Arbitral Award – Contract is voidable at the instance of Contractor – NHAI
NHAI had invited bids for collection of toll fees at NH-2 on annuity basis for two years vide tender dated 18.10.2012. The annual potential collection was set at Rs.47.09 crores per annum based on survey and research done by NHAI.
On 22.1.2013, the bid of the petitioner was accepted, and the agreement was executed on 7.3.2013 for Rs.62.10 crores. As per the agreement, the petitioner was required to pay Rs.1,19,09589/- every week to NHAI.
However, on 26.2.2013 the notification was issued to authorize collection of toll fees at NH-2 for the length of 66.813 kms before completion of Kalpi stretch at the specified rate and at enhanced rate for the length of 68.513 kms after completion of said stretch.
Since the petitioner came to know that Kalpti stretch was not available for toll collection, only after execution of the agreement, on 16.4.2013, the petitioner requested NHAI to complete the said stretch and to exclude the period of its completion. It was also informed that in the event the period of completion is not excluded from the Agreement, the petitioner would terminate the agreement.
On 20.5.2013, NHAI directed the petitioner to calculate the remittance for 66.813 kms on a pro-rata basis.
On 30.5.2013, the petitioner invoked arbitration that as per NHAI Rules and the agreement, the condition precedent for execution of toll collection contract is that the road should be complete in all respects before signing such contract.
On 3.7.2013, NHAI appointed the sole Arbitrator.
On 3.5.2015, the Arbitrator passed the Arbitral Award. The finding was that the entire road remained incomplete even on the date of Agreement. It was also found that the road of 1.7 kms was under hindrance and continued to be under hindrance even after execution of the Agreement.
Thus, the claim of the petitioner was allowed and the counter claim of NHAI was rejected. It was held that a contractor can collect toll only when a national highway is entirely complete.
However, the learned Single Judge allowed Section 34 petition of NHAI on the ground that by virtue of Exception to Section 19 of the Contract Act, the agreement would not be voidable. It was held that if a party whose consent was caused by misrepresentation had the means of discovering the truth with ordinary diligence, Section 19 of the Contract Act would have no application.
HELD, in appeal under Section 37 of the Arbitration Act, that the cases of “deliberate fraud” do not come in the Exception to Section 19 of the Contract Act and where an agreement was obtained by fraud, it is voidable at the instance of the party deceived notwithstanding that the party whose consent was caused by fraudulent misrepresentation had means of discovering the truth by due diligence. However, the conclusion of the learned Single Judge that in view of Exception to Section 19 of the Contract Act, the findings are not required to be adjudicated upon is not correct. The matter was remanded for fresh adjudication to the learned Single Judge.
Judgment dated 16.5.2024 of the Division Bench of the Delhi High Court in FAO (OS) (COMM) 287/2019 and CM APPL. 31842/2018 of Sangam (India) Ltd Vs. The National Highway Authority of India and another
