Delhi High Court
National Highway Authority Of ... vs M/S Madhucon Projects Limited on 17 April, 2018
$~1
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 17.04.2018
+ FAO(OS) (COMM) 17/2018
NATIONAL HIGHWAY AUTHORITY OF INDIA ..... Appellant
Through: Ms. Pinky Anand, ASG, Mr. Debojit
Borkakati and Mr. Sumit Teterwal,
Advocates.
versus
M/S MADHUCON PROJECTS LIMITED ..... Respondent
Through: Mr. Akhil Sibal, Sr. Adv. with
Mr. Pradeep Chhindra and
Mr. Suryadeep Singh, Advocates.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE A.K. CHAWLA
HON'BLE MR. JUSTICE S. RAVINDRA BHAT (ORAL)
%
Caveat No. 82/2018
Since the counsel for the respondent/caveator has put in
appearance the caveat stands discharged.
CM APPL. 3886/2018 (for exemption)
Allowed, subject to all just exceptions.
CM APPL. 3887/2018 (for condonation of delay)
For the reasons mentioned in the application, the delay of 93
days in filing the appeal is hereby condoned.
Application stands disposed of.
FAO(OS) (COMM) 17/2018 & CM APPL. 3885/2018 (for stay)
The appellant/National Highway Authority of India (hereinafter
referred to as the 'NHAI') appeals the decision of the learned Single
Judge rejecting its petition under Section 34 of the Arbitration and
Conciliation Act, 1996 (hereinafter 'the Act').
Briefly, the facts are that the NHAI entered into a contract with
the respondent (hereinafter referred to as the 'claimant') for the
execution of the lane carriageway of National Highway No.57 Section
from Km. 110 to Km. 17 (Jhanjharpur-Dharbhanga Section in the
State of Bihar). The total contract value agreed was `388,23,24,691/-.
Inevitably the execution got delayed and the parties agreed to extend
the period of performance. Claiming to have suffered injury, the
NHAI withheld certain amounts payable to the contractor (`2.01
crores and `2.56 crores, respectively). Aggrieved, the contractor
invoked the arbitration clause and lodged his claim contending, inter
alia, that in the absence of any condition authorising NHAI to deduct
the amounts on account of compensation or liquidated damages, as
was done, the withholding of the amounts was illegal and that, it was
entitled to an award. The claims were apparently lodged and the
matter proceeded and the proceedings ensued; it is a matter of record
that till that point of time the NHAI had not processed and cleared the
final bill presented by the contractor, which was in excess of `22
crores. During the pendency of the arbitration proceedings, the parties
entered into a Supplementary Agreement on 27.05.2015. The
principal objective of this supplementary agreement was to novate the
contract so as to include the liquidated damages clause for the
extended period. Once the agreement was signed, the NHAI
proceeded to clear and process the final bill and made all payments
(except withheld amounts) - the last payment was made in this series
on 27.06.2015. The Arbitral Tribunal proceeded to adjudicate upon
the claims of the parties and held that withholding of the amounts
towards the two claims (both falling during the extended period) was
unjustified, a final reasoning was rendered.
Aggrieved, NHAI approached the learned Single Judge under
Section 34 of the Act contending inter alia that the Arbitral Tribunal's
findings with respect to coercion in the manner of the execution of the
supplementary agreement, were contrary to the facts; it relied upon the
judgment of the Supreme Court in the case of 'Cauvery Coffee
Traders, Mangalore vs. M/s Hornor Resources (International)
Company Limited', (2011) 10 SCC 420. The contractor relied upon
another decision in the case of 'R.L. Kalathia & Company vs. State of
Gujarat', (2011) 2 SCC 400 to contend that the economic coercion
had been practiced and that was apparent from an overall conspectus
of the circumstances.
The learned Single Judge, after noticing the circumstances as
well as the NHAI's plea that consequent upon the execution of the
supplementary agreement, the contractor had withdrawn its claim in
respect of the liquidated damages, which were allegedly illegally
withheld, held that there was no patent illegality in the award and that
none of the vitiating circumstances, such as the award being contrary
to the contract or disclosing a manifestly unreasonable conclusion,
were found.
The learned Additional Solicitor General relied upon the
judgment in the case of 'Cauvery Coffee Traders, Mangalore' (supra)
and contended that the learned Single Judge fell into error in
overlooking that the supplementary agreement dated 27.05.2015 and
the withdrawal of the claims towards the amounts withheld, were
voluntary and that the Tribunal had fallen into error in permitting the
contractor to re-instate the claims on 16.11.2015, which it had
abandoned.
It is evident from the above discussion that when the parties
entered into arbitration, the contractor made a composite claim which
basically included the amount withheld. Concededly, at the point of
time the parties entered into the original agreement, NHAI could not
have withheld the amount on accounts of the liquidated damages.
Nevertheless, it did; that became the subject matter of the claim. At
the same time, the contractor's final bill was pending, which was for
an amount of `22 crores. In these circumstances, the supplementary
agreement was entered into on 27.05.2015, after which, the NHAI
released the amounts (which were undisputed by it) and had been
apparently kept back only to justify its claim for the liquidated
damages, which, otherwise was impermissible under the original
agreement. Its contention that the supplementary agreement was
entered into voluntarily and consequent upon it, the contractor could
not urge against the withdrawal of its claims, is not sustainable. This
Court is of the opinion that the findings of the Arbitral Tribunal with
respect to coercion, having regard to the law declared in 'R.L.
Kalathia v. State of Gujarat' (2011) 2 SCC 400, are justified.
Besides that ruling, the Court also notices that in the cases of
'National Insurance Company Ltd. vs. M/s Boghara Polyfab Pvt. Ltd.'
2009(1) SCC 267 and 'Union of India & Ors. vs. M/s Mater
Construction Company', 2011 (12) SCC 349, the finding by the
Tribunal with respect to the economic coercion was justified in the
circumstances. With respect to the NHAI's argument that the
arbitrator and the learned Single Judge overlooked the withdrawal of
the claims and that impacted the award, this Court notes that no such
ground was urged in the pleadings under Section 34 of the Act by the
NHAI.
For the foregoing reasons, this Court is of the opinion that there
is no merit in the appeal. It is, accordingly, dismissed.
S. RAVINDRA BHAT, J
A. K. CHAWLA, J
APRIL 17, 2018
nn/SU
