PSA SICAL TERMINALS PVT. LTD. v. THE BOARD OF TRUSTEES OF V.O. CHIDAMBRANAR PORT TRUST TUTICORIN AND OTHERS

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CHIDAMBRANAR PORT TRUST TUTICORIN [B. R. GAVAI, J.]

76Copy pinpoint76. A conjoint reading of all these documents would reveal that when the bid document was published in April 1997; SICAL tendered its bid in October, 1997 and submitted its financial offer in December,1997; and the LoI was issued to SICAL on 29th January, 1998, there were no guidelines at all. Even the guidelines of February 1998 do not provide for royalty being factored as cost while fixation of tariff. On the contrary, the tariff order of 1999 specifically clarifies that it has left the royalty issue to be decided by TPT and the GoI. It has specifically clarified that the approval by TAMP should not be interpreted to be amounting to any implicit approval of royalty-related issue. Further, the tariff order issued on 20th September, 2002 specifically rejects the claim of SICAL for factoring any royalty as cost while tariff/price fixation. As already stated herein above, SICAL has challenged the said order before the Madras High Court by way of writ petition, which petition has been allowed. It is also not in dispute, that on account of interim order passed by the Madras High Court dated 8th November, 2002, SICAL is still continuing to charge at rates notified in the 1999 tariff order. D

77Copy pinpoint77. In this scenario, the finding of the Arbitral Tribunal, that there was a law when the Agreement was entered into between the parties, which provided royalty as a pass-through and that the said law has been changed for the first time in 2003 and subsequently again changed in 2005, in our view, is a finding based on ‘no evidence’. Had the Arbitral Tribunal perused the tariff orders of 1999 and 2002, it would have found that in the 1999 tariff order TAMP has specifically observed that its approval of the tariff should not be construed as its implicit approval of royalty-related issue and the 2002 tariff order specifically states that royalty was not permitted to be factored in the cost while determining tariff. The Arbitral Tribunal has totally failed to take into consideration this aspect of the matter.

78Copy pinpoint78. As such, we are of the view, that since the finding of the Arbitral Tribunal, that there was an existing law to the effect that the royalty payable shall be permitted as a pass-through in cost while fixation of tariff, is based on ‘no evidence’ and the finding, that there was a G change in law in 2003 and 2005 is based on without taking into consideration the relevant evidence, would come in the realm of perversity as explained by this Court in paragraph 31 of the Associate Builders (supra). The findings are based on ‘no evidence’ and ‘ignorance of vital evidence’ in arriving at its decision. H

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79Copy pinpoint79. This brings us to the next issue viz., as to whether the Arbitral Tribunal was justified in passing an award thereby substituting ‘royalty payment module’ to the ‘revenue-sharing module’. A contract duly entered into between the parties cannot be substituted unilaterally without the consent of the parties. The intention of the parties could be gathered from the documents on record. SICAL, for the first time, made B representation to TPT on 6th October, 2006thereby seeking a relief under the terms of Article 14.3 of the Agreement. On 14th October, 2006, TPT informed SICAL that the issues raised by it were under examination. However, vide order dated 27th October, 2006, TPT refused to consider SICAL’s application for relief since, according to it, the issue raised by C SICAL was pending before the Madras High Court. SICAL therefore filed writ petition being Writ Petition No. 4361 of 2006 before the Madras High Court. The Madras High Court allowed the said writ petition vide order dated 21st August, 2007 clarifying that the petition pending before the High Court had nothing to do with the representation under Article 14 of the License Agreement and remanded the matter to TPT for consideration afresh. Vide a reasoned letter dated 25th April, 2008, TPT rejected the claim of SICAL. TPT has specifically observed that any change in the Agreement cannot be done without prior approval of the GoI. SICAL on 19th November, 2012 addressed a letter to TPT invoking arbitration under Article 15.3 of the License Agreement. TPT strenuously contested the claim of SICAL with regard to prayer for change from ‘royalty payment mode’ to ‘revenue sharing mode’. The stand of TPT has been crystalized by the Arbitral Tribunal in paragraph 5 of the Award, which reads thus: “5. Sum and substance of the defence is as follows: F “There is no dispute at all. The grievance of the SICAL is that there is an error committed by TAMP in fixing the tariff. That grievance had been repeatedly taken before the High Court of Madras by SICAL and at all stages orders have been passed by setting aside the orders challenged. Therefore, the real G grievance of SICAL is only against TAMP and not against PORT. Since the issue regarding fixing of tariff is pending finality, SICAL cannot maintain any claim legally or factually against PORT. PORT is bound by the order of TAMP. Whatever order TAMP passes, the PORT is bound to obey. The PORT has no right to interfere with the tariff fixing power H

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CHIDAMBRANAR PORT TRUST TUTICORIN [B. R. GAVAI, J.]

of TAMP which is their exclusive domain and jurisdiction. The A Contract is not entered into on the basis of any guidelines. There was no guideline, as contended by SICAL, on the date of the contract. By the present dispute, SICAL is trying to change the entire nature of the contract, namely, from the royalty module to the revenue sharing module. It is impermissible for a court or this Tribunal to compel any party to enter into a new contract. Contract is always by consent of parties. All the grievance put forward before the Tribunal by SICAL is their grievance in sum and substances before TAMP and High Court of Madras in all challenges made against the order of TAMP. Neither a Court nor the Tribunal can rewrite the Contract. The contract is an enforceable one and simply because SICAL is stated to be losing monetarily, the relief sought for in this dispute cannot be granted. If the case of SICAL is true, it is open to them to put an end to the contract and seek appropriate relief. If such a termination of the contract takes place at the instance of SICAL, then the PORT will take steps to get appropriate relief. Section 56 of the Contract Act is applicable to this case” A number of case laws have been cited by the learned Senior Counsel for the PORT and we will refer to them at the appropriate stage.” E

80Copy pinpoint80. It could thus be seen, that SICAL wanted the Agreement to be amended so as to change the ‘royalty payment method’ to ‘revenue- sharing method’. TPT was always opposed to it. The intention of TPT is apparent from its various communications and its stand before the Arbitral Tribunal, that it was not agreeable for amendment of the Agreement F from ‘royalty payment method’ to ‘revenue-sharing method’.

81Copy pinpoint81. However, ignoring the stand of TPT, by the impugned Award, the Arbitral Tribunal has thrust upon a new term in the Agreement between the parties against the wishes of TPT. The ‘royalty payment method’ has been totally substituted by the Arbitral Tribunal, with the G ‘revenue-sharing method’. It is thus clear, that the Award has created a new contract for the parties by unilateral intention of SICAL as against the intention of TPT.

82Copy pinpoint82. After referring to various international treaties on arbitration and judgments of other jurisdictions, this Court in Ssangyong H

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A Engineering and Construction Company Limited (supra), observed thus: “76. However, when it comes to the public policy of India, argument based upon “most basic notions of justice”, it is clear that this ground can be attracted only in very exceptional circumstances when the conscience of the Court is shocked by B infraction of fundamental notions or principles of justice. It can be seen that the formula that was applied by the agreement continued to be applied till February 2013 — in short, it is not correct to say that the formula under the agreement could not be applied in view of the Ministry’s change in the base indices from 1993-1994 to C 2004-2005. Further, in order to apply a linking factor, a Circular, unilaterally issued by one party, cannot possibly bind the other party to the agreement without that other party’s consent. Indeed, the Circular itself expressly stipulates that it cannot apply unless the contractors furnish an undertaking/affidavit that the price adjustment under the Circular is acceptable to them. We have seen how the appellant gave such undertaking only conditionally and without prejudice to its argument that the Circular does not and cannot apply. This being the case, it is clear that the majority award has created a new contract for the parties by applying the said unilateral Circular and by substituting a workable formula under the agreement by another formula dehors the agreement. This being the case, a fundamental principle of justice has been breached, namely, that a unilateral addition or alteration of a contract can never be foisted upon an unwilling party, nor can a party to the agreement be liable to perform a bargain not entered into with the other party. Clearly, such a course of conduct would be contrary to fundamental principles of justice as followed in this country, and shocks the conscience of this Court. However, we repeat that this ground is available only in very exceptional circumstances, such as the fact situation in the present case. Under no circumstance can any court interfere with an arbitral award on the ground that justice has not been done in the opinion of the Court. That would be an entry into the merits of the dispute which, as we have seen, is contrary to the ethos of Section 34 of the 1996 Act, as has been noted earlier in this judgment.” H [emphasis supplied]

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CHIDAMBRANAR PORT TRUST TUTICORIN [B. R. GAVAI, J.]

83Copy pinpoint83. As such, as held by this Court in Ssangyong Engineering A and Construction Company Limited (supra), the fundamental principle of justice has been breached, namely, that a unilateral addition or alteration of a contract has been foisted upon an unwilling party. This Court has further held that a party to the Agreement cannot be made liable to perform something for which it has not entered into a contract. In our B view, re-writing a contract for the parties would be breach of fundamental principles of justice entitling a Court to interfere since such case would be one which shocks the conscience of the Court and as such, would fall in the exceptional category.

84Copy pinpoint84. We may gainfully refer to the following observations of this Court in Bharat Coking Coal Ltd. v. Annapurna Construction26. C

“22. There lies a clear distinction between an error within the jurisdiction and error in excess of jurisdiction. Thus, the role of the arbitrator is to arbitrate within the terms of the contract. He has no power apart from what the parties have given him under the contract. If he has travelled beyond the contract, he would be acting without jurisdiction, whereas if he has remained inside the parameters of the contract, his award cannot be questioned on the ground that it contains an error apparent on the face of the record.”

85Copy pinpoint85. It has been held that the role of the Arbitrator is to arbitrate within the terms of the contract. He has no power apart from what the parties have given him under the contract. If he has travelled beyond the contract, he would be acting without jurisdiction.

86Copy pinpoint86. It will also be apposite to refer to the following observations of this Court in the case of Md. Army Welfare Housing Organization F v.Sumangal Services (P) Ltd.27 “43. An Arbitral Tribunal is not a court of law. Its orders are not judicial orders. Its functions are not judicial functions. It cannot exercise its power ex debito justitiae. The jurisdiction of the arbitrator being confined to the four corners of the agreement, he G can only pass such an order which may be the subject-matter of reference.”

26 (2003) 8 SCC 154 27 (2004) 9 SCC 619 H

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87Copy pinpoint87. It has been held that an Arbitral Tribunal is not a Court of law. Its orders are not judicial orders. Its functions are not judicial functions. It cannot exercise its powers ex debito justitiae. It has been held that the jurisdiction of the arbitrator being confined to the four corners of the agreement, he can only pass such an order which may be the subject- matter of reference. B

88Copy pinpoint88. In that view of the matter, we are of the considered view, that the impugned Award would come under the realm of ‘patent illegality’ and therefore, has been rightly set aside by the High Court.

89Copy pinpoint89. The High Court has gone into various other aspects of the matter. Arguments have also been advanced before us with regard to NSCT being given a discriminatory treatment as against SICAL. The arguments have also been advanced on the ground of approbate and reprobate and doctrine of election. It has also been argued on behalf of SICAL that it is incurring huge losses. Per contra, it is submitted on behalf of TPT, that it is incurring huge losses on account of various interim orders passed by the High Court and the District Judge in Section 9 applications.

90Copy pinpoint90. We do not propose to go into those aspects of the matter. TAMP has issued various notifications with regard to fixation of tariff so also various orders have been passed by the GoI with regard to the aspect of grant or refusal of pass through of royalty payable. Various petitions have been filed by SICAL challenging the said orders and notifications. All the petitions were allowed thereby remanding the matters to TAMP and GoI. However, it is not in dispute, that SICAL, by virtue of the interim order passed dated 8th November, 2002 in Miscellaneous F Petition No. 60240 of 2002 in Writ Petition No.40638 of 2002 is continuing to levy charges on the basis of 1999 tariff order (dated 8th December, 1999) passed by TAMP.

91Copy pinpoint91. The last notification issued by TAMP with regard to price/ tariff fixation dated 17th December, 2008, gazetted vide notification dated G 30th December, 2008 was challenged by SICAL by way of Writ Petition No.1350 of 2009. The last direction issued by the GoI dated 20th February, 2008 was also challenged by SICAL by way of Writ Petition No.1351 of

2009. By an order dated 15th October, 2009, the High Court has allowed these writ petitions by setting aside the order of the GoI dated 20th February, 2008 and the notification dated 17th December, 2008 issued by H

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CHIDAMBRANAR PORT TRUST TUTICORIN [B. R. GAVAI, J.]

TAMP and has directed the GoI as well as TAMP to consider the issue afresh.

92Copy pinpoint92. It is informed at the Bar, that the said order has been carried in appeal before the Division Bench of the High Court both by SICAL as well as TAMP, which are still pending before the High Court.

93Copy pinpoint93. We are of the considered view, that if we make any observation on merits of the issue with regard to aforesaid submissions made before us, it may prejudicially affect the rights of either of the parties. We therefore refrain from making any observation with regard to the aforesaid arguments, though heavily contested before us.

94Copy pinpoint94. We therefore, confine ourselves with the issue as regards the validity of the Award. We also clarify that any observations made by the High Court with regard to other aspects of the matter except the validity of the Award, would not come in the way of either of the parties raising their grievances in either the proceedings which are pending before the Division Bench of the High Court or any other proceedings to which either of it would be entitled to take recourse in law.

95Copy pinpoint95. In the result, with these observations, we dismiss the appeals. However, in the facts and circumstances of the case, there shall be no order as to costs. Pending applications, if any, shall stand disposed of accordingly. E

Devika Gujral Appeals dismissed.