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2019 SCC OnLine Del 8235 : (2019) 3 Arb LR 258

In the High Court of Delhi at New Delhi


(BEFORE NAVIN CHAWLA, J.)

National Highways Authoruty of India Through The


Project Director, NHAI … Petitioner;
Versus
Reengus Sikar Expressway Ltd. … Respondent.
O.M.P. (COMM) 463/2018 & I.A. No. 15416/2018
Decided on April 11, 2019
Advocates who appeared in this case:
Mr. S. Ravi Shankar, Ms. Yamunah Nachiar, Ms. Bhanu Kapoor, Advs.
Mr. Dhruv Mehta, Sr. Adv. with Mr. Prashant Pakhiddey, Ms. Lakshmi
Dwivedi, Mr. Anubhav Ray, Advs.
The Judgment of the Court was delivered by
NAVIN CHAWLA, J. (Oral):— This petition under Section 34 of the
Arbitration and Conciliation Act, 1996 (hereinafter referred as to the
‘Act’) has been filed by the petitioner challenging the Arbitral Award
dated 05.07.2018 passed by the Arbitral Tribunal adjudicating the
disputes that have arisen between the parties in relation to the work of
Four Laning of Reengus Sikar section from Km 298.075 near Madhopur
Junction to Km 341.047 of NH-11 in the State of Rajasthan awarded by
the petitioner to the respondent under the Concession Agreement dated
26.04.2011.
2. Some of the undisputed features of the contract as also the dates
relevant thereto given by the Arbitral Tribunal itself are reproduced
hereinunder:
i. Authority NHAI
ii Concessionaire (SPV) RSEL
iii Estimated Cost, as per RFP Rs. 333.51 Cr.
iv Total Project Cost as per C.A. (cl.48.1) Rs. 227.51 Cr.
v. Date of signing of Concession Agreement 26.04.2011
vi Schedule 4 Lanning date from Appointed Date 910 days
(cl.5.1 of Schedule G)
vii Concession Period including construction period 17 years
to be reckoned from Appointed Date (cl.3.1.1)
viii Project Highway length 43.887 km
ix Appointed Date to be declared/notified by the 25.10.2011
Authority within 180 days from date of signing
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of Agreement (cl.4.1.2 & Article 24)


x Appointed Date declared/notified by Authority 05.03.2012
(delay of 132
days)
xi Schedule Project Completion Date (SPCD) 31.08.2014
xii Effective Date of Provisional Certificate, i.e. COD 14.12.2013
originally recommended by IE to the Authority
on 05.02.2014 for completion of 91.07%
length of Project Highway, i.e. 39.532 km. and
re-confirmed on 02.05.2104 (c/.14.3 & 15.1)
xiii Effective Date of Provisional Certificate, i.e. COD 22.09.2014
as issued by the Independent Engineer on
25.09.2014 by deferring the date of COD in
original recommendation.
xiv Amount of each (Semi-Annual) Annuity Rs.
(Cl.27.1.1. & Schedule M) 18,77,22,277/-
xv Max Amount of Bonus-equivalent to one Rs.
Annuity payable 18,77,22,277/-
for six months
(cl.8.1.)

3. The first challenge of the petitioner is to the grant of Claim no. 6


in favour of the respondent. Under Claim no. 6, the respondent had
claimed payment of Annuity for 260 days from 14.12.2013, which is
the Commercial Operation Date (COD) to 31.08.2014, which was the
Scheduled Project Completion Date (SPCD).
4. Counsel for the petitioner submits that there is no challenge made
in the present petition with respect to COD being 14.12.2013. The only
limited challenge to the grant of Claim no. 6 is that in terms of Clause
27.2.1 of the Concession Agreement, the respondent, even though it
achieved the COD prior to SPCD, was not entitled to the grant of any
additional Annuity due to such event. The only benefit that the
respondent was entitled to out of such event was in form of Bonus
under Clause 28.1 of the Agreement, which the respondent has been
separately granted under the Impugned Award as Claim no. 1 on which
no challenge has been made by the petitioner.
5. On the other hand, the learned senior counsel for the respondent
submits that the Arbitral Tribunal has awarded Claim no. 6 by
interpreting Clause 27.1.1, 27.2.1 and 27.2.2 of the Agreement. Such
interpretation being plausible in nature, it would not be open for this
Court to interfere with the same. He further submits that even if this
Court finds any ambiguity in the Concession Agreement, though in the
submission of the respondent there is none, the Agreement has to be
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interpreted against the petitioner.


6. Before I consider the submissions made by the counsels for the
parties, it would be advisable for me to first reproduce Article 27.1 and
27.2 of the Agreement as under:—
27.1 Annuity
27.1.1 Subject to the provisions of this Agreement, the
Concessionaire upon achieving COD for the Project Highway and in
consideration of the Concessionaire accepting the Concession and
undertaking to perform and discharge its obligations in accordance
with the terms, conditions and covenants set forth in this
Agreement, Authority agrees and undertakes to pay to the
Concessionaire, for each Annuity Payment Period, on each Annuity
Payment Date as set forth in Schedule M - Annuity Payment
Schedule, the sum of Rs. Eighteen Crore and Seventy Seven Lakhs
Twenty Two Thousand Two Hundred and Seventy Seven (the
“Annuity”) as set forth in its Bid.
27.1.2 In case, the Concessionaire achieves COD pursuant to
provisions of the Clause 14.3.2 of this Agreement then it would be
entitled for 90% of the Annuity payment till the Completion
Certificate is issued as per the provisions of the Clause 14.2 of this
Agreement.
27.2 Payment of Annuity
27.2.1 Subject to the provisions of this Article 27 and Article 28
and any other applicable provisions of this Agreement, Authority
shall make payment of Annuity to the Concessionaire on each
Annuity Payment Date. For avoidance of doubt the number of such
Annuities shall not exceed 29 over the Concession Period and will
commence from COD.
27.2.2 The first Annuity Payment Date shall be the date:
(a) Six months after COD, in case COD is achieved on Scheduled
four lane date
(b) Six months after Scheduled four lane date, In case COD is
achieved before Scheduled lour lane date.
(c) of the next Annuity Payment as per Schedule M, in case COD
is achieved after Scheduled four lane date. For avoidance of
doubt it is agreed that the first Annuity Payment shall be the
product of Average daily Annuity and the number of days
between the COD and the first Annuity Payment date.
Each Annuity payment period shall be deemed to be a period of 6
(six) calendar months from the preceding Annuity Payment date
subject to provision of Clause 27.2.2(c).
27.2.3 Notwithstanding anything contrary contained to anywhere
in this Agreement, Authority's obligation to pay Annuity shall arise
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subject to and only upon occurrence of COD.”


7. The Arbitral Tribunal, has interpreted Clause 27.2.2 and 27.2.3 by
holding as under:
“25. xxxxxxx
iii. xxxxxxx
b. A conjoint reading of Clause 27.2.2(c) & Clause 27.2.3 shows
that the ‘Authority's obligation to pay Annuity shall arise subject to
and only upon occurrence of COD’ and ‘For avoidance of doubt it is
agreed that the first Annuity Payment shall be the product of
Average daily Annuity and the number of days between the COD and
the first Annuity Payment date.’ Thus, the Claimant is also entitled
for payment of annuity for the period of 260 days i.e. from
14.12.2013 (COD) to 31.08.2014 (SPCD). The annuity for the period
from 14.12.2013 (COD) to 31.08.2014 (SPCD) is to be treated as
part of the 1st annuity and not as not ‘additional’ annuity. Therefore,
there would be no case of any additional annuity over and above 29.
Under the circumstances the Respondent's defence that ‘Since the
contract does not have any provision for additional annuity, claim 6
of the claimant must be rejected’ cannot be accepted.”
8. I cannot agree with the above interpretation of the Arbitral
Tribunal. Infact, Clause 27.2 of the Concession Agreement required no
interpretation as it is explicit. Clause 27.2.2 clearly states that if COD
and the SPCD coincide the first Annuity Payment Date shall be six
months after the COD; if the COD is achieved before SPCD, the first
Annuity Payment Date shall be six months after SPCD; however, if the
COD is achieved after SPCD, the first Annuity Payment Date shall be
the next annuity payment date as per schedule ‘M’.
9. Schedule ‘M’ of the Concession Agreement gives the Annuity
Payment Date and the Annuity Amount.
10. As under Clause 27.2.1 (c), incase COD is achieved after SPCD,
the first Annuity Payment Date has been prescribed to be the next
Annuity Payment Date as per Schedule ‘M’, a further clarification was
required as to how the amount of Annuity has to be calculated. It is
only for clarifying this aspect that clause 27.2.2 (c) stipulates as under:
“(c) …………. For avoidance of doubt it is agreed that the first
Annuity Payment shall be the product of Average daily Annuity and
the number of days between the COD and the first Annuity Payment
date.”
11. This addition has no co-relation with Clause 27.2.2 (b) of the
Concession Agreement. Incase, the COD is achieved before the SPCD,
Clause 27.2.2 (b) clearly and only states that the first Annuity Payment
Date shall be six months after the Scheduled Four Lane date, that is
SPCD, and nothing further. The only benefit to the respondent if COD is
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achieved before SPCD is in form of a Bonus under Clause 28.1.1 of the


Concession Agreement.
12. Though, it is true that where the Arbitral Tribunal interprets a
term of an Agreement, the Courts are not to interfere in such
interpretation only because they would prefer another interpretation to
the contractual terms, in the present case, the interpretation put
forward by the Arbitral Tribunal for Clause 27.2.2 of the Agreement is,
in my opinion, completely perverse and against a plain reading of the
contractual terms and therefore, cannot be sustained. In the name of
interpretation, the Arbitral Tribunal has re-written the contract between
the parties, which is certainly not permissible:
i) Rajasthan State Mines and Minerals Ltd. v. Eastern Engineering
Enterprises (1999) 9 SCC 283.
ii) Nabha Power Limited (NPL) v. Punjab State Power Corporation
Limited (PSPCL) (2018) 11 SCC 508.
13. I therefore, set aside the award of Claim no. 6 which had been
granted in favour of the respondent.
14. Claim no. 7 of the respondent was towards interest on the
amount that would be awarded on Claim no. 6. As I have held that the
respondent is not entitled to any amount under Claim no. 6,
consequentially the award of Claim no. 7 in favour of the respondent is
also set aside.
15. The next challenge of the petitioner is to Claim no. 12 of the
respondent. Claim no. 12 of the respondent was towards damages
payable to the Concessionaire/claimant for delay in handing over the
Right of Way (ROW).
16. Counsel for the petitioner submits that the Arbitral Tribunal has
failed to appreciate that in a meeting dated 02.03.2012, the
respondent had agreed to start the construction activity without waiting
for the petitioner to fully comply with the Conditions Precedent as
provided under Clause 4.1.2 of the Concession Agreement. Therefore,
the respondent was estopped from claiming any damages on account of
alleged failure of the petitioner to meet the Conditions Precedent within
the time stipulated under Clause 4.1.2.
17. Counsel for the petitioner further submits that, in any case, the
only loss alleged to have been suffered by the respondent as claimed in
the Statement of Claim was loss of full amount of Annuity, which had
been paid at only 90% of the full Annuity amount. As full amount of
Annuity has thereafter been paid to the respondent, the loss, if any,
suffered by the respondent had been fully satisfied. In the absence of
any loss or damage, the respondent was not even entitled to claim
liquidated damages as prescribed in clause 4.2 and/or 10.3.4, leave
alone actual damages as awarded under Claim 12 of the Arbitral
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Tribunal.
18. On the other hand, learned senior counsel for the respondent
submits that the Arbitral Tribunal has rightly held that the Minutes of
Meeting dated 02.03.2012 do not in any manner amount to a waiver of
the right of the respondent to claim damages due to petitioner's failure
to meet the Conditions Precedent as provided in Clause 4.1.2 of the
Concession Agreement. He further submits that Claim no. 12 of the
petitioner has been awarded by applying Clause 10.3.4 of the
Concession Agreement which provides for liquidated damages incase of
failure of the petitioner to grant ROW to the concessionaire within 90
days from the Appointed Date. He further submits that as far as the
actual loss is concerned, though it may be true that with the petitioner
paying 100% of the annuity amount, the loss as alleged in the
Statement of Claim may no longer survive, at the same time the
Arbitral Tribunal has found such loss to have been actually suffered by
the respondent while granting Claim no. 15 in favour of the respondent.
He submits that as actual damages were proved by the respondent in
form of Claim no. 15, the award of Claim no. 12 in favour of the
respondent cannot be challenged by the petitioner. He further submits
that there is no challenge made by the petitioner to the fact that the
damages as awarded under Claim no. 12 are strictly in accordance with
Article 10.3.4 of the Concession Agreement, which is the clause
providing for Liquidated Damages.
19. I have considered the submissions made by the counsels for the
parties. I would first reproduce the relevant extract from the Minutes of
Meeting dated 02.03.2012 that has been relied upon by the petitioner
in support of its challenge as under:
“…..Further, the Project Director informed that existing ROW of
45m is enough for execution of 4-lanning and action already taken
for acquisition of remaining land of 15m width. Further in case of
Palsana Bypass 60m land is being acquired. Consequent upon
publication of notification u/s 3(D) of NH Act, the land for Palsana
Bypass has vested to Central Government. As such, the
concessionaire is in a position to commence the work in Palsana
Bypass immediately and meantime the 2nd stage clearance of
protected forest could be obtained. Accordingly, on insistence of
NHAI, the concessionaire agreed to commence the work on existing
available stretches. However the concessionaire requested to
expedite the necessary action for 2nd stage forest clearance.
In view of the above status, the concessionaire and Authority
agreed for Appointed Date of the project as 05.03.2012 subjected to
approval of Competent Authority and Joint Memorandum as per
Concession Agreement shall be prepared, accordingly.”
20. A reading of the above extract from the Minutes of Meeting
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would show that it was only at the insistence of the petitioner that the
respondent agreed to commence the work on the existing available
stretches of land and for the Appointed Date to be declared as
05.03.2012. A reading of the Minutes of Meeting do not suggest that
the consequence and failure of the petitioner to meet the Conditions
Precedent as prescribed in Clause 4.1.2 and/or liquidated damages as
prescribed in Clause 4.2 was ever in contemplation of the parties while
taking the decision as recorded in the Minutes of Meeting dated
02.03.2012.
21. In Sonell Clocks and Gifts Ltd. v. The New India Assurance Co.
Ltd., (2018) 9 SCC 784, the Supreme Court has held as under:—
“13. It is a well established position that waiver is an intentional
relinquishment of a right. It must involve conscious abandonment of
an existing legal right, advantage, benefit, claim or privilege, which
except for such a waiver, a party could have enjoyed. It is an
agreement not to assert a right. To invoke the principle of waiver,
the person who is said to have waived must be fully informed as to
his rights and with full knowledge about the same, he intentionally
abandons them. There must be a specific plea of waiver, much less
of abandonment of a right by the opposite party.”
22. The Arbitral Tribunal has also considered the said Minutes of
Meeting and held as under:
“18. The Tribunal has gone through the pleadings of the parties
and finds that:
“i. xxxxxxx
ii Contrary to the argument of the Respondent, there is no
provision in the C.A. for waiver of the conditions precedent for
deciding the appointed date, nor can the minutes of the
meeting held on 02.03.2012 be construed as a waiver of the
conditions precedent as the concessionaire/claimant signed the
minutes and agreed to the appointed date decided (as
05.03.2012) on the insistence of the Respondent even as the
land/RoW as required to be made available up to the appointed
date was not available.”
23. I do not find any reason to disagree with the said finding of the
Arbitral Tribunal.
24. However, at the same time, the only pleading of the respondent
to justify Claim no. 12 as in its Statement of Claim is in paragraph 12.0
(v), which is reproduced hereinbelow:
12.0 Claim No. 12 : Damages payable to
Concessionaire/Claimant for delay in handing over ROW Rs.
2,77,38,359.00
xxxxxxx
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(v) Due to delay in handing over of encumbrance free Land/RoW


by the Authority/Respondent, the Concessionaire/Claimant was paid
only 90% of full Annuity from the date of issue of Provisional
Certificate, resulting in substantial loss of revenue to the
Concessionaire/Claimant by withholding 10% Annuity for the
reasons, attributable to the Authority/Respondent. The with-held
amount of 2nd and 3rd Annuity has since been paid to the
Concessionaire/Claimant, as confirmed by the Authority/Respondent
vide letter no. - 564 dt. 22.08.2016 (Exhibit C - 66).
25. It is not disputed by the respondent that the petitioner
thereafter has paid 100% of the annuity amount for the second and the
third annuity as well. Therefore, the loss which the petitioner alleged in
support of Claim no. 12 no longer survives.
26. In the absence of any loss, the question of award of liquidated
damages in favour of the respondent could not have arisen.
27. In Kailash Nath Associates v. DDA, (2015) 4 SCC 136, the
Supreme Court has clarified the interplay of Section 73 and 74 of the
Indian Contract Act, 1872 (the Contract Act) as under:
“33. Section 74 occurs in Chapter 6 of the Contract Act, 1872
which reads “Of the consequences of breach of contract”. It is in fact
sandwiched between Sections 73 and 75 which deal with
compensation for loss or damage caused by breach of contract and
compensation for damage which a party may sustain through non-
fulfilment of a contract after such party rightfully rescinds such
contract. It is important to note that like Sections 73 and 75,
compensation is payable for breach of contract under
Section 74 only where damage or loss is caused by such breach.
xxxxxx
43. On a conspectus of the above authorities, the law on
compensation for breach of contract under Section 74 can be stated
to be as follows:
xxxxx
43.3. Since Section 74 awards reasonable compensation for
damage or loss caused by a breach of contract, damage or loss
caused is a sine qua non for the applicability of the section.
xxxxx
43.6. The expression “whether or not actual damage or loss is
proved to have been caused thereby” means that where it is possible
to prove actual damage or loss, such proof is not dispensed with. It
is only in cases where damage or loss is difficult or impossible to
prove that the liquidated amount named in the contract, if a genuine
pre-estimate of damage or loss, can be awarded.”
28. In view of the above, though grant of claim no. 6 for the reasons
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stated in the Impugned Award could not have been sustained,


however, I find that the learned senior counsel for the respondent has
rightly contended that while granting claim no. 15, the Arbitral Tribunal
has indeed agreed that due to faults of the petitioner in granting ROW
within the stipulated time, the respondent actually suffered loss in form
of idle manpower and machinery.
29. Under claim no. 15, the Arbitral Tribunal after holding that the
petitioner was indeed in breach of the contract in handing over
complete ROW to the respondent within the time stipulated and that
the respondent had suffered losses in form of idle manpower and
machinery due to prolongation of the work, has awarded damages in
favour of the respondent to the tune of Rs. 3,24,22,683/-.
30. As far as the award of damages under claim no. 15 is concerned,
in the presence of Clause 10.3.4 which prescribes the liquidated
damages due to default of the petitioner in the grant of ROW within the
time prescribed, damages in excess thereof could not have been
granted in favour of the respondent.
31. Section 74 of the Indian Contract Act is clear on this aspect and
is reproduced hereinbelow:
“74. Compensation for breach of contract where penalty
stipulated for.— When a contract has been broken, if a sum is
named in the contract as the amount to be paid in case of such
breach, or if the contract contains any other stipulation by way of
penalty, the party complaining of the breach is entitled, whether or
not actual damage or loss is proved to have been caused thereby, to
receive from the party who has broken the contract reasonable
compensation not exceeding the amount so named or, as the case
may be, the penalty stipulated for.
Explanation.—A stipulation for increased interest from the date of
default may be a stipulation by way of penalty.”
32. In Kailash Nath Associates (supra), the Supreme Court stated
the law on compensation under Section 74 of the Contract Act as
under:
“43. On a conspectus of the above authorities, the law on
compensation for breach of contract under Section 74 can be stated
to be as follows:”
43.1. Where a sum is named in a contract as a liquidated amount
payable by way of damages, the party complaining of a breach can
receive as reasonable compensation such liquidated amount only if it
is a genuine pre-estimate of damages fixed by both parties and
found to be such by the court. In other cases, where a sum is named
in a contract as a liquidated amount payable by way of damages,
only reasonable compensation can be awarded not exceeding the
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amount so stated. Similarly, in cases where the amount fixed is in


the nature of penalty, only reasonable compensation can be awarded
not exceeding the penalty so stated. In both cases, the liquidated
amount or penalty is the upper limit beyond which the court cannot
grant reasonable compensation.”
33. In Mahanagar Telephone Nigam Ltd. v. TATA Communications
Ltd. (Judgment dated 27.02.2019 passed in Civil Appeal No.
1766/2019), the Supreme Court has reiterated that the maximum
damages that would be payable would be those prescribed as
liquidated damages under the Contract Act.
34. Therefore, while it is held that the Arbitral Tribunal has erred in
granting Claim no. 15 separately in favour of the respondent, at the
same time, grant of such claim would be relevant consideration for
upholding grant of Claim no. 12 in the Impugned Award. To clarify, it is
held that as the respondent was able to prove actual loss suffered due
to breach of contract by the petitioner, Claim no. 12 awarded in favour
of the respondent is upheld. At the same time, once the respondent has
been awarded full amount of liquidated damages under Clause 10.3.4
in Claim No. 12, respondent cannot claim further damages for the
actual loss suffered by it and therefore, award of Claim no. 15 in favour
of the respondent is set aside.
35. The next challenge of the petitioner is to Claim no. 21, which is
of grant of interest on the amount awarded under Claim no. 12.
36. The only challenge of the petitioner is that as the respondent
was not entitled to claim no. 12 consequently it should not be held
entitled to any interest under claim no. 21 as well.
37. As the challenge of the petitioner to Claim 12 has been rejected,
consequentially challenge to the Claim no. 21 is also rejected.
38. The next challenge of the petitioner is to grant of Claim no. 14
which is a claim of escalation in TPC cost due to delay in handing over
of land and Claim no. 16 which is for additional overhead charges.
39. Counsel for the petitioner submits that these claims were based
on the delay of the petitioner in declaring the Appointed Date under
Clause 4.1.2 of the Concession Agreement. The Arbitral Tribunal has
held that the Appointed Date should have been fixed latest by
13.11.2011 while it was actually declared on 05.03.2012. Counsel for
the petitioner submits that for the said delay, the Arbitral Tribunal
could have granted damages only to the extent of those provided in
Clause 4.2 of the Concession Agreement as liquidated damages and not
beyond that. He further submits that if calculated on the basis of
Clause 4.2 of the Concession Agreement, the respondent would have
been entitled to only a sum of Rs. 1,16,76,000/- for Claim no. 14 and
16 collectively.
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40. Learned senior counsel for the respondent does not dispute the
above contention. He submits that the respondent would have no
objection if under Claim no. 14 and 16 a consolidated amount as noted
above is granted in favour of the respondent.
41. In view of the above submissions, award of claim no. 14 and 16
is modified holding that the respondent would be entitled to only a
consolidated sum of Rs. 1,16,76,000/- under Claim no. 14 and Claim
no. 16. Award of amount in excess of Rs. 1,16,76,000/- under Claim
No. 14 and 16 is set aside.
42. The last challenge of the petitioner is to award of Claim no. 19,
which is the award of interest on the amount awarded under Claim no.
14 in favour of the respondent. As the award of Claim no. 14 and 16
have been confined only to a sum of Rs. 1,16,76,000/- on the basis of
the submissions made by the petitioner itself, the interest under Claim
no. 19 would also stand modified and the respondent would be entitled
to interest at the rate awarded by the Arbitral Tribunal, however, on the
awarded amount of Rs. 1,16,76,000/-.
43. No other submission is made by the counsels for the parties.
44. The petitioner, pursuant to the interim order dated 22.11.2018
passed in the present petition has deposited certain amounts with the
Registry of this Court. The parties shall jointly approach the Registrar
General of this Court with the computation of the amounts that would
have to be released to either party in terms of the Arbitral Award as
modified by the present judgment.
45. The petition partially succeeds in the above terms, with no order
as to costs.
———
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