The Bombay High Court on Friday while dismissing writ petitions filed by toll operator infrastructure companies seeking directions to provide for a dispute resolution mechanism through Arbitration regarding contracts they entered into with Maharashtra State Road Development Corporation Limited (MSRDC), imposed a cost of Rs.10 lakh (5 lakh each) and directed the petitioners to deposit the same with the Tata Memorial Hospital.
Division bench of Chief Justice Dipankar Datta and Justice GS Kulkarni observed-
"Petitioners are thoroughly ill-advised to file the present proceedings to seek application of the State Government Policy to provide for an institutional arbitration qua the agreements executed by them with the MSRDC. It is also equally surprising as to how the petitioner in the first petition can take a contradictory stand that clause 36(a) is an arbitration clause."
Further, admonishing the petitioners, Court said-
"Before parting we would be failing in our duty if we do not record what our judicial conscience would say. We have noted that the reliefs as prayed for were totally not maintainable. It appears to us that the purpose for which these proceedings are instituted is not innocuous. There seems to be some oblique purpose. The petitioners are experts in their commercial field, they are certainly not those who would be deprived of legal advice so as to be not oblivious of their contractual limitations.
Nonetheless the petitioners with all resources at their disposal have taken recourse to the present proceedings and in doing so have imposed a toll on the already burdened docket and precious public time of the Court, which could have been utilised for many deserving cases."
The two writ petitions were filed by M/s.MEP RGSL Toll Bridge Pvt. Ltd. (MEPRGSL) and Raima Toll & Infrastructure Pvt. Ltd. Both the petitioners are stated to be 'Special Purpose Vehicles' of one MEP Infrastructure Developers Limited (MEPIDPL). The petitioners were beneficiaries of 'toll contracts' awarded by MSRDC, which were at different locations and for different periods. The contract period in regard to both these contracts, has long expired. Although, there is no relation between these two contracts, as the cause of action is common, the petitions were tagged together.
In 2013, MSRDC invited bids for appointment of a contractor for operation and maintenance of 'Rajiv Gandhi Sea Link Project & Toll Plaza & Collection of Toll' on upfront basis. The contract work inter alia consisted of collection of toll, from the notified vehicles crossing the toll plaza, at the prescribed rate and making payment of upfront amount in installments to the MSRDC. The contract period was to be of 3 years commencing from February 6, 2014 and to end on February 1, 2017. MEPIDPL's bid was the highest bid, of an amount of Rs.227.70 crores.
On December 5, 2013 MEPIDPL agreed to pay Rs.50 lakh as upfront payment over and above the financial offer as quoted. The MSRDC accepted this revised offer and issued a letter of acceptance dated January 10, 2014 to MEPIDPL for a contract period of 3 years. Then, MEPIDPL sought approval for a contract to be entered with the petitioner (MEPRGSL), being a Special Purpose Vehicle created for the said contract. On January 17, 2014 the MSRDC granted its approval to the SPV proposal. Accordingly, on January 29, 2014 an agreement came to be entered between the MSRDC and the petitioner, under which the petitioner was appointed as a contractor for operation and maintenance of this toll project. It was a tripartite agreement between MSRDC, parent company of the petitioner and the petitioner.
Although the first petitioner's contract with MSRDC had come to an end on February 1, 2017, the petitioner's case is, that the MSRDC by its letter dated February 26, 2018 had called upon the petitioner to pay Rs.16.86 crores as the petitioner's revenue share as per Article 22, Clause no.22.12 (Volume II) of the contract. This is based on the difference in the traffic count reported by the contractor/petitioner and the traffic count undertaken by MSRDC independently.
It is stated that correspondence ensued between the parties on this issue and as there was disagreement on the accuracy of the traffic data, as per the dispute resolution clause, as contained in the agreement, a committee comprising of the Legal, Accounts and Engineering Division was formed on September 18, 2018. This committee did not accept the objections of the petitioner. The petitioner was then called upon to pay the revenue share as demanded by the MSRDC. The petitioner contends that the order passed by the said committee is cryptic and a non-speaking order.
Petitioners have impleaded the State Government as a respondent in the petition, as it is their case that the State by its notification dated October 13, 2016 has provided for an "Institutional Arbitration Policy", as a preferred mode of dispute resolution in respect of Government contracts. According to the petitioner, Mumbai Centre for International Arbitration (Respondent No. 5) is an arbitration centre, recognized by the State Government, under the said policy notification, which provides for a platform for institutional arbitration, for adjudication of contractual disputes in which the State Government/ its instrumentalities are parties.
In the said petition, it is argued that Clause 36.a of the said agreement is a clause which is akin to an arbitration clause and it also satisfies the test of an arbitration clause as laid down in the decision of the Supreme Court in Jagdish Chander Vs. Ramesh Chander & Ors.
Moreover, petitioner also contends that even assuming that Clause 36.a is not in the nature of the arbitration agreement, however, in terms of the policy decision as taken by the State of Maharashtra as contained in the notification dated October 13, 2016, the existing contract would be required to be suitably amended/altered so as to provide, that the disputes be referred to arbitration, under the auspices of a recognized arbitral institute namely the respondent no.5-Mumbai Centre for International Arbitration.
This according to the petitioner would be mandatory for the MSRDC, in terms of the prevalent policy. It is contended that it is illegal and arbitrary to disregard the scope, purport and intent of the State policy and deny the remedy of arbitration to the petitioner.
Petitioners also argued that the State's arbitration policy is impliedly recognized in an earlier agreement (which is prior to the policy notification) entered between the MEPIDPL and the MSRDC, under which the nature of the work was similar, namely toll collection, in respect of the five Mumbai entry points, petitioners argued. Facts in the second petitioner's case were different but the cause of action is similar.
After hearing submissions on behalf of both parties and examining the same, Court noted-
"What is significant is as to what is provided in clause (iv)(supra) that only with the consent of the parties to the contract/agreement, the existing agreement and / or contract can be suitably amended or altered to provide for a dispute resolution mechanism for referring the disputes to an Indian Arbitration Institute. It is thus not a policy of the State Government that it would mandate compulsory imposition of an arbitration agreement, qua the existing contracts so as to automatically amend such contracts as entered between the parties, by such executive fiat. This cannot be done in law.
In our opinion, the contracting freedom and the free consent of the parties, to have mutually agreed terms in a contract is in no manner disturbed, when this policy recognizes that only with the consent of the other parties namely the contractors the existing agreement can be changed. Admittedly no initiative has been taken by the MSRDC to demand arbitration."
Furthermore, the bench said-
"A judicial review as to what should be the terms and conditions of an agreement, is certainly not the jurisdiction of the Court and that too the extraordinary jurisdiction under Article 226 of the Constitution. If such interference is made, it would amount to this Court sitting in appeal over the contractual freedom exercised by the MSRDC.
Furthermore. the Court by exercising writ jurisdiction cannot re-write or vary the terms and conditions of the contract. Once the contract was entered between the parties, the parties being governed by the terms and conditions of the contract, would be the normal rule. There is nothing exceptional in the present case which would require a judicial review of the contractual position taken by the parties. This, more particularly when the parties have acted under the contract and the contractual period having already come to an end. There is no public law element involved in the present case so as to exercise the powers of judicial review in the present proceedings. In our considered opinion, a writ petition under Article 226 of the Constitution in the present circumstances for the prayers as made in the petitions to provide for arbitration as a dispute resolution mechanism, is certainly not maintainable."
The bench relied on a full bench decision of the Kerala High Court in Southern Structurals Ltd. Vs. Kerala State Electricity Board which declared that a decision of the division bench in Koshy Varghese V. Hindustan Paper Corporation Ltd wherein the division bench held that a Court sitting under Article 226 of the Constitution can direct the parties to go for arbitration under the Arbitration & Conciliation Act even in the absence of an arbitration agreement between the parties, did not lay down the correct law. It was held that the Court cannot compel a party to agree for arbitration.
Finally, dismissing the petitions, Court said-
"For the above reasons the writ petitions need to fail, they are accordingly dismissed with cost of Rs.5 Lakhs each to be deposited with the Tata Cancer Hospital within two weeks from today."
Senior Advocate Dr.Abhishek Manu Singhvi appeared on behalf of the petitioners and Senior Advocate Dr.Milind Sathe for MSRDCL and its Vice Chairman.