National Highway Authority Of ... vs M/S Oriental Structural ...
2018 Latest Caselaw 6441 Del

*            IN THE HIGH COURT OF DELHI AT NEW DELHI


+                         O.M.P. (COMM) No. 443/2018


%                                                  25th October, 2018

NATIONAL HIGHWAY AUTHORITY OF INDIA

                                                         ..... Petitioner

                          Through:       Mr. Manish Kumar Bishnoi,
                                         Ms. Tanvi Sapra and Mr.
                                         Sarthak Ahuja, Advocates
                                         (Mobile No. 9811548007).

                          versus

M/S ORIENTAL STRUCTURAL ENGINEERS PVT. LTD.

                                                       ..... Respondent

                          Through:       Mr. Anil Airi, Sr. Advocate
                                         with Mr. Ravi Chandna, Ms.
                                         Bindiya Logawney and Ms.
                                         Sukanya     Lal,   Advocates
                                         (Mobile No. 9711752002).

CORAM:
HON'BLE MR. JUSTICE VALMIKI J.MEHTA

To be referred to the Reporter or not?

VALMIKI J. MEHTA, J (ORAL)

I.A. No. 14634/2018 (for exemption)

1. Exemption allowed, subject to all just exceptions.

I.A. stands disposed of.

I.A. No. 14635/2018 (for delay)

2. For the reasons stated in the application the delay of 5 days in

re-filing the petition stands condoned, subject to all just exceptions.

I.A. stands disposed of.

O.M.P. (COMM) No. 443/2018

3. The present petition under Section 34 of the Arbitration

and Conciliation Act, 1996 (hereinafter 'the Act') is filed by the

petitioner/employer impugning the Award passed by the Arbitration

Tribunal (hereinafter 'AT') on 21.04.2018 by which the AT has

awarded Claim no. 2 to the respondent/contractor. Claim no. 2 of the

respondent/contractor was the claim made for the expenses incurred in

the period for which the Performance Bank Guarantees (hereinafter

'PBGs') and Retention Bank Guarantees (hereinafter 'RBGs') were

illegally directed to be continued by the petitioner/employer beyond

the requisite dates provided by the contract, and thus causing incurring

of expenses towards the continuation of the bank guarantees. The

PBGs or RBGs had to be returned, by a particular date of taking over

of the project by the petitioner/employer, so far as the RBGs are

concerned these were to be returned on completion of the Defect

Liability Period. The petitioner/employer also impugns the Additional

Award dated 07.06.2018 by which the AT under Section 33 of the Act

has amended the Award dated 21.04.2018 and has directed that the

charges payable by the respondent/contractor to the banks for

continuing the validity of these RBGs, will continue to be payable to

the respondent/contractor till the RBGs are returned by the

petitioner/employer to the respondent/contractor.

4. The facts of the case are that the petitioner/employer

awarded to the respondent/contractor a contract/project pertaining to

'Allahabad Bypass Project-Construction from Km 198 to Km 242.708

of NH-2 Construction: Contract Package ABP-3'. The date of issuing

of the letter of acceptance of the contract by the petitioner/employer

was 06.09.2004, with commencement date being 04.11.2004. The

time for completion of the contract originally was thirty months i.e. by

04.05.2007, with the actual date of completion being 15.10.2009.

Since the respondent/contractor had to remove certain defects in the

work, the handing over of the project to the petitioner/employer by the

respondent/contractor took place subsequently on 11.12.2009. The

Defect Liability Period was of 365 days and this period of 365 days

would commence from 11.12.2009 when the project was handed over

to the petitioner/employer. Disputes between the parties arose because

the respondent/contractor claimed that it had to incur unnecessary

charges for keeping alive the PBGs upto a date beyond the stipulated

date as provided in the contract. The respondent/contractor also had to

keep alive the RBGs till date, being well beyond the stipulated date as

provided in the contract.

5(i). As per Clause 10.2 of Conditions of Particular

Application, the PBGs were to be valid until a period of twenty eight

days from the date of issue of the Taking Over Certificate and that

these PBGs were to be returned to the respondent/contractor within

fourteen days after this aforesaid twenty eight day period. Since the

PBGs had to be returned within twenty eight days plus fourteen days

from 11.12.2009, the last date for returning the PBGs would be

22.01.2010. The PBGs were however returned by the

petitioner/employer to the respondent/contractor only subsequently on

08.05.2010. The respondent/contractor, therefore, claimed charges for

keeping the PBGs alive from 22.01.2010 to 08.05.2010.

5(ii). The second part of the claim of the respondent/contractor

was for the charges incurred for the period for keeping the RBGs alive

beyond the stipulated date as required under the contract. The

stipulated date for keeping the RBGs alive was a period of 365 days

after the completion of the project. This period of 365 days is

mentioned in Clause 49 of the General Conditions of Contract read

with Clause 49.1 of the Appendix to the Bid Documents. Since the

contract was completed on 11.12.2009, therefore the Defect Liability

Period came to an end on 11.12.2010. Since, the

petitioner's/employer's Engineer had during the Defect Liability

Period pointed out various defects in the project work undertaken by

the respondent/contractor for the petitioner/employer, such defective

works were rectified by the respondent/contractor even beyond

11.12.2010, and the defects were ultimately removed by 12.01.2012,

and on this date of 12.01.2012, the Engineer issued the unqualified

Defect Liability Certificate (hereinafter 'DLC') i.e. the Engineer

certified that no defects remained in the project/contract performed by

the respondent/contractor.

6. As per the contract, from every Interim Payment

Certificate, the petitioner/employer could retain certain amounts, but

these retained amounts could be received by the respondent/contractor

on furnishing bank guarantees for such amounts. The total defective

work, as pointed out by the engineer appointed by the parties, was of

the value of Rs. 6.50 crores whereas the RBGs which were available

to the petitioner/employer were of a larger amount of Rs. 12.63 crores.

The difference of the RBGs beyond Rs. 6.50 crores was hence

released by the petitioner/employer to the respondent/contractor, but

the balance amount of the bank guarantees of Rs. 6.50 crores were

retained by the petitioner/employer on the ground that there existed

defects in the works executed by the respondent/contractor and that

the respondent/contractor is liable to remove the defects in the work.

This retention was done although the Engineer designated by the

parties had issued an unconditional DLC that no defects remained

which were required to be rectified.

7. Therefore, it is seen that there were two disputes which

arose before the AT, and which are the subject matter of the present

petition under Section 34 of the Act as under:-

(i) Claim of the respondent/contractor for charges for

keeping the PBGs alive from 22.01.2010 till 8.05.2010, and

(ii) Keeping the RBGs alive till date and from the date

beyond the fourteen day period of issuing of the DLC dated

12.01.2012 by the Engineer appointed by the parties under the

contract.

8. It is not disputed before this Court that as per the

contractual provisions, the PBGs were to be released by the employer

on 22.01.2010, but were actually released only later on 08.05.2010.

Therefore, since the respondent/contractor has incurred charges to

keep the PBGs alive, beyond the date from 22.01.2010 and till

08.05.2010, the AT in my opinion has committed no illegality or

perversity or in any manner acted beyond the contract by holding that

the charges incurred by the respondent/contractor for keeping the

PBGs alive from 22.01.2010 to 08.05.2010 have to be awarded to the

respondent/contractor.

9. On the second dispute between the parties, it is seen that

it is an undisputed position in terms of the contract that the RBGs

were to be returned immediately after completion of the one year of

the Defect Liability Period. This is clearly provided in Sub Clause

62.1 of the General Conditions of Contract, and this clause makes it

further clear that this liability of the petitioner/employer to return the

RBGs is even independent of the Engineer failing to issue the DLC.

The DLC is dated 12.01.2012, and therefore within 14 days of this

date i.e. by 26.01.2012, the RBGs had to be released to the

respondent/contractor. Admittedly, the RBGs for the disputed

amounts have not been released till date, and consequently by the

impugned awards, the respondent/contractor has been rightly awarded

charges to keep these RBGs alive from 26.01.2012 till the RBGs are

returned by the petitioner/employer to the respondent/contractor.

10(i). Learned counsel for the petitioner/employer very

vehemently argued that the claim petition with respect to PBGs

charges was filed by the respondent/contractor in the year 2017,

although the cause of action had arisen to claim these PBGs charges

on 08.05.2010 when the PBGs were admittedly released back to the

respondent/contractor, and hence it is argued that the AT has

committed an illegality in awarding time barred claims.

10(ii). The learned senior counsel for the respondent/contractor

argues that no doubt the issue of limitation is an issue of law, however

an issue of limitation can always be waived by a person in whose

favour the right to plead the bar of limitation arises. It is argued on

behalf of the respondent/contractor that admittedly at no stage in the

arbitration proceedings, i.e. either in the pleadings of the

petitioner/employer, or during the course of evidence, or even during

the course of final arguments, the petitioner/employer ever urged

before the AT this ground of limitation, and the same is now urged for

the first time in this petition under Section 34 of the Act.

11. In my opinion, the argument urged on behalf of the

respondent/contractor is justified that the plea of limitation if not

raised, is deemed to be waived. In my opinion, an issue of limitation

cannot be raised for the first time in a petition under Section 34 of the

Act because a petition under Section 34 of the Act has to challenge the

Award on the ground that what the award decides is violative of the

provisions and ingredients of Section 34 of the Act. Once there is

nothing decided in the Award with respect to the issue of limitation, then

how can the petitioner/employer argue that Award is wrong on the

ground of awarding time barred claims. The Award has not decided this

issue of limitation as this issue was admittedly never raised by the

petitioner/employer in the arbitration proceedings. An issue before being

argued as wrongly decided, has to first be decided on raising of such a

defence, and once there is no decision on the issue of limitation, as it was

not raised by the petitioner/employer, then how can the

petitioner/employer urge that the issue of limitation is wrongly decided.

This argument of the petitioner/employer is wholly misconceived and is

therefore rejected.

12. In view of the aforesaid facts, I do not find that the

impugned Awards in any manner violate any provisions of law or the

contract between the parties, or that the Awards can be said to be in any

manner wholly perverse, for this Court to interfere under Section 34 of

the Act.

13. The petition is therefore dismissed.

OCTOBER 25, 2018/AK                             VALMIKI J. MEHTA, J