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

Citation: [2021] 5 S.C.R. 408 · Decided: 28-07-2021 · Supreme Court of India · Bench: R.F. NARIMAN · Disposal: Dismissed

Cited by 2 judgment(s) · cites 13 · see the full citation network in Lexace

Judgment (excerpt)

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SUPREME COURT REPORTS
[2021] 5 S.C.R.
   [2021] 5 S.C.R. 408
408
PSA SICAL TERMINALS PVT. LTD.
v.
THE BOARD OF TRUSTEES OF V.O. CHIDAMBRANAR PORT
TRUST TUTICORIN AND OTHERS
(Civil Appeal Nos. 3699-3700 of 2018)
JULY 28, 2021
[R. F. NARIMAN AND B. R. GAVAI, JJ.]
Arbitration and Conciliation Act, 1996: s.34 – Application
for setting aside award – Scope of interference – Held: In an
application under s.34, the court is not expected to act as an
appellate court and re-appreciate the evidence – The scope of
interference would be limited to grounds provided under s.34 of the
Arbitration Act – The interference would be so warranted when the
award is in violation of “public policy of India”, which has been
held to mean “the fundamental policy of Indian law” – A judicial
intervention on account of interfering on the merits of the award
would not be permissible – However, the principles of natural justice
as contained in s.18 and 34(2)(a)(iii) of the Arbitration Act would
continue to be the grounds of challenge of an award – The ground
for interference on the basis that the award is in conflict with justice
or morality is now to be understood as a conflict with the “most
basic notions of morality or justice” – It is only such arbitral awards
that shock the conscience of the court, that can be set aside on the
said ground – An award would be set aside on the ground of patent
illegality appearing on the face of the award and as such, which
goes to the roots of the matter – However, an illegality with regard
to a mere erroneous application of law would not be a ground for
interference – Equally, re-appreciation of evidence would not be
permissible on the ground of patent illegality appearing on the face
of the award.
Arbitration and Conciliation Act, 1996: s.34 – Arbitral
Tribunal passed the award in favour of SICAL holding that there
was a change in law and thereby granting reliefs as prayed for by
SICAL – It directed conversion of Container Terminal of TPT from
royalty model to revenue share model – The finding of the Arbitral
Tribunal was based on a premise that when TPT entered into a
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contract with SICAL there was an existing policy, which provided
royalty to be factored into the cost while fixation of tariff and that
subsequently, the GoI changed its policy on 29th July, 2003 thereby
providing that royalty payment/revenue sharing will not be factored
into/taken into account as cost for fixation/revision of tariff by TAMP;
and that there was subsequent change in policy on 31st March, 2005
by which part of royalty was permitted to be factored into the cost –
According to the Arbitral Tribunal, there was a change in policy,
which amounted to change in law, which, in turn, adversely affected
SICAL – Award of Arbitral Tribunal challenged by TPT before the
District Judge – District Judge dismissed the s.34 petition – TPT
successfully challenged before the High Court – Aggrieved SICAL
filed instant appeals – Held: When the bid document was notified
and when SICAL submitted its bid and LoI was issued to it, there
were no guidelines in vogue – 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 – SICAL has challenged
the said order before the 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 High Court dated 8th November, 2002,
SICAL is still continuing to charge at rates notified in the 1999
tariff order – 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, 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

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