‘Partial Reduction In Traffic’ Due To Remote Event Of Flood Is Not A Force Majeure Event, Delhi High Court Sets Aside The Award Against NHAI

The Delhi High Court has held that ‘partial reduction in traffic’ due to a remote event of flood is not a force majeure event.

The bench of Justice Manoj Kumar Ohri held that force majeure event contemplates a complete blockade of the road due to the floods and not mere reduction of the traffic on a particular road.

The Court set aside an arbitration award passed against NHAI on the ground that the interpretation adopted by the Arbitral Tribunal was contrary to the intent of the parties, therefore, the award would be vulnerable to challenge for being contrary to contractual provisions and would fall within the scope of Section 34(2)(b)(ii) of the Act.

Facts

The parties entered into an agreement dated 21.03.2014 by which the respondent was engaged to collect the ‘User Fee’ at a toll plaza. The period of the agreement was 12 months. The agreement contemplated arbitration for resolution of the dispute.

Clause 9 of the agreement dealt reduction in the traffic and prohibited any claim for the same. It provided that the contractor at the time of submitting its bid for the project should take into consideration that there could be reduction in the traffic due to diversions or deterioration in the condition in the roads.

Clause 25 of the agreement dealt with force majeure situations. It allowed the contractor to claim compensation for the reduction in the collection if due to any event stipulated therein, there was a complete blockade on the road. This was subject to the contractor giving a notice in advance before claiming compensation.

A dispute arose between the parties when due to heavy rainfalls and floods, there was a restriction/partial closure of vehicles at a nearby route which resulted in the reduction of the traffic passing through the toll plaza. The appellant also imposed liquidated damages on the respondent for its failure to collect the minimum amount provided under the agreement.

The respondent claimed the reduction in the weekly collections and additional rebate due to these events. The project director of NHAI also suggested the same, however, the same recommendation was rejected by the Regional Director on the ground that the reduction in not pursuant to Clause 25 of the agreement. Aggrieved by this, the respondent invoked arbitration.

The arbitral tribunal passed an award in favour of the respondent. Aggrieved thereby, the petitioner challenged it under Section 34 of the Act. However, the challenge was rejected by the Court below. Consequently, the appellant filed an appeal under Section 37 of the Act.

Grounds of Appeal

The appellant challenged the award on the following grounds:

• The award suffers from patent illegality as it is against the provisions of the agreement between the parties.
• The tribunal erred in granting compensation under Clause 25 of the agreement on the ground that the situation was a force majeure event. It also erred that before it could entertain any claim under Clause 25, the claim had to be first raised through a notice which was not done by the respondent.
• The tribunal erred to appreciate that the flood/rainfall only resulted in the reduction of the traffic and the consequent collections and not the entire blockade of the roads leading to toll plaza. This situation is squarely covered by Clause 9 of the agreement which prohibits any such claims.

The respondent made the following submissions in favour of the award:

• The reliance placed on procedure provided under Section Clause 25 is misplaced as this contention was never taken either before the arbitral tribunal or before the Court under Section 34 of the Act.
• Clause 9 of the agreement has no play as the claim of the respondent was solely based on Clause 25 of the agreement and squarely falls under the scheme provided thereunder.

Analysis by the Court

The Court interpreted both the clauses and observed that the situation covered under Clause 25 i.e., force majeure is only regarding the complete blockade of the roads connecting to the toll plaza and any partial reduction or diversion of traffic is squarely covered by Clause 9 of the agreement.

The Court held that admittedly, the case is not that of complete blockade of the roads but only of partial reduction in the traffic and the consequent reduction in the toll user fee collection due to a remote event of flood and partial closure of nearby roads/highways.

The Court held that ‘partial reduction in traffic’ due to a remote event of flood is not a force majeure event as it contemplates a complete blockade of the road due to the floods and not mere reduction of the traffic on a particular road.

The Court set aside an arbitration award passed against NHAI on the ground that the interpretation adopted by the Arbitral Tribunal was contrary to the intent of the parties, therefore, the award would be vulnerable to challenge for being contrary to contractual provisions and would fall within the scope of Section 34(2)(b)(ii) of the Act.

The Court also held that since the situation is covered by Clause 9 of the agreement, the finding of the tribunal regarding the return of the liquidated damages is also wrong.

Case Title: NHAI v. Suresh Chandra

Citation: 2023 LiveLaw (Del) 490

Counsel for the Appellant: Mr. Sudhir Nandrajog, Sr. Advocate with Mr. Balendu Shekhar, Mr. Krishna Chaitanya, Mr. Sriansh Prakarsh and Mr. Rajkumar Maurya, Advocates.

Counsel for the Respondent: Mr. Swastik Singh and Mr. Himanshu Dagar, Advocates.

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