Delhi High Court
National Highways Authority Of ... vs Progressive Constructions Ltd. on 10 April, 2019
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 29.10.2018
Date of decision : 10.04.2019
+ O.M.P. (COMM) 66/2017
NATIONAL HIGHWAYS AUTHORITY OF INDIA
..... Petitioner
Through: Ms.Tanu Priya Gupta, Adv.
versus
PROGRESSIVE CONSTRUCTIONS LTD. ..... Respondent
Through: Dr.Amit George, Mr.Rishabh
Dheer, Mr.Swaroop George,
Ms.Rajsree Ajay, Advs.
CORAM:
HON'BLE MR. JUSTICE NAVIN CHAWLA
1. The petitioner by way of this present petition filed under Section
34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to
as the „Act‟) challenges the Arbitral Award dated 27.04.2016 (hereinafter
referred to as the „Impugned Award‟) passed by the Arbitral Tribunal in
favour of the respondent.
2. The Impugned Award allows an amount of Rs. 74,25,61,312/-
inclusive of pre-award interest and alongwith post award interest in case
of failure of payment, in favour of the respondent, while also directing
the petitioner to release the Bank Guarantees for Rs. 35,71,45,914/- as
also Rs. 17,85,72,957/-furnished by the respondent as Performance Bank
Guarantee and Machinery Advance respectively, to the respondent, if not
O.M.P. (COMM) 66/2017 Page 1
already released by the petitioner in furtherance of the Tribunal‟s interim
Award dated 16.01.2016.
3. The challenge in the petition is made to the claims of the
respondent allowed by the Arbitral Tribunal, that is, Claim Nos. 1(i) to
(v), 2, 3, 4, 6 and 7, as also to the rejection of the counter claims.
However, during the course of arguments, the counsel for the petitioner
has made no submissions assailing the rejection of counter claims.
Accordingly, I shall be only dealing with the claims of the respondent
allowed by the Tribunal and challenged by the petitioner.
4. Before dealing with the objections against each of the claims, the
following basic facts regarding the dispute may be noted.
5. In response to the petitioner‟s notice inviting bids for the work
relating to four laning from km.360.915 to km.402.00 of Gorakhpur-
Gopalganj section of NH-28 in Bihar - Contract Package No. LMNHP-
EW-II-(WB)-9 (hereinafter referred to as "Project Work"), the
respondent‟s tender dated 25.07.2005 was accepted by the petitioner vide
Letter of Acceptance dated 09.09.2005 at the contract price of Rs.
357,14,59,136/-.
6. In terms of the Acceptance Letter, the respondent furnished the
Performance Bank Guarantee dated 05.10.2005 for Rs.35,71,45,914/-
(Rupees Thirty Five Crores Seventy One Lakhs Forty Five Thousand
Nine Hundred Fourteen) to the petitioner.
7. The parties thereafter entered into an Agreement dated 20.10.2005
for execution of the aforesaid Project work. The stipulated time for
completion of the work was thirty-six months. The notice for
commencement of the work was dated 28.10.2005 and accordingly, the
O.M.P. (COMM) 66/2017 Page 2
Scheduled Date of Completion was 27.10.2008. The Project however,
was not completed by the aforesaid date.
8. The parties, therefore, entered into a Supplementary Agreement
dated 27.11.2008 providing for minimum monthly progress of the Project
work. The petitioner also granted extension of time to the respondent
revising the completion schedule. The Supplementary Agreement
records an acknowledgement of the respondent that the rate of progress
of work had remained too slow despite it receiving notices from the
Engineer.
9. Shortly thereafter, citing reasons of non achievement of the
minimum monthly progress as mandated in the aforesaid Supplementary
Agreement, the petitioner served upon the respondent notice dated
07.02.2009 under Clause 63.1 of the Contract, stating that a case for
termination of the Contract has been made out and directed the
respondent to handover the work site.
10. In response, the respondent sought reinstatement of the Contract
upon revocation of the termination/expulsion notice, assuring timely
completion of the Project work and accordingly, based on such
representation, the petitioner vide letter dated 27.08.2010 revoked its
termination notice. The said letter dated 27.08.2010 further envisaged the
completion of the project by 30.06.2012, alongwith a fresh Agreement to
be entered into by the parties for the altered target date.
11. A Supplementary Agreement dated 19.11.2010 was thereafter
executed by the parties, modifying the terms of the original Contract
dated 20.10.2005 to a limited extent of extending the target date till
30.06.2012, that is, by twenty two months of construction period from
O.M.P. (COMM) 66/2017 Page 3
01.09.2010. In Clause 3 and 4 of the Supplementary Agreement it was
provided that the respondent will no longer be entitled to any of the
facilities available under the World Bank contract nor to escalation for
the period from 07.02.2009 to 31.08.2010.
12. Owing to the pendency of work even on the extended date, the
respondent, vide its letter dated 13.06.2012, sought a further extension of
time till 31.12.2013 and reiterated its request through letters even
thereafter. The petitioner instead issued a Show Cause Notice dated
26.09.2012 to the respondent, whereafter it ultimately terminated the
Contract dated 20.10.2005 and the Supplementary Agreements dated
27.11.2008 and 19.11.2010, vide its notice dated 11.11.2013.
13. In the meanwhile, the respondent had furnished additional Bank
Guarantees, inter alia Bank Guarantee dated 16.01.2009 for
Rs.17,85,72,957/- towards mobilisation advance; Bank Guarantee dated
06.09.2010 for Rs.17,85,72,957/- towards machinery advance; Bank
Guarantee dated 14.02.2011 for Rs.2,00,00,000/- towards Retention
Money; and Bank Guarantee dated 14.02.2011 for Rs.3,66,94,206/-
towards Retention Money.
14. Disputes having arisen between the parties due to the termination
of the Contract, the respondent submitted its claims to the petitioner to be
settled/adjudicated as per sub clause 67 of the Conditions of Particular
Application. As no resolution was achieved, the respondent invoked
arbitration vide its notice dated 03.03.2014.
15. The respondent also filed a petition under Section 9 of the Act
being O.P. 2415 of 2013, in the City Civil Court, Hyderabad, seeking to
restrain the petitioner from invoking the Bank Guarantees upon
O.M.P. (COMM) 66/2017 Page 4
termination of the Contract and Supplementary Agreements. The Court
on 14.11.2013 passed an ex-parte order of injunction against the
petitioner restraining it from invoking the Bank Guarantees stated therein
till 28.11.2013.
16. The City Civil Court on 01.05.2014 dismissed the petition filed by
the respondent accepting petitioner‟s plea of lack of jurisdiction.
17. In an appeal filed against this order, the High Court of Andhra
Pradesh in CMA 520 of 2014, vide order dated 08.05.2014, directed the
petitioner not to invoke the Bank Guarantees till 16.06.2014, subject to
the respondent extending their validity.
18. The said appeal was however, later dismissed on 10.09.2014 in
view of the constitution of the Arbitral Tribunal and interim order passed
by the Tribunal on 25.08.2014.
19. Even before the Arbitral Tribunal, the respondent filed an
application for stay on the encashment of the Bank Guarantees,
whereupon the Arbitral Tribunal granted an ex parte order of stay on
25.08.2014.
20. The Arbitral Tribunal passed orders extending the stay on
invocation of the Bank Guarantees and subsequently, on 16.09.2015, the
Arbitral Tribunal modified its earlier orders and allowed invocation of
the Bank Guarantee dated 16.01.2009 towards mobilisation advance,
which was then duly encashed by the petitioner.
21. Eventually, the Tribunal passed an Interim Award dated
16.01.2016 directing the petitioner to release two Bank Guarantees, that
is, Bank Guarantee dated 05.10.2005 towards Performance Guarantee
and Bank Guarantee dated 06.09.2010 towards machinery advance.
O.M.P. (COMM) 66/2017 Page 5
22. The Arbitral Tribunal in its final Impugned Award has awarded the
following claims in favour of the respondent and against the petitioner:-
(i) Claim no. 1(i):Payment towards work done against IPC 30
and IPA 31: Rs.1,28,97,988/-
(ii) Claim No. 1 (ii): Payment towards refund of Building
Worker's Welfare Cess deducted from the IPCs : Rs.
1,21,40,107/-
(iii) Claim No. 1(iii): Payment towards cost of left over
materials lying at the site; Rs. 1,73,53,624/-
(iv) Claim No. 1(iv): Payment towards refund of retention
money: Rs. 8,43,82,382/-
(v) Claim No. 1(v): Payment towards refund of royalty on
earth: Rs. 21,80,143/-
(vi) Claim No. 2: Loss of profit on balance work : Rs. 24.90
crores
(vii) Claim No. 3: Loss due to idle hire charges of machinery
and equipment: Rs. 25,75,95,264/-
(viii) Claim No. 4: Loss due to encashment of Bank Guarantees:
Rs. 1,35,10,120/- ; Respondent to release two BG's, one issued
by the Union Bank of India for Rs.35,71,45,914/- and second
issued by Bank of India for Rs.17,85,72,957/-, if the same have
not been released in compliance of interim award passed by the
Arbitral Tribunal dated 16.01.2016
(ix) Claim No. 6: Cost of temporary assets taken over: Rs.
3,96,57,600/-
(x) Claim no 7: Interest on Claim Nos. 1-6: Rs. 24,32,74,960/-
Total: 93,19,92,198/-
23. Additionally, following Award has been passed on the counter-
claims of the petitioner:
(i) Counter-claim (a): Rs. 210,75,85,461/- to execute the
Balance Work of the Project which is awarded to M/s Punj
Lloyd: : Nil
O.M.P. (COMM) 66/2017 Page 6
(ii) Counter-claim (b), (c), (d) towards maintenance of road:
Nil
(iii) Counter-claim (e) for recovery of mobilization and
machinery advance: Rs. 11,54,84,240/-
(iv) Counter-claim (f) for interest on early release of retention
money: Nil
(v) Counter-claim (g) for recovery of outstanding material
advance : Rs. 2,56,26,674/-
(vi) Counter-claim (h) for recovery against final bill IPC-31:
Nil
(vii) Counter-claim (i) for recovery of DRB retainership : Rs.
1,50,000/-
(viii) Counter-claim (j) & (k) for recovery of taxes against
notice issued by deputy commissioner commercial taxes: Nil
(ix) Counter-claim (l), (m), (n), (o), (p), (q) and (r) for the
claims raised by various vendors: Nil
(x) Counter-claim for interest on awarded amount: Interest
against counter claim for the period 11.11.2013 to 27.04.2016
@ 12% p.a. compounded monthly as provided in the contract.
The interest amount comes to Rs. 4,81,69,972/-.
Total : Rs. 18,94,30,9886/-
24. On the merits of the Award, the petitioner has challenged the
claims as under:
Claim No.1(i) : Towards the Work Done : Rs. 1,28,97,998/-
(Rs.64,32,682/- against IPC-30 and Rs.64,65,316/- against IPA-
31)
25. The finding of the Arbitral Tribunal on this sub-claim is
reproduced hereinunder:
"6.02 The record shows that the Contractor submitted IPA-30
on 07.05.2012 for the work done in respect of the period
01.04.2012 to 30.04.2012. The Engineer issued IPC-30
on 11.06.2012 for payment of Rs.64,32,682/- to the
O.M.P. (COMM) 66/2017 Page 7
Claimant. However the Employer did not release the
payment against this IPC on the ground that the
Contractor had been paid excess amount in respect of
price escalation which needed to be recovered and took
further plea that even the High Court had passed orders
that the Contractor should give Bank Guarantee of
equivalent amount.
6.03 We observe that the payments against price escalation
have been made to the Contractor against IPCs up to
IPC-29 in view of some mutual understanding of the
parties regarding interpretation of price escalation
clause in the Contract. Thereafter if the Employer feels
that the Contractor has been paid excessively in the
previous 29 IPCs, then it is a dispute which needs to be
got resolved through the mechanism provided in the
Contract. Employer cannot be judge of his own cause.
Moreover on going through the relevant High Court
orders as referred by the Respondent, AT found that there
were no such orders of Hon'ble High Court for giving
Bank Guarantee of equivalent amount. Thus there was no
justification for denying the payment to the Contractor
against IPC-30 to which he was entitled under the
Contract.
6.04 Record further shows that on 30.06.2012, the Claimant
submitted Interim Payment Application (IPA-31) for
Rs.64,65,316/- (Exhibit 'C-26' at Page 153 of CD-2 Vol.-
1) for the work done in respect of the period from
01.05.2012 to 31.05.2012. However, neither the Engineer
certified the said IPA within the stipulated period of 42-
days nor the Respondent released the amount in respect
of this IPA-31.
6.05 The Respondent did not deny or dispute the correctness
of the amounts claimed of Rs.1,28,97,998/- i.e.
Rs.64,32,682/- (+) Rs.64,65,316/- towards IPC-30 &
IPA-31.
6.06 ......Thus the Contractor is entitled to payment of
Rs.64,32,682/-(against IPC-30) and Rs.64,65,316/-
O.M.P. (COMM) 66/2017 Page 8
(against IPA-31), under terms of the Contract, against
the claim.
26. The learned counsel for the petitioner submits that the payments
under IPC-30 and IPA-31 had been rightly withheld by the petitioner for
recovery of the escalation amount overpaid by it till IPC-29 to the
respondent.
27. It is, however, not denied that claim of such alleged over-paid
amount was not a subject matter of the arbitration proceedings in
question, but is a subject matter of another arbitration proceeding.
Therefore, the finding of the Arbitral Tribunal in regard to this claim
cannot be faulted.
28. The petitioner further challenges the Award on Claim No.1(ii)
towards Refund of Building Worker's Welfare Cess Deducted from the
IPCs: Rs. 1,21,40,107/-.
29. The findings of the Arbitral Tribunal on this sub-claim are
reproduced hereinbelow:
"6.10 In the present case before us, it is evident that the Cess
Act becomes operative only from the notification of
publishing of "The Bihar Building and other
Construction Workers (Regulation of Employment and
Conditions of Service) Rules, 2005" which were
published on 03.09.2005
6.11 The last date of submission of bids in this case was
25.07.2005 and so the cut off date i.e. 28 days prior to
last date of submission was 26.06.2005 whereas The
Bihar Building and other Construction Workers
(Regulation of Employment and Conditions of Service)
O.M.P. (COMM) 66/2017 Page 9
Rules, 2005" were published on 03.09.2005. So the cess
deducted from various IPCs becomes reimbursable under
Clause 70.8 of the Contract. The Respondent has not
disputed the amount of deductions of cess. Thus the
Claimant is entitled to a payment of Rs.1,21,40,107/-
against this claim."
30. In view of the judgment of the Division Bench of this Court in
National Highways of India v. Gammon-Atlanta (JV), 2013 (4) Arb.
L.R. 61 (Delhi) (DB), there is no serious challenge to the above finding
and the same is accordingly rejected.
31. Though the petitioner also challenges the grant of Claim no.1(v)
towards refund of Royalty on Earth of Rs.21,80,143/-, in view of the
judgment of Supreme Court in National Highways Authority of India v.
ITD Cementation India Ltd., (2015) 14 SCC 21, the learned counsel for
the petitioner does not press such challenge.
32. The primary challenge of the petitioner is to the Award of Claim
no.2 towards loss of profit of Rs.24.9 crores on balance work.
Connected with this is the challenge to Claim No.1 (iii) towards the cost
of left over materials lying at site of Rs.1,73,53,624/- and Claim No.1(iv)
towards refund of retention money of Rs.8,43,82,382/-.
33. The learned counsel for the petitioner submits that the Arbitral
Tribunal has erred in passing the above Award in favour of the
respondent. She submits that from the reading of the Supplementary
Agreements dated 27.11.2008 and 19.11.2010, it is evident that it was the
respondent who was in default in carrying out its obligations under the
Contract. In fact, these Supplementary Agreement(s) contain the
admission of the respondent to this effect. It is further asserted that the
O.M.P. (COMM) 66/2017 Page 10
petitioner in its Show Cause Notice dated 26.09.2012 had referred to
various letters written by the petitioner to the respondent pointing out to
the delay in execution of the work. The petitioner thereafter, considered
the reply dated 10.10.2012 submitted by the respondent and found the
justification for delay given therein to be untenable and, therefore,
terminated the Agreement vide its notice dated 11.11.2013. The Arbitral
Tribunal has, however, without appreciating the reasons for termination
of the Contract, held the same to be illegal and granted the above claims
of the respondent. She submits that the real reason for the delay in the
execution of the work was the financial constraint faced by the
respondent and not the reasons attributed to the petitioner. She submits
that it was the responsibility of the respondent to remove the utilities and
therefore, having itself failed to perform the Contract, the respondent was
not entitled to the above claim.
34. On the other hand, the learned counsel for the respondent, while
reminding this Court of limitation on its powers to re-appreciate the
evidence or interfere with the interpretation of the Contract by the
Arbitrator, submits that the Arbitral Tribunal has rightly held that the
petitioner had failed to discharge its obligations under the Contract.
35. Relying upon the judgment of the Supreme Court in M/s Hind
Construction Contractors vs. State of Maharashtra, AIR 1979 SC 720,
he submits that time was not of essence to the Contract. The petitioner,
on the one hand did not consider the repeated applications of the
respondent seeking extension of time, on the other hand abruptly
terminated the Contract without making time the essence of contract or
fixing a reasonable period of time for completion of the work by the
O.M.P. (COMM) 66/2017 Page 11
respondent. He also places reliance on the judgment of this Court in
National Buildings Construction Corporation Ltd. vs. Indian Railways
Construction Co. Ltd., MANU/DE/2728/2015.
36. The learned counsel for the respondent further submits that the
Arbitral Tribunal has considered the effect of sub-Clause 110.1 of the
Technical Specifications and has rightly concluded that the said Clause
does not make it the responsibility of the Contractor to make the site
hindrance free. He relies upon judgment of this Court in National
Highways Authority of India vs. Hindustan Construction Co. Ltd., 2017
(5) Arb. L.R. 258 (Delhi).
37. The learned counsel for the respondent further submits that the
Arbitral Tribunal has considered all submissions made by the parties
before it and it is not essential for the Arbitral Tribunal to refer to every
single submission of the aggrieved party or to each and every
correspondence relied upon by the aggrieved party. He places reliance
on the judgments of this Court in CMDR S.P.Puri vs. Alankit
Assignments Ltd., 2008 (3) Arb. L.R. 465 (Delhi), and National
Highways Authority of India vs. Som Dutt Builders-NCC(JV),
MANU/DE/3053/2018, in this regard.
38. The learned counsel for the respondent further submits that the
reliance of the petitioner on the termination letter dated 11.11.2013 is ill-
founded as the petitioner had made no effort to even aver, let alone
establish the self-serving contents of its termination letter. He submits
that having not done so, the petitioner cannot be allowed to challenge the
Award on this issue. He relies upon judgment of this Court in KEI
Industries Ltd. vs. DVB & Ors., MANU/DE/0852/2012.
O.M.P. (COMM) 66/2017 Page 12
39. The learned counsel for the respondent further relies on the
judgment of the Supreme Court in Dwaraka Das vs. State of M.P. &
Anr. (1999) 3 SCC 500, to submit that in case of construction contracts,
when the contractor is deprived of profit on account of illegal termination
of contract, the contractor is to be compensated for the same. He further
relies on the judgment of this Court in NHAI vs. BEL-ACC (JV)
MANU/DE/5111/ 2012, to contend that in case of illegal termination of
contract, the Court has upheld grant of loss of profit at the rate of 10% of
the left over work.
40. I have considered the submissions made by the counsels for the
parties. It would be useful to first quote the relevant findings of the
Arbitral Tribunal on this issue:
6.27 In the Contract in question, Clause 44.1 provides that the
Contractor is entitled for extension of time for completion
of work in certain eventualities. The scheduled date of
completion as stipulated in the Contract is 27.10.2008.
This date of completion was firstly extended up to
01.11.2009 which was further extended up to 11.12.2009.
This was still further extended up to 30.06.2012.
6.28 Thus, in view of provision in the Contract for time
extension and such time extensions actually having been
granted, time is not the essence of the Contract in this
case in view of the law laid down by the Supreme Court
as above.
6.29 The Respondent, without making time as the essence of
the Contract, terminated the Contract vide its letter dated
11.11.2013 under Clause 63.1 of the Contract on account
of slow progress of the work. Evidently, such termination
of Contract is wrongful and illegal in terms of the law
O.M.P. (COMM) 66/2017 Page 13
laid down by the Supreme Court as above, being violative
of second para of Section 55 of the Indian Contract Act
1872.
xxxxxx
6.33 The record shows that the Respondent has not been
responsive to all these letters of the Contractor for the
removal of hindrances probably because it is his
contention, as stated in the SOD that it is the Contractor
who has to remove the hindrances as stipulated in sub
Clause 110.1 of the technical specifications of the
Contract.
6.34 AT has gone through the relevant Sub-clause 110.1 and
finds that cutting of trees, shifting of utilities and removal
of encroachments etc. is to be done by authorities
concerned like forest department or state electricity
board etc. and payment for such activities has to be made
by the Respondent as required by the concerned
department. The Contractor is only to work as
coordinator between the concerned department and the
Respondent. Thus the basic obligation for removal of
hindrances lies with the Employer only and not with the
Contractor.
6.35 In this Sub-clause 110.1, it is very clearly provided that
in the first priority stretch of about 10 km, tree cutting
will be done by the Contractor against BOQ item
provided in the Contract and the balance reach free from
encumbrances shall be subsequently provided to the
Contractor so except for tree cutting of the priority
stretch, the obligation for removal of all other hindrances
lies with the Employer.
6.36 AT finds that approval for shifting of electric cables/ poles
was given to the Contractor as late as on 19.04.2011,
after about 6 years of awarding the work, when the
O.M.P. (COMM) 66/2017 Page 14
concerned department refused to carry out the job.
Thereafter, the Engineer took about 10-months in
finalizing the location of utility ducts and overhead wire
raising as conveyed by his letter dated 23.02.2012.
Similarly the permission of cutting of additional trees
was given on a very belated stage i.e., on 15.11.2011.
The Contractor was asked to carry out these works of
removal of hindrances whereas as per Contract, it was
the Employer who was to handover encumbrance free
site to the Contractor as provided in sub-Clause 110.1 of
the technical specifications.
6.37 Record shows that in addition to the trees, HT/LT cables
and cultural properties, there were other hindrances
which were causing delay but these had not been
contemplated at the time of entering into the Contract. If
we extend the intent of the Contract regarding unforeseen
hindrances as dealt by Clause 12.2 of the Contract, all
such hindrances, which were beyond the control of the
Contractor and which could not be contemplated at the
time of formation of the Contract, are required to be got
removed by the Respondent for putting the Contractor in
the same position, viz-a-viz, the availability of
encumbrance-free site as was contemplated at time of
formation of Contract. Also as provided under Clause
12.2, the Contractor is even entitled to time extension and
additional cost on account of non-removal of such
hindrances.
6.38 This is a Contract with reciprocal promises wherein the
hindrances are required to be first got removed by the
Employer and thereafter only the Contractor can execute
the work. So in view of the provision in Section 54 of the
Indian Contract 1872, the Respondent cannot claim the
performance of the Contractor till it performs its
obligation of removing the hindrances and the
Respondent has to rather make compensation to the
O.M.P. (COMM) 66/2017 Page 15
Contractor for any loss which the Contractor may sustain
on account of non-removal of these hindrances.
6.39 This is a Contract based of FIDIC conditions wherein the
Contractor is not considered a financer of the project and
the Respondent has to ensure the cash flow for the
Contractor. That is why the Contractor is given interest
free mobilisation advance as well as machinery advance
to the extent of 20% of the Contract price. Further if the
payment has not been made within 42 days of the date of
submission of bill, the Contractor gets the interest for
such delayed payment.
6.40 Further if any IPC has not been paid by the Employer
within the stipulated time, the Contractor is even entitled
to suspend the work under Clause 69.4 of the Contract or
even terminate the Contract under Clause 69.3 of the
Contract.
6.41 The record shows that the Contractor submitted IPA-30
on 07.05.2012 for the work done in respect of the period
01.04.2012 to 30.04.2012. The Engineer issued IPC-30
on 11.06.2012 for payment of Rs.64,32,682/- to the
Claimant. However the Employer did not release the
payment against this IPC.
This issue has been examined by AT under Claim No. 1
(i) in the previous paras and it has been found that there
was no justification for the Respondent to deny the
payment of IPC-30 to the Contractor.
6.42 Since the Respondent did not make payment against IPC-
30, the Contractor issued notice to the Engineer under
Clause 69.4 of the Contract on 23.07.2012 for
suspending the work. When it was brought to his
knowledge that such notice is to be addressed to the
Employer only, the Contractor issued notice to the
Employer vide his letter no. PCL/ND/WB-9/2012/8586
dated 24.07.2012 for suspension of work. Record shows
that these notices have been duly received by Engineer
and Employer but the payment against IPC-30 was not
made. Clause 69.5 of the Contract stipulates that it is
only after payment by the Respondent that the notice of
O.M.P. (COMM) 66/2017 Page 16
suspension shall lapse. Thus the work remained
suspended because of non-payment of IPC-30 by the
Employer.
6.43 The Claimant vide its letter NO.PCL/ND/WB-
9/2012/8520 dated 13.06.2012 (Page 430 of CD-2)
applied to the Engineer for extension of time up to
31.12.2013 under Clause 42.2(a) and (b) of GCC on
account of existence of hindrances in the ROW, like tree
cutting, shifting of electric poles, raising of height of
HT/LT cables, delay in finalization of land for relocation
of cultural properties, etc. It was brought out that against
the completion period of 36 months for the whole work as
provided in the Contract for 42.085 km of road, a length
of 20.62 km (two lane) is yet to be handed over
encumbrance-free, though a period of 6 years and 6
months has lapsed. This was followed by reminders vide
letters dated 15.10.2012 and 24.03.2013 wherein the
Contractor had even submitted the work programmes for
the completion of the work within the extended time
applied for. But the Employer/ Engineer neither rejected
the application for time extension nor granted the time
extension beyond 30.06.2012.
6.44 From the record it is clear that non-removal of
hindrances attributable to the Employer is the main
cause of delay and slow progress of work. Still the
Employer served a show-cause notice dated 26.09.2012
for termination of the Contract. It was replied by the
Contractor vide his letter dated 10.10.2012 wherein it
was brought out that the various reasons for slow
progress were delay in tree cuttings, delay in raising of
height of HT/LT lines, delay in shifting of properties etc.
as attributable to the Employer. The Contractor also
stated in this reply letter that they had got surplus plant
and machinery from works at WB-10 and WB-12
packages which could be well utilized for WB-9 for early
completion of work. The Contractor requested for
O.M.P. (COMM) 66/2017 Page 17
granting EOT and submitted the work program for
completion of work but there was no response from the
Employer.
xxxxx
6.46 In view of above facts of the case, AT finds that the
Claimant was entitled to EOT under Clause 42.2 (a) and
(b) of GCC but the EOT was not granted by the
Employer. After sitting over the matter for more than a
year, the Employer terminated the Contract on
11.11.2013 on account of slow progress which, in the
opinion of AT, is unjust and unfair Thus on facts of the
case also the termination of the Contract the Employer
vide its letter dated 11.11.2013 is wrongful and illegal
being violative contractual provisions.
xxxxxx
6.49 The Claimant has stated that against a Contract value of
Rs.367.14 Crores, the work done up to IPA-31 was of
Rs.108.1 Crores and he has been prevented in completing
the balance work of Rs.249.04 Crores. He has claimed
loss of profit of Rs.24.9 Crores which is @10% of the left
over work. He has referred to the Date Book of Ministry
of Road Transport & Highways which provides for 10%
Contractors profit in road projects........
6.50 The Respondent has not denied the basis of claim not
countered the principles laid down in the judgment on the
basis of which loss of profit has been claimed.
6.51 The facts of the case reveal that the Contractor has been
prevented by the Respondent from completing the work
when he issued wrongful and illegal termination orders
of the Contract. Thus, in view the facts of the case and
the law of the land governing the loss of profit in such
O.M.P. (COMM) 66/2017 Page 18
cases, AT finds that the Contractor is entitled to a claim
of Rs. 24.90 Crores on account of loss of profit.
41. A reading of the above findings of the Arbitral Tribunal would
show that the Tribunal has held that in presence of the provision for grant
of Extension of Time and such Extension of Time having been granted
on earlier occasion by the petitioner, time cannot be considered to be the
essence of the Contract. No fault can be found to such finding.
42. In M/s Hind Construction Contractors (supra), the Supreme Court
has held as under :
"8. It will be clear from the aforesaid statement of law
that even where the parties have expressly provided that
time is of the essence of the contract such a stipulation will
have to be read along with other provisions of the contract
and such other provisions may, on construction of the
contract, exclude the inference that the completion of the
work by a particular date was intended to be fundamental;
for instance, if the contract were to include clauses
providing for extension of time in certain contingencies or
for payment of fine or penalty for every day or week the
work undertaken remains unfinished on the expiry of the
time provided in the contract such clauses would be
construed as rendering ineffective the express provision
relating to the time being of the essence of contract......
xxxx
10. ....In our view, the question would not be whether the
rescission of the contract was unreasonable and, therefore,
unjustified but whether the rescission of the contract in the
circumstances of the case was wrongful and illegal. If time
was not of the essence of the contract or if the stipulation
as to the time fixed for completion had, by reason of
waiver, ceased to be applicable then the only course open
to the respondent-defendant was to fix some time making it
O.M.P. (COMM) 66/2017 Page 19
the essence and if within the time so fixed the appellant-
plaintiff had failed to complete the work the respondent-
defendant could have rescinded the contract. The High
Court has taken the view that the contract was rightly
rescinded by the respondent-defendant because by about
July 21, 1956 (vide letter Ex. 74) the appellant-plaintiff
had done work of the value of Rs 35,000 as against the
tender value of Rs 1,07,000, that is to say, only one-third
of the total work had been completed and, therefore, even
though time was not of the essence of the contract, the
appellant-plaintiff, in the circumstances, could not have
completed the work even within the next three months. In
our view, this approach adopted by the respondent-
defendant and upheld by the High Court is not correct.
Long before the expiry of the period of 12 months the
appellant-plaintiff had by his letter dated June 6, 1956 (Ex.
68) requested for extension of period of completion up to
the end of December, 1956; this request was repeated by
another letter dated June 23, 1956 (Ex. 69). Maybe the
reasons or grounds on which the request was made may
not have appealed to the Superintending Engineer but
some reasonable time making it the essence sought to have
been granted........ It will thus appear clear that though
time was not of the essence of the contract, the respondent-
defendant did not fix any further period making time the
essence directing the appellant-plaintiff to complete the
work within such period instead it rescinded the contract
straightaway by letter dated August 27, 1956. Such
rescission on the part of the respondent-defendant was
clearly illegal and wrongful and thereby the respondent-
defendant committed a breach of contract, with the result
that there could be no forfeiture of the security deposit."
43. However, in the facts of the present case, this finding could not
have been sufficient to award the claims of the respondent. It is relevant
to take note that the time for completion of work had been extended by
O.M.P. (COMM) 66/2017 Page 20
the petitioner vide the Supplementary Agreement dated 27.11.2008. The
said Agreement inter alia recorded as under:
"AND WHEREAS the Contractor having accepted that the rate
of progress of works remained too slow despite its receiving
notices pursuant to sub-clause 46.1 of the Contract from the
Engineer has now represented to the Employer that it would
expedite the progress of works here onwards
AND WHEREAS the Employer based on the
representation/request of the Contractor and in the interest of the
Project has agreed to allow the Contractor a last opportunity to
demonstrate its earnestness and capability by expediting the works
and meeting the minimum monthly progress set below to complete
the works without waiving any of the rights and interests of the
Employer under the Contract
NOW THEREFORE, IT IS HEREBY AGREED BETWEEN
THE PARTIES AS UNDER:
The Contractor hereby undertakes that it shall expedite the
progress of works and shall achieve the minimum monthly
progress of works as stated below:
a) December, 08 - 2%
b) January, 09 - 3%
c) February, 09 - 3%
d) March, 09 - 3.5%
e) April, 09 - 3.5%
f) May, 09 - 4%"
xxxxx
3. In case the Contractor fails to achieve the required
minimum progress in any one of the calendar months stipulated in
para 1 above the Employer shall have the absolute right, without
being required to give any kind of notice whatsoever (Save and
except force majeure conditions) to the Contractor
notwithstanding any related specific requirements in the Contract
to terminate the Contract forthwith and enter upon the site. The
Contractor shall not be entitled to adjust any shortfall in the
O.M.P. (COMM) 66/2017 Page 21
stipulated minimum progress of works in a particular month as
provided in para 1 above to the subsequent months) or any other
month.
4. This Agreement is without prejudice to the right of the
Employer to levy Liquidated Damages in accordance with the
terms of the Contract.
5. The Contractor hereby undertakes that it shall maintain
sufficient staff labour and equipment for effective progress of
works. The Contractor further undertakes that it shall have
available at site the aggregate and other construction materials
sufficient for next 10 days of work required for achieving the above
minimum progress of works."
44. The petitioner, thereafter, sought to terminate the Contract vide its
notice dated 07.02.2009 for failure of the respondent to meet the monthly
progress as stipulated in the Supplementary Agreement dated 27.11.2008.
45. The parties thereafter entered into the second Supplementary
Agreement dated 19.11.2010 extending the time of completion of work
till 30.06.2012. The Supplementary Agreement records inter alia as
under:
"2. The final revised target date for completion of project shall
be 30.06.12 by the Contractor i.e. 22 months of construction
period reckoned from 01.09.2010. The Quarterly Miles-Stones
scheduled to be achieved by the Contractor as under mutually
finalized.
Sl. Year Quarter Target (%)
No.
1. 2010-11 Till September 2010 19%
October-December 5%
2. January-March 9%
3. 2011-12 April-June 10%
O.M.P. (COMM) 66/2017 Page 22
4. July-September 7%
5. October-December 12%
6. January-March 18%
7. 2012-13 April-June 20%
3. The Contractor will not be entitled to any of the facilities
available under World Bank contract in future. However for the
facilities which have already been availed by the Contractor under
certain terms and conditions has to be necessarily maintained and
conditions obligation incorporated therein in the respective
approvals have to be fulfilled by the Contractor in future also.
4. The contractor shall not be entitled for the escalation for the
period from 07.02.2009 to 31.08.2010 (the sine-die period) i.e.
from termination of the Contract to the date on which the
termination of the Contract was revoked."
46. Before the expiry of this extended period, the respondent vide its
letter dated 13.06.2012 and subsequent reminder letters dated 15.10.2012,
13.03.2013 and 27.06.2013 sought further extension of time.
47. The petitioner, however, issued Show Cause Notice dated
26.09.2012, inter alia asserting as under:
"AND WHEREAS in view of the grossly inadequate
execution of the Project reflecting an extremely slow rate
of progress of work, the Engineer to the Project has issued
Notices under Clause 46.1 of the Contract Agreement
which obliges you to take such steps so as to expedite
progress to comply with the time for completion which is
30.06.2012.
AND WHEREAS the Regional Officer (RO) vide its letter
no. NHAI/RO/PAT/PIU-MUZ/WB-09/2011/538(i) dated
21.04.2011 to the Project Manager of PCL, pointed that
after site visit with PD, Muzaffarpur, RE of the Supervision
Consultant and your Representative it was noted that the
O.M.P. (COMM) 66/2017 Page 23
progress of the works is slow and dissatisfactory and due
attention on the observations made thereunder is required,
since, they are extremely vital for progress of work within
the scheduled time frame of the Contract.
AND WHEREAS the Manager (Tech.) of NHAI, PIU,
Muzaffarpur vide its letter No.33018/01/2006/PD/PIU-
MUZ/489 dated 25.04.2011 had requested the Project
Manager of PCL to submit the catch up programme to
achieve the progress as per the Supplementary Agreement.
AND WHEREAS the Team Leader (TL) issued a Notice
under Clause 46.1 of GCC to PCL vide its letter No. TL-
PCL/LMNHP-9/WB-9/217/11 dated 29.04.2011 and
specifically pointed out that progress of works in
Gopalganj Section from Km.381.500 to Km. 389.000, Rail
Over Bridge at Km.368.898 and in underpass at Sasamusa
and Koini are extremely slow and necessary action for
expediting progress shall be taken by PCL to comply with
the time for completion as per the Supplementary
Agreement.
AND WHEREAS the PCL vide its letter NO. PCL/LMNHP
/pkg-09/11/178 dated 18.05.2011, submitted its response in
reference to above letter of TL dated 29.04.11.
AND WHEREAS the TL vide its letter No. TL-
PCL/LMNHP-9/WB-9/218/11 dated 21.05.2011 in
response to PCL letter dated 18.05.11, asked PCL to
submit overall work programme for completion of contract
within the time schedule agreed, substantiated with
resources plan within week time for review and refuted all
claims for slow progress raised by PCL.
AND WHEREAS the TL vide its letter no. TL-PO-/
LMNHP /TL/277/11 dated 06.06.2011 to the Project
Director, PIU, Muzaffarpur mentioned that since PCL has
already been issued notice for slow progress of works no
O.M.P. (COMM) 66/2017 Page 24
steps necessary for expediting progress to comply with the
time frame under the Supplementary Agreement have been
taken. The TL also stated that PCL does not have adequate
resources to complete the works in agreed time schedule
and further mentioned that as per their evaluation PCL
may take atleast 36 months to complete the works. It was
also mentioned that the amount of works done by PCL are
not confirming to the required specifications and
standards under the Contract and pointed out that PCL is
not taking any remedial measures in this context. The TL
further stated that PCL has employed a sub-contractor for
execution of earthworks without the prior consent of
NHAI. Therefore, since it was observed by the TL that the
works under the Contract would not be completed either
under the time schedule or executed as per the
specifications of the Contract, he recommended NHAI to
take action against PCL under Clause 63.1 of GCC.
AND WHEREAS the Deputy General Manager (T)/PD of
NHAI vide its letter No. 33018/01/2006/PD/PIU-MUZ/696
dated 07.06.2011 to the Project Manager of PCL
forwarded the letter of the TL dated 06.06.2011 and
required the Project Manager to submit parawise
compliance to the said letter failing which action would be
against PCL as per the Contract.
AND WHEREAS the PD, PIU, Muzaffarpur vide its letter
No. 33018/01/2006/PD/ PIU/MUZ/1222 dated 21.09.2011
informed you that the works as on date have come to a
stands still even after your repeated assurances that the
works shall be completed by June, 2012 and whereas the
actual progress achieved till the date of the letter was only
35%. The status of progress of work was categorically
stated in this letter and it was pointed out that from
September, 2010 to March, 2011 the progress of work was
only 12% against the target of 18% and further stated
during the previous 3 months the percentage of works done
by PCL was 0.6%, 0.3% and 0.2% in July, August and
September, respectively. The PD, in the said letter also
O.M.P. (COMM) 66/2017 Page 25
reminded you that as per your discussion held with the PD
in the Month of August you had given fund crises as the
reason for such delays and stated that the situation would
improve by September end. Inspite of your assurances to
the PD the work done at the site was almost nil. Therefore,
the PD asked you to show cause as to why termination
process shall not be initiated against you.
AND WHEREAS PCL vide its letter No. PCL/ND/WB-
09/2011/8196 dated 03.10.2011 submitted its reply to
above show cause letter issued by PD, PIU, Muzaffarpur.
AND WHEREAS the PD, PIU, Muzaffarpur vide its letter
No. 33018/01/2006/PD/PIU/MUZ/1469A dated 21.10.2011
while replying to your above mentioned letter stated that
the reasons cited by you are completely frivolous as no
progress has been achieved in the past three months. It
was further stated that as per the meeting of your Project
Manager with the District Magistrate, Gopalgunj on
10.10.2011 you had promised to complete the maintenance
within 10 days but the fact remains that nothing in this
matter has been done. Moreso, during the last 3-days nil
works have been carried out due to non-payment of labour
and staff and non-availability of diesel at the site. It was
also pointed out that in the ongoing month works
amounting to only Rs. 50 lacs have been carried out. It
was categorically stated that as the site is being monitored
by this Office on a daily basis it has been noted that due to
non-maintenance of the road regular accidents have been
caused for which no remedial measures have been taken
by you.
This shows your complete lack of responsibility towards
the project and deliberate lack of action which has been
severely jeopardizing the safety and life of the users of the
road.
O.M.P. (COMM) 66/2017 Page 26
AND WHEREAS Engineer vide its letter no.
160/LM/FPI/PVK/2011 dated 10.11.2011 intimated to the
Project Director, PIU, Muzaffarpur that the progress of
works continue to remain poor, the matter of slow progress
has been brought to the notice of the General Manager,
NHAI on 21 April, 2011 and recommended action against
contractor by NHAI under clause 63.1 of GCC.
AND WHEREAS the Team Leader (TL) of the SC has
issued notice to PCL 46.1 of GCC vide his letter TL-
PCL/LMNHP/WB-9/228/11 of 29.08.2011.
AND WHEREAS you have consistently failed to achieve
the milestones ever since and the actual achieved
percentage is as under:
Year Quarter Achieved
(%)
2010-11 Till September 2010 19%
October-December 4.2%
January-March 4.8%
2011-12 April-June 4.3%
July-September 1.06%
October-December 0.49%
January-March 1.05%
AND WHEREAS as per the terms of the Supplementary
Agreement, you failed to achieve the required minimum
progress in any of the quarter of year 2010-11, 2011-12
and 2012-13, NHAI has the absolute right, without being
required any kind of the notice whatsoever to you, to
terminate the Contract forthwith and enter upon the site."
48. The respondent submitted its reply to the Show Cause Notice vide
its letter dated 10.10.2012.
O.M.P. (COMM) 66/2017 Page 27
49. The petitioner considered the above reply and terminated the
Contract vide its letter dated 11.11.2013 inter alia observing as under:
"AND WHEREAS the Contractor submitted a reply vide
letter no. PCL/ND/WB-9/2012/8665 dated 10.10.2012 to
the NHAI. The same was examined and the various
reasons for delay mentioned by Contractor like non-
handing over of encumbrance free site, delay in tree
cutting, raising of height of HT/LT lines, shifting of
properties, shortage of aggregates, delay in payment of
IPC 30 are found to be not correct representation of the
fact. Due to poor progress, the Employer terminated the
contract in Feb 2009 when the progress was only 18%
after lapse of 3.25 years. After revocation of termination in
Nov 2010, the progress till date is only 35%. The
properties relocation and cutting of trees is to be carried
out by Contractor under BOQ item no. 1.08 & 1.02
receptively. Also separate sanction was made for utility
shifting items to be carried out by Contractor as non-BOQ
items. However, due to failure of Contractor these could
not be carried out. Hence, Contractor himself is
responsible for not making the site encumbrance free. The
procurement of aggregate is also responsibility of
Contractor and that has not affected the progress of this
project because Contractor himself has stated to be in
possession of quarry licence. The fact remains that the
Contractor is always suffering from shortage of funds and
this has affected the project. The proposal for grant of
Extension of Time till June 2014 with full escalation and
without penalty cannot be agreed as per contract
agreement and supplementary agreement.
AND WHEREAS, PD NHAI, PIU Muzaffarpur vide its
letter no. 33018/01/2006/PD/PIU/MUZ/272 dated
21.02.2013, stated that the issue of non-payment of IPC-30
has already been intimated vide this office no.
33018/01/2006/PD/PIU/MUZ/1335 dated 03.08.2012 and
33018/01/2006/PD/PIU//MUZ/1573 dated 11.09.2012 and
other issues raised by you has already been furnished by
O.M.P. (COMM) 66/2017 Page 28
Resident Engineer vide his letter no. FB/NH-28/RE-
9/PCL/A/365/13 dated 06.02.2013.
AND WHEREAS the Contractor vide letter no.
PCL/HYD/BD/NHAI/WB-9/2013/116 dated 25.02.2013
while replying to the letter of PD NHAI, PIU Muzaffarpur,
stated that it is due to financial problems that it was
unable to maintain the Project Highway and has opted for
Corporate Debt Restructuring (CDR) of 100 crores as
working capital. The Contractor requested the NHAI to
release the payment of IPC 30 and IPC 31 and further
requested NHAI to instruct the concerned authorities to
grant extension of time applied by the Contractor vide its
letter no. PCL/ND/WB9/2012/8520 dated 13.06.2012. The
Contractor further requested NHAI to clear arbitration
awards amounting to Rs. 92 crores. Further, the
Contractor vide his letter no. PCL/ND/WB-09/2013/8841
dated 13.03.2013 to the Chairman of NHAI stated that its
financial constrains would be overcome in view of the
CDR and also requested the NHAI to grant EOT and sign
a new supplementary agreement incorporating the EOT. It
was also stated by the Contractor that a time period of
approx two months would be required to procure working
capital assistance from the Bank so as to proceed further
with the Project.
AND WHEREAS the Contractor vide his letter no.
PCL/ND/WB-09/2013/8885 dated 22.04.2013 to NHAI
submitted a revised construction programme and cash flow
statement. The letter also stated that deficit in cash flow
would be covered by taking loans from banks and that the
Contractor would complete the work within the time
schedule mentioned in the revised construction
programme.
AND WHEREAS vide the his letter dated 04.05.2013, the
Contractor requested NHAI to sign another supplementary
agreement granting EOT for completing the balance work
with full extension of time without any penalty and also
with the provision of full escalation even for the period of
suspension (07.02.2009 till 30.09.2010). It is pertinent to
O.M.P. (COMM) 66/2017 Page 29
mention that this escalation during suspended period was
agreed to be frozen as per the Supplementary Agreement
dated 19.11.2010 at the time of consideration of revocation
of the termination. Therefore, the Contractor's request for
grant of full escalation was not in accordance with the
supplementary agreement and hence it was not agreed to.
AND WHEREAS vide his letter no.
PCL/HYD/Operations/NHAI/WB-09/2013-14/077 dated
27.06.2013, the Contractor stated that to facilitate the
working capital for WB-9 and WB-10, the Bankers had
insisted for EOT and therefore requested NHAI to issue
EOT which would allow the Contractor to complete the
Project.
From the above paras, it is apparent that at first the
Contractor tried to convince NHAI that it has procured
working capital to start construction and maintenance of
the Project Highway and upon anticipating that the
Authority may accede to the request of the Contractor tried
to trick the Authority to believe that the Contractor is
serious in implementing the Project, however, the ill
motive of the Contractor is apparent from the fact that
once the Authority seemed agreeing to continue with the
Project, the Contractor has tried to trick the Authority to
procure full escalation even for the period of suspension.
AND WHEREAS the Contractor vide his letter no.
PCL/HYD/Operations/EW-II(WB-09)/2013-14/063 dated
17.06.2013 informed NHAI about the details of his Quarry
Agreements and Crusher Licences as required by NHAI
during the meeting dated 14.06.2013. The status of six
aggregate quarry with the Contractor as informed vide
letter dated 17.06.2013 is as follow:
S.N Mauze Plot Area Period Status
No.
1. Jamuara 366 (P) 1.00 acre 7.12.07
to
06.12.12
O.M.P. (COMM) 66/2017 Page 30
2. Jamuara 366 (P) 1.90 acre 7.12.07 Applied
to for
06.12.12 renewal
3. Jamuara 366 (P) 1.00 acre 31.03.08 Applied
to for
30.03.13 renewal
(Quarry
no. 17)
4. Neerpur 01 (P) 1.00 acre 19.12.08 (Quarry
to no. 18)
18.12.13
5. Neerpur 01 (P) 1.20 acre 23.01.09 (Quarry
to no. 19)
22.01.14
6. Jamuara 366 (P) 1.25 acre 17.03.20 New
13 to Quarry
29.01.20 has
14 taken on
Lease.
Even though as per the Conditions of the Contract, the
arrangement of approved quality of raw materials for the
Project execution including aggregates is responsibility of
the Contractor your submission regarding quarry
availability with you to support your ability for the
execution of the Project xxxx mentioned that in view of the
notification dated 04.02.2010 of xxxxx non-renewal of
lease for quarry, your submission that renewal is xxxxx for
O.M.P. (COMM) 66/2017 Page 31
three quarries of Jamuara, can be treated as optimistic
view. As per the present position you are having only three
quarries at Neerpur and Jamuara with lease expiring on
Dec 2013 & Jan 2014. So far you have not submitted any
other documentary evidence to Authority in support of any
renewal of above lease.
AND WHEREAS The work programme cash flow
statements and machinery deployment submitted vide your
letter dated 22.4.2013 was also examined. The updated
work programme and cash flow submitted by the
Contractor for completing the work in Oct, 2014 are not
workable it assumes 3.7% per month average progress.
The balance work is estimated to be about Rs. 474 Crore
at present prices. This implies average per month progress
of about Rs. 17.54 Crores. Considering the past
performance of the Contractor your ability to achieve this
target is highly doubtful.
AND WHEREAS one of the prime reasons for non-
performance of the Contractor was its financial crisis
which was also admitted by the Contractor in its various
correspondence and meetings with the Authority. Even
though as per the conditions of the Contract, the
arrangement of necessary funds for the execution of the
Project including aggregates is responsible of the
Contract, your submission vide letter dated 27.06.2013
regarding sanction of working capital fund of Rs. 68.92
crore was also examined. In this context, it is mentioned
that the working capital loan sanctioned by Bank is as per
the settlement between the Contractor and Bank wherein
the Authority is not a party. Therefore, the Bank is in no
way accountable to the Authority for continuing to extend
the working capital loan facility till the completion of the
Project or increase the loan amount as per the
requirement of the Project.
AND WHEREAS it is further important to note that the
commercial tax department of Bihar has issued directions
against you due to outstanding dues Rs. 21.86 Cr on your
part. Further, there is also a case (No.OA 3285 of 2012
O.M.P. (COMM) 66/2017 Page 32
and CS 392 of 2012) In Hon'ble High Court Kolkata
wherein Hon'ble Court inquired if there are any
outstanding payment due to M/S PCL. However, you have
not submitted your response to the Authority on these
issues till date.
AND WHEREAS it is vital to mention that the Authority
has been deprived of the toll revenue from the Project due
to continuous delay in completing the Project and more so
due to stoppage of work since May 2012. The expected toll
revenue from the Project is about Rs.14.5 Cr. per annum
implying Rs.1.1 Cr. per month.
AND WHEREAS due to the non-maintenance of the road
in traffic worthy condition the Authority has been
subjected to continued public criticism and complaints.
The State Government is also pressing hard for
maintaining the road as it is important link with UP along
east-west corridor. Since the Project is not completed and
road is to be maintained in traffic worthy condition, the
Authority has incurred costs from its end solely due to your
failure to comply with the terms and conditions of the
Contract and the revised time schedules.
AND WHEREAS, considering the poor condition of
existing highway & your attitude for not maintaining the
highway, NHAI appointed a maintenance contractor at a
cost of about Rs.4.26 Cr for carrying out the maintenance
for keeping road in safe and traffic worthy condition prior
to monsoon under clause 39.2. However, your continuous
denial to maintain the road even after the cyclone attack in
Aug 2013 and heavy rain have made the condition of
project highway exceptionally bad and unsafe.
Considering the inconvenience caused to the Road users
and safety aspect, the state government vide letter dated
25.09.2013 has submitted an estimate amounting to
rs.37.76 crores for maintenance of the project section and
adjacent reach. The same is under examination for
sanction in Authority.
O.M.P. (COMM) 66/2017 Page 33
AND WHAREAS as per the terms of the Supplementary
Agreement dated 19.11.2010, your have failed to comply
with your unambiguous and unequivocal obligation of
achieving the minimum required progress in the specified
period. The records clearly reflect that the failure on your
part is solely attributable to you besides reflecting your
total disregard to the mandatory provisions of the Contract
dated 20.10.2005, Supplementary Agreement dated
27.11.2008 & 19.11.2010. Your failure has resulted in not
only monitory loss to the NHAI but has also caused
immense hardship to the general public who have been
denied the benefit of a highway."
50. The above letters have been quoted in detail as their reading would
show that the Team Leader and the Project Director were repeatedly
pointing out the slow progress of the work to the respondent and calling
upon it to expedite the work. Further, the progress of work was nowhere
near the percentage as stipulated in the second Supplementary
Agreement.
51. The Arbitral Tribunal, relying upon Clause 110.1 of the Technical
Specifications of the Contract, has held that the cutting of trees, Shifting
of utilities and removal of encroachments etc., was to be done by the
Authorities concerned like Forest Department or State Electricity Board
etc., and the respondent was only to work as a coordinator between the
concerned department and the petitioner herein. Clause 110.1 of the
Technical Conditions of Contract is reproduced hereinunder:-
"Clause 110.1
The contractor shall be responsible to coordinate with service
provider/concerned authorities for cutting of trees, shifting of
utilities and removal of encroachments, etc. and making the
O.M.P. (COMM) 66/2017 Page 34
site unencumbered from the project construction area
required for completion of work. This will include initial and
frequent follow-up meetings/actions/discussions, with each
involved service provider/concerned authorities. The
contractor will not be entitled for any additional
compensation for delay in cutting of trees, shifting of utilities
and removal of encroachments by the service
provider/concerned authorities. The Employer shall make
payment for cutting of trees and shifting of utilities as
required by the concerned department.
However, for the first priority stretch as mentioned in BOQ,
the tree cutting provided in BOQ will be done by the
contractor and the balance reach free from encumbrance
shall be subsequently provided to the contractor."
(Emphasis supplied)
52. A reading of the above Clause shows that even if the
interpretation of the Arbitral Tribunal cannot be faulted, however, at
the same time, the Clause further provides that the Contractor will
not be entitled for any additional compensation for delay in cutting
of trees, shifting of utilities and removal of encroachments by the
service provider / concerned authorities.
53. It is also a matter of record that the approval for shifting of
electric cables/poles was given to the Contractor on 19.04.2011 and
the Engineer finalized the location of utility ducts and overhead wire
raising by his letter dated 23.02.2012. Similarly, the permission of
cutting of additional trees was given on 15.11.2011. Though it
cannot be denied that grant of such late permission would have
affected the performance of the work by the respondent, however, it
was for the Arbitral Tribunal to have further considered whether the
slow performance of the work as mentioned in the Show Cause
O.M.P. (COMM) 66/2017 Page 35
Notice as also in the termination notice issued by the petitioner was
justified on part of the respondent due to such delays and if so, to
what extent. Certainly, the entire delay in the execution of the
Contract could not have been justified merely for the above reasons.
This becomes more profound in light of the two Supplementary
Agreement (s) executed between the parties wherein the respondent
had admitted to the slow progress of work by it. In view of the
above, the reliance of counsel for the respondent on judgment of
Hindustan Construction Co. Ltd. (supra) does not suffice.
54. The Arbitral Tribunal has further placed reliance on the non-
payment of IPC-30/IPA-31 by the petitioner to the respondent. It is
noted that IPC-30 was submitted only on 07.05.2012 and therefore,
could not have been a cause for delay prior to the date of
submission.
55. Equally, the Arbitral Tribunal places reliance on non-payment
of IPA-31 as also on the fact that the respondent vide its letter dated
13.03.2013 had informed the petitioner of approval of CDR and
further vide letter dated 27.06.2013 had submitted that the banks
were insisting on grant of extension of time before releasing the
working capital.
56. I note that while IPA 31 was submitted by the respondent
only on 30.06.2012, letters regarding CDR are dated 13.03.2013 and
27.06.2013, that is much beyond the extended period of the
Contract. These letters, instead of helping the respondent, infact
suggest merit in the case of the petitioner that the work was being
O.M.P. (COMM) 66/2017 Page 36
delayed due to financial crunch faced by the respondent during the
execution of the work.
57. It is true that in exercise of powers under Section 34 of the
Act, this Court cannot act as a Court of appeal and re-appreciate the
evidence led before the Arbitral Tribunal, however, at the same
time, if the Arbitral Tribunal has drawn inference from the
documents that are totally unreasonable and has not even considered
the vital evidence led by the parties before the Arbitral Tribunal, this
Court, certainly, cannot act as a mute spectator and uphold such
Award. In the present case, I find that the Arbitral Tribunal has not
only drawn incorrect inference from the documents referred by it in
the Award, it has also not considered other vital and relevant
documents in reaching its conclusion. Therefore, the Award on
claim no. 2 cannot be sustained.
58. As noted earlier, the learned counsel for the respondent has
relied upon the judgments of this Court in CMDR S.P.Puri (supra)
and Som Dutt Builders-NCC (JV) (supra) to contend that the
Arbitral Tribunal cannot be said to have violated the law merely
because it has not referred to every single contention of the parties
nor can it be said that the Award is liable to be set aside merely
because each and every correspondence referred by the parties has
not been elaborately discussed by the Arbitral Tribunal.
59. Though there can be no quarrel with the said legal
proposition, the same cannot come to the aid of the respondent in
the present case. It is not as if the Arbitral Tribunal has failed to
consider only one or two correspondences that are relevant to be
O.M.P. (COMM) 66/2017 Page 37
considered nor can it be inferred from reading of the Award through
any specific reference in the Award that such correspondences were
appreciated and considered by the Arbitral Tribunal in passing of
the Award. As noted above, the Arbitrator has not considered
various complaints made by the Team Leader and the Project
Director to the respondent regarding slow progress of the work. It
has also not considered the percentage of work done by the
respondent within the extended period of Contract. It has also not
considered what portion of delay can be attributed solely to the
petitioner for the reasons given by the respondent as a justification
for such delay in the progress of the work. This would certainly
have had an effect on the claim for loss of profit even if the
termination of contract is held to be premature or illegal. The
Award, therefore, infact can qualify as a non-speaking Award.
60. As far as the judgment of Dwaraka Das (supra) and M/s
BEL-ACC(JV) (supra) relied on by counsel for the respondent, it is
significant to note that grant of loss of profit was upheld in these
judgments on the ground of termination of contract being illegal or
amounting to a breach of contract. In the instant case, the finding of
delay being attributable solely to the petitioner and termination of
contract being illegal is being set aside due to non-consideration and
improper consideration of evidence by the Arbitral Tribunal and
hence, question of allowing loss of profit on ground of alleged
wrongful termination does not arise. In any case, whether in the
facts of the present case, the respondent was entitled to claim loss of
profit at the rate of 10% of the balance work, required consideration
O.M.P. (COMM) 66/2017 Page 38
of the Arbitral Tribunal. It cannot be that in each case the contractor
must be held entitled to claim loss of profit at the rate 10% on the
termination being found illegal. The fact whether the Contractor
also contributed to the delay and was at all in a position to complete
the balance work in a reasonable period of time, would be relevant
to be taken into consideration while awarding damages / loss of
profit.
61. In Associate Builders v. Delhi Development Authority
(2015) 3 SCC 49, the Supreme Court has, while cautioning the
Courts exercising power under Section 34 of the Act, held as under:
"29. It is clear that the juristic principle of a "judicial
approach" demands that a decision be fair, reasonable
and objective. On the obverse side, anything arbitrary and
whimsical would obviously not be a determination which
would either be fair, reasonable or objective.
xxx
31. The third juristic principle is that a decision which is
perverse or so irrational that no reasonable person would
have arrived at the same is important and requires some
degree of explanation. It is settled law that where:
(i) a finding is based on no evidence, or
(ii) an Arbitral Tribunal takes into account something
irrelevant to the decision which it arrives at; or
(iii) ignores vital evidence in arriving at its decision,
such decision would necessarily be perverse."
62. The present case would fall in the exception to the general rule of
non-interference as the Arbitral Tribunal has ignored vital evidence in
arriving at its decision.
63. In view of the above, grant of Claim no.2 in favour of the
respondent cannot be sustained.
O.M.P. (COMM) 66/2017 Page 39
64. As Claim No.1(iii) and 1(iv) were also allowed on basis of the
finding that the Contract had been illegally terminated by the petitioner,
the Award on these claims is also liable to be set aside.
65. However, as these claims are being set aside for reasons of non-
consideration of vital evidence by the Arbitral Tribunal, the respondent
would be entitled to re-agitate these claims afresh in accordance with
law.
66. As noted above, the Claim no.3 of the respondent is for loss of idle
hire charges of machinery and equipment confiscated by the Employer
for Rs.25,75,95,264/-.
67. Counsel for the respondent has submitted that the claim for loss of
idle charges on machinery and equipment has been rightly granted by the
Arbitral Tribunal by computing hire charges on basis of Standard Data
Book of Ministry of Road Transport and Highways (MORTH), which is
an accepted benchmark in road projects and relies on judgment dated
11.04.2018 of this Court in NHAI vs. Prakash Atlanta (JV) (FAO(OS)
(Comm.) No.1/2017).
68. The said claim is premised on the finding of the Arbitral Tribunal
regarding delay in execution of the work being attributable to the
petitioner and non-grant of extension of time by the petitioner resulting
in idling of the machinery and equipment. Apart from the fact that the
finding of the Arbitral Tribunal of delay being attributable solely to the
petitioner cannot be accepted, equally, the Arbitral Tribunal having
already noted that the respondent had stopped the execution of the work
with effect from 01.07.2012, albeit on the ground of non grant of
O.M.P. (COMM) 66/2017 Page 40
extension of time, such claim could not have been allowed in full by
adopting the MORTH Standard Data Book.
69. As far as the Claim no.4 is concerned, the same was for cash loss
due to encashment of bank guarantees. The Arbitral Tribunal, while
awarding this claim has noted that the petitioner had claimed
Rs.29,40,57,197/- on account of recovery of mobilization and machinery
advance from the respondent in its counter claim. An amount of
Rs.17,85,72,957/- had been recovered by the petitioner on encashment of
a Bank Guarantee, leaving an amount of Rs.11,54,84,240/- further to be
recovered, which the Arbitral Tribunal directs to be adjusted against the
amount payable by the petitioner to the respondent in terms of the Award.
As far as the other two Bank Guarantees are concerned, the same were
ordered to be released by way of an Interim Award dated 16.01.2016,
which is not in challenge before this Court. Having held so, the Arbitral
Tribunal has granted the above claim in favour of the respondent only on
the ground that it found the petitioner to be guilty of reasons leading to
the prolongation of the Contract.
70. As noted above, this finding of the Arbitral Tribunal cannot be
sustained. Even otherwise, I do not find this to be an adequate
justification for awarding such claim in the peculiar facts of the present
case.
71. The petitioner has further challenged the award of Claim no.6,
which is for cost of temporary assets taken over for Rs.3,96,57,600/- per
month. As this claim is again based on the finding of the Arbitral
Tribunal that the termination of the Contract by the petitioner was illegal,
O.M.P. (COMM) 66/2017 Page 41
the said award also cannot be sustained. The Award insofar as it allows
the same is set aside.
72. The last challenge of the petitioner is to award of interest in favour
of the respondent. While awarding such interest, the Arbitral Tribunal has
placed reliance on Clause 60.8 of the Contract. Therefore, I do not find
any merit in the said challenge.
73. In view of the above, the present petition partially succeeds,
leaving the parties to bear their own cost.
NAVIN CHAWLA, J
APRIL 10, 2019/rv/Arya
O.M.P. (COMM) 66/2017 Page 42
