.0 23.37 144.37 533.75 9/99 12.0 132.0 29.97 161.97 695.72 12/99 12.0 132.0 36.57 168.57 864.29 3/2000 12.50 137.50 43.44 180.94 1045.23 Total 47.50 522.50 133.35 655.85 1045.23 Grand 79.0 869.0 176.23 1045.23 1045.23 Total c c [2011) 9 S.C.R. PHASE -11 2005-06 6/2005 15.0 8.25 173.25 173.25 9/2005 15.0 16.50 181.50 354.75 Total 30.0 24.75 354.75 354.75 The documents further reveal that phase II work was of worth Rs.354.75 lacs and it included repairing, maintenance and second layer of bitumen on the entire road. Admittedly, this 0 part of the contract had never been executed by the private appellant. More so, the chart filed by the State of Rajasthan shows that the estimated cost of the work had been recovered by the private appellant as the schedule prepared for repayment tally with the amount collected by the private appellant as toll E fee within the stipulated period. ·
34. In the first phase, the private appellant spent about Rs.10.45 crores and recovered the said amount with certain profit, though the actual figure i.e. the toll fee recovered has not been disclosed. So far as the second phase is concerned, F admittedly, the amount of Rs.354.75 lacs has not been spent by the private appellant. This issue has been agitated by the State of Rajasthan before this Court in its Counter Affidavit wherein it is stated as under: "It is respectfully submitted that as per the terms of the Agreement, petitioner was required to complete the project in two phases. In the first phase investment of Rs.1045 lacs and after 5 years in the second phase Rs. 354.75 lacs was to be made by the petitioner. However, the petitioner has not abided by the terms of the agreement and has not _. MSK PROJECTS (I) (JV) LTD v. STATE OF RAJASTHAN & ANR. [DR. B.S. CHAUHAN, J.] made any investment for.the second phase and, therefore, it has breached the terms of the contract and, therefore, it is respectfully submitted that the contention of the petitioner that he is entitled to recover its investment, is erroneous and petitioner is trying to give wrong picture about investment made and has not come to this Hon'ble Court . with clean hands and, therefore, the present Special Leave Petition is liable to be dismissed° by the Hon'ble Court. The concession period has come to an end."
35. The aforesaid allegations have not been denied by the private appellant while submitting its rejoinder. Relevant part of the rejoinder affidavit reads: " ….. the present contention as raised was not part of the arbitration proceeding, before the arbitral Tribunal. It is further submitted that this contention was never raised before the District Court and as well as before the Hon'ble Court of Rajasthan. The point as raised is subsequent to completion of the project and work to be done after the period of 5 years …. " Thus, there is no specific denial of the allegations/ averments taken by the State as required by the principie enshrined in Order VIII Rule 5 of the Code of Civil Procedure, 1908.
36. It is strange that a person who has not complied with terms of contract and has acted in contravention of the terms of agreement claims that he was entitled to earn more profit. The private appellant cannot be permitted to claim damages/ compensation in respect of the amount of Rs.13.25 crores, as he did not spend the said amount stipulated in the terms of agreement. Private appellant cannot claim the amount of Rs. 7 .13 crores for a period of three years for a small patch of 1.25 kilometres out of the total length of the road to the extent of 10.85 kilometres. c (2011] 9 S.C.R. w
37. In fact, the tribunal has dealt with the issue in correct perspective only to the extent the period of delay by which the notification barring the heavy vehicles through market of Bharatpur had been issued stating as under: "The traffic survey conducted by the claimant on 17th, 18th & 19th April, 2000 has not been accepted by the respondent. The arbitral tribunal also feels that this survey, which has been done by the claimant alone, cannot be relied upon for this purpose, because respondent is not a c party to this survey. The claim lodged by claimant on its own survey as per para 12.3(iii) from 12/4/2000 to 30/9/ 2000 is for Rs.31.18 lacs. In this regard tribunal is of the opinion that traffic survey of 1997 as per agreement in which both parties bears consent of each other therefore can safely be relied upon for purpose of assessment Clf such losses to the claimant, because the occurrence of loss as such to the claimant has not been denied by respondent, which otherwise is an established fact as per documentary evidence on record. The tribunal has assessed this part of loss on the traffic survey of 1997 for commercial vehicles only as Rs.26.34 lacs from 12/4/2000 to 301912000." As the notification had been issued, and it was not the responsibility of the State to establish a police chowki etc. to . . F implement the notification, there was no occasion for the tribunal to proceed further. Therefore, any award in favour of the private appellant in that respect for non-issuance of notification beyond the date of the notification, cannot be held to be justified and the same is liable to be set aside.
38. The State authority has decided to establish a toll road t as it was not having sufficient funds. In case the claim of the private appellant is allowed and as the State is not in a position to grant further facility to collect the toll fee at such a belated stage, the purpose of establishing the toll road itself stands j .• ' MSK PROJECTS (I) (JV) LTD v. STATE OF RAJASTHAN & ANR. [DR. ·s.s. CHAUHAN, J.] frustrated. More so, the toll fee cannot be collected to recover the amount never spent by the contractor. It is evident from the discourse in pre-bid meetings of the parties that it had been decided that compensation would be worked out on the basis of investment made by concerned contractor. More so, the statutory notification dated 10.2.1997 provided to recover the cost of construction and maintenance including interest thereon. Therefore, the question of non-execution of work of second phase of the contract becomes very material and relevant to determine the real controversy. The State authorities for the reasons best known to them, did not make reference to the arbitration proceedings for non-execution of the work of the second phase of the contract. However, the relief claimed by the private appellant would prove to be a "windfall profit" without carrying out the obligation to execute the work just on technicalities. We have held in this very case, that the arbitrator cannot proceed beyond the terms of reference and, therefore, the question of considering the non-execution of work of second phase of the work was neither permissible nor possible as it had arisen subsequent to the date of award in the arbitration proceedings. Be that as it may, in order to do complete justice between the parties and protect the public exchequer, we feel that the matter requires adjudication and reconsideration on the following points by the arbitration tribunal: (i) What amount could have been recovered by the private appellant for Bharatpur-Deeg part of the road from the vehicles using the road? (ii) What could be the effect on the contract as a whole for non-executing the work of the second phase? In view of the fact that a long time has elapsed, we request . the learned tribunal to decide the case as early as possible after giving due opportunity to the parties concerned. The private c A appellant shall be entitled only for a sum of Rs.26.34 lacs awarded by the tribunal for delay in issuing the notification with 10% interest, if not paid already or it could be adjusted in the final accounts bills. With these observation, the appeals stand disposed of. No costs. B R.P. Appeals disposed of. j