The Delhi High Court has held that once extension of time is granted in a contract, the employer cannot turn around and reassess the delay.
The single-judge bench of Justice Sanjeev Sachdeva dismissed NDMC's challenge to an Arbitral Award on the ground that the extension to contract was only provisional and it has the right to reassess the delay caused by the respondent in completion of the project.
In the application under Section 34 of the Arbitration and Conciliation Act 1996, the petitioner has contended that the Arbitral Tribunal erred in rejecting the contention of the petitioner that the extension of the time granted was only provisional and petitioner had reserved its rights to impose liquidated damages at the end of the work.
Opposing the same, the Counsel for the respondent conested that extension of the time granted can never be provisional and once extension of time is granted same cannot be curtailed specially after the extended period is over.
The Court noted that the petitioner granted the requests in each case upto a specified date, however, also mentioned that it was without prejudice to the rights of the petitioner to recover liquidated damages.
The contention of the respondent is that the work was completed within the stipulated period of the contract by including the extended periods as sanctioned by the petitioner and the work did not extend beyond the extensions granted by the petitioner.
The stand of the petitioner, on the other hand is that at the conclusion of the work it was open to it to re-assess the extensions granted and determine as to whether the extensions granted were correct or not and also that the number of days could be reduced.
Noting that in the present case, the petitioner has after the conclusion of the work and after the period stipulated by the contract and the extended periods as sanctioned, have expired, re-assessed the number of days of delay and reduced the extended period and levied compensation of liquidated damages, the Court analysed Clause 5.2, 5.3 and 5.4 of the Contract.
It noted that the requests for the extension were made and granted, though petitioner reserved their right to levy to recover liquidated damages in accordance with provisions of Clause 2 of the agreement and therefore its contention can't be sustained.
"Once a request is received and extension of time is granted, the engineer in charge/the competent authority cannot after the extended period is over turn around and reassess the extension to the detriment of the contractor. If extension is granted, say for a period of three months, the engineer in charge after expiry of three months cannot turn around and say that the extension should have, in fact, been for a period of two months."
Though it may be open to the competent authority/engineer incharge to, in the first instance, grant an extension for a shorter period than requested and thereafter extend it further but he cannot having once granted it, curtail it retrospectively, the Court clarified.
Citing caluse 5.4 which provides the competent authority, a period of three months, the Court stated that the competent authority cannot mechanically grant an extension in the first instance and then after the period is over, reduce the same retrospectively.
Case Title: NORTH DELHI MUNICIPAL CORPORATION vs IJM CORPORATION BERHAD
Case Details: O.M.P. (COMM) 185/2022, I.A. 5905/2022 & I.A. 5906/2022
Coram: Justice Sanjeev Sachdeva
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