Delhi High Court
M/S Moni Traders vs Govt Of Nct Of Delhi on 1 August, 2017
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ FAO No. 325/2017
% 1st August, 2017
M/S MONI TRADERS ..... Appellant
Through: Mr R. Rajappan, Advocate
versus
GOVT OF NCT OF DELHI ..... Respondent
CORAM:
HON'BLE MR. JUSTICE VALMIKI J. MEHTA
To be referred to the Reporter or not?
VALMIKI J. MEHTA, J (ORAL)
CM No. 27241/2017 (for exemption)
Exemption allowed subject to all just exceptions.
CM stands disposed of.
FAO No. 325/2017
1. This first appeal under Section 37 of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as 'the Act') impugns
the judgment of the court below dated 05.04.2017, whereby the
objections filed by the appellant under Section 34 of the Act have been
dismissed and the Award dated 04.02.2016 of the arbitration tribunal
upheld.
2. By the Award, the respondent has been allowed to forfeit
the security deposit/performance guarantee which is the only aspect
which is argued before this Court.
3. The facts of the case are that a contract was entered into
between the appellant/contractor and the respondent for a sum of
Rs.67.62 lacs dated 20.11.2012 which was to commence on
04.12.2012 allowing six months time for completion of removal of
obstructions in the bed of NG drain like steel girders/RCC pipe,
dumped malba, building rubbish etc. and protection work on both
sides bank on the Mall Road bridge.
4. Appellant commenced the work but abandoned the work
on account of heavy seepage which could not be overcome despite
dewatering operations being carried out alleging impossibilities in
conditions of performance. Respondent rescinded the contract vide
letter dated 15.06.2013, that is, after the six months period of
completion of the contract. Respondent thereafter forfeited the earnest
money and the performance guarantee amount which was disputed by
the appellant as a claimant in the arbitration proceedings.
5. The issue argued before this Court on behalf of appellant
is that the earnest money and the performance guarantee could not be
forfeited unless losses were proved by respondent as required by
Section 74 of the Indian Contract Act, 1872. It is argued that the court
below ought to have relied upon the judgment of the Supreme Court in
the case of Hind Construction Contractors By Its Sole Proprietor
Bhikam-Chand Mulchand Jain (Dead) By LRs vs. State of
Maharashtra, AIR 1979 SC 720 which held that as the time was not
the essence of the contract, there cannot be forfeiture by invoking
Section 74 of the Contract Act. It is argued on behalf of appellant that
court below wrong relied upon the judgment of the Supreme Court in
the case of State of Gujarat vs. Dahyabhai Zaverbhai, AIR 1997 SC
2701 and which judgment approved the action of forfeiture of security
deposit as per clause of the contract on abandonment of work by the
contractor.
6. In my opinion, appellant cannot place reliance upon the
Hind Construction Contractors case (supra) inasmuch as in that case
the issue was of extension of time and consequently, once there was a
provision for extension of time hence disentitlement of the owner of
the project to rescind the contract, whereas in the present case the fact
of the matter is that appellant has been found to have abandoned the
contract. Further, the rescission of the contract by the respondent is
after the period of six months given in the contract as the six months
period commenced on 04.12.2012 and the rescission letter is dated
15.06.2013. In my opinion, therefore, the judgment in Dahyabhai
Zaverbhai's case (supra) squarely applies and which entitles the
forfeiture of the security deposit on account of abandonment of the
contract.
7. In my opinion there is another reason for rejecting the
argument urged on behalf of appellant inasmuch as whether the losses
have to be proved to have been caused or not depends on the nature of
the contract. If nature of the contract is such that losses which occur
cannot be proved, then there is no requirement of losses having to be
proved in order to forfeit the earnest money vide ONGC Ltd. vs. Saw
Pipes Ltd., (2003) 5 SCC 705 and Kailash Nath Associates vs. Delhi
Development Authority and Another, (2015) 4 SCC 136. In a
contract of cleaning a drain before the onset of the monsoon season
and which is not completed even after onset of monsoon season what
would be the loss of the respondent cannot be calculated in terms of
money and, therefore, keeping in mind the nature of the contract, the
respondent was entitled to forfeiture of security deposit/performance
guarantee. Accordingly, I reject the argument of the appellant that the
security deposit/performance guarantee could not have been forfeited
without proving of the losses.
8. There is no merit in the appeal. Dismissed.
AUGUST 01, 2017/SR VALMIKI J. MEHTA, J
