Delhi High Court
National Highway Authority Of ... vs M/S Bla Project Pvt Ltd on 7 January, 2019
$~11
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Decided on: 07.01.2019
+ O.M.P. (COMM) 1/2019
NATIONAL HIGHWAY AUTHORITY OF INDIA..... Petitioner
Through: Mr. Ramesh Kumar with Mr. Gaurav
Mishra, Advs
versus
M/S BLA PROJECT PVT LTD ..... Respondent
Through: None.
CORAM:
HON'BLE MR. JUSTICE RAJIV SHAKDHER
RAJIV SHAKDHER, J. (ORAL)
I.A. No. 34/2019 (Exemption)
1. Allowed, subject to just exceptions.
O.M.P. (COMM) 1/2019
Prefatory Facts:
2. This is a petition which seeks to challenge an award dated
31.08.2018.
3. The respondent i.e. the original claimant, had lodged 13 claims while
the petitioner i.e. the original respondent, had lodged 7 counter claims.
4. Via the impugned award, the Arbitral Tribunal (in short „A.T.‟) has
awarded a total sum of Rs. 4,72,82,443/- along with interest at the rate of
10% per annum with effect from 01.09.2018.
4.1. Furthermore, the A.T. has also held that if the awarded amount is not
paid as indicated in Annexure 1 appended to the award within the stipulated
period, interest at the rate given in the award will continue to run.
4.2 The interest, thus, quantified against claims 1 to 10 is a sum of Rs.
1,73,13,492/-. This interest is quantified upto 31.08.2018.
5. As indicated above, the principal amount awarded by the A.T. qua
thirteen claims lodged by the respondent is a sum of Rs. 4,72,82,443/-.
6. A brief description of the claims and the amounts awarded against
them in favour of the respondent as set out in para 8.1 of the impugned
award, for the sake of convenience, is set out hereafter: -
" 8.1 Amount as payable by the Respondent to Claimant.
Claim Claim Description Amount
No. (in Rs)
1 Payment against 1st RA 34,34,408.00
Bill including refund of
Security Deposit and
interest on mobilization
advance
2 Balance quantity of work 4,76,780.00
3 Value of work done at site 11,99,696.00
(Non BOQ item)
4 Financial Charges 14,91,631.30
5 Refund of revoked amount 1,95,81,134.
towards Performance
Security
6 Expenses towards 27,94,000.00
Establishment
7 Idling of Plant & 34,05,067.00
Machinery
8 Idling of site Overheads 24,09,037.00
9 Loss of profit on amount 1,24,82,670.
10 Loss of reputation Nil
4,72,82,443.
11 Interest @ 10% per 1,73,13,492.
(As worked out in attached
sheet (Annexure-1)
12 Cost of Arbitration 10,00,000.00
13 GST, if payable As actually
paid or
payable.
7. In order to adjudicate upon the petition, the following broad facts are
required to be noticed: -
7.1 The petitioner, it appears, floated a tender in August, 2012, for
Construction of Service Road on both sides of Belghoria Expressway from
(a) Rabindra Sarani at Adarsh Nagar (Ch, 2.835km to 4.900km) and (b) NH-
34 to Bangaon ROB (Ch. 0.000 to 1.750 Km), in the State of West Bengal
(hereafter referred to as "subject works").
7.2 The total road length for which bids were invited admeasured 7.63
kms.
7.3 Against the tender, the respondent preferred a bid. Upon the bids
being opened, the respondent was declared successful and its bid being the
lowest was accepted for the value of Rs. 19,58,91,538/-
7.4 Consequently, a Letter of Acceptance (in short "LoA") dated
01.11.2012 was issued to the respondent for the aforementioned contract
price i.e. Rs.19,58, 91,538/-.
7.5 The tenure set down for completion of the subject works was 12
months.
7.6 With the issuance of the LOA, a Contract Agreement dated
24.12.2012 was executed between the parties. On the very same date, Notice
to Proceed (NTP) was also issued by the petitioner.
7.7 The respondent, in terms of Clause 1.1 of the General Conditions of
Contract (in short "GCC"), was to commence the work after 10 days of
issuance of the NTP i.e. by 03.01.2013.
7.8 To begin with, the petitioner appointed PD-PIU-Kolkata as the
Engineer qua the subject works to be replaced by CES (India) Pvt Ltd in
April, 2013.
8 Concededly, the respondent against the mobilisation advance received
from the petitioner, furnished an unconditional Bank guarantee.
8.1 It appears that disputes arose between the petitioner and the
respondent which finally led to the petitioner terminating the Contract on
22.01.2015.
8.2. Just before the termination of the Contract, on 03.01.2015, the
petitioner also encashed the Bank guarantee in the sum of Rs. 98,00,000/-
furnished in its favour by the respondent.
8.3. The record shows that the A.T. which included three members was
constituted only upon the respondent approaching the Calcutta High Court.
9. As indicated at the outset, the respondent upon constitution of the
A.T. lodged its Statement of Claim which included 13 claims.
9.1 The petitioner on the other hand, filed its Statement of Defence which
included 7 counter claims.
10. The A.T. based on the pleadings and the documents placed before it,
framed the following issues: -
"i) Whether the Claimant has not referred the disputes to
Dispute Review Expert under Clause 19.1 of the· contract
before invoking arbitration and if not, the claims of the
Claimant are not maintainable?
ii) Whether the claims of the Claimant are not
maintainable in view of termination of the Contract by the
Respondent vide notice dated 22.01.2015 which remains
unchallenged in the Statement of Claims and no
declaration is sought against the same?
iii) Whether the Respondent was justified in adjusting the
amount certified by the Engineer under 1st RA Bill,
Engineer's final certificate dated 16.07.2015 and other
amounts recoverable against the Bank Guarantees
towards performance security and mobilization advance?
iv) Who has committed the breach of the agreement and its
effect?
v) Whether the Claimant is entitled to the amounts claimed
in para-52 of the claim? If so, to what amount?
vi) Whether the Respondent is entitled to the amounts
Claimed in the counter claim? If so, to what amount?
vii) Relief."
11. The main finding based on which the A.T. has come to the conclusion
that the stand of the petitioner was untenable is pivoted on the finding that
the petitioner was unable to give a hindrance free site to the respondent.
Challenge:
12. Given this backdrop, Mr. Ramesh Kumar, who, appears for the
petitioner, assails the award on the following three grounds: -
(i) First, since the respondent had not challenged the termination notice
dated 22.01.2015, the A.T. could not have returned a finding that the
termination was invalid.
(ii) Second, most of the claims which were awarded in favour of the
respondent were not based on any evidence.
(iii) Third, the conclusion reached by the A.T. qua issue no. 1 was flawed.
Reasons:
13. I have perused the record with the assistance of learned counsel for
the petitioner.
14. In my view, all three submissions made by learned counsel for the
petitioner are untenable.
15. The A.T., in no uncertain terms, has returned the following finding of
fact as to who was responsible for breach of contract.
"....The Claimant furnished the same on 09.12.2017 with their
synopsis whereas the Respondent submitted the same on
22.01.2018. On perusal of these plans it is noted that as in Feb,
2018, the site still remained obstructed to the extent of about 50%
in the form of 538 trees 38 electrical poles, IOCL pipeline,
houses. Some part is marshy land requiring soil removal
operation and special reclamation treatment. It could be possible
to work from one end to other as road width is 5.5 m requiring at
any time continuous full width operation. This was not possible
since full length in whole road way width has not been possible
due to failure of the Respondent.
The Respondent on 23.02.2018, on an oral enquiry by AT,
admitted that the actual site situation has not been fit for
completion of the contracted· work. The work so far done could
not be continued due to site full of obstructions namely 538 trees
+ 38 electrical poles i.e. 576nos. in a length of 7.630km i.e. on an
average every 13 m distance besides IOCL pipe line, buildings
and marshy stretch and not yet fit even on 23.02.2018 for further
work. The Respondent admitted that the balance work after
termination in January 2015, has not been rewarded and it
seemed that the project has been abandoned.
The AT finds that the Respondent failed to provide the site for
construction without hindrance and even as in February 2018, the
work has not been resumed at the risk and cost of the Claimant.
The Respondent has not been able to make the site fit for pre-
construction activities even as upto January 2015 the extended
date for execution. The Respondent has abandoned the project
and it didn't divulge the truth but only on 23.02.2018, it confirmed
that the Respondent failed to deliver the site free from
obstructions, obstacles and buildings etc. The Claimant, thus,
cannot be made responsible for failure and therefore, termination
of contract is unlawful and against the Contract Agreement
between the parties. The Respondent is, therefore, liable to
compensate the Claimant in accordance with the Contract
conditions and law of the land."
(emphasis is mine)
16. Given the aforesaid finding, which, in sum, points in the direction that
even though the Contract Agreement was terminated on 22.01.2015,
concededly, till Feb, 2018, the petitioner was not able to provide a hindrance
free site to the respondent.
16.1 According to the A.T., fifty percent (50%) of the site remained
obstructed on account of 583 unfelled trees, utilities, buildings, IOCL
pipelines and marshy land. It also found that electrical poles were found at
average distance of 13 metres.
16.2 In view of the aforesaid, the A.T. came to a definitive conclusion that
the respondent was in breach of its obligations contained in the Contract
Agreement and therefore, the submission of learned counsel for the
petitioner that because the respondent had not assailed the termination
notice it could not have reached the conclusion that the termination was
invalid overlooks the fact that issue (iv) framed in the matter, required the
A.T. to reach a conclusion as to which of the two sides was responsible for
the breach of the Contract Agreement. Thus, once the A.T. reached a
conclusion qua this issue, against the Petitioner, the finding returned that the
termination notice invalid was only a logical next step in the matter.
17. Insofar as the other argument that the claims awarded were not
backed by evidence, in my view, a bare perusal of the award would show
that this submission of the counsel for the petitioner is not correct.
18. I was taken by the counsel for the petitioner through each of the
claims. The claims are pivoted on the finding as to whether or not the
petitioner was in breach of its contractual obligations. Since, the petitioner
was found to be in breach of the contract, the quantification of the claims
was made based on material which was placed on record by the petitioner.
19. The other submission of the counsel for the petitioner with regard to
issue no.(i) which pertains to the objection taken by the petitioner that since
the respondent had not, in the first instance, approached the Dispute Review
Expert ("DRE"), its action was not maintainable does not impress me. To
my mind, the finding returned by the A.T. in that behalf squarely answers
the submission raised before me by the counsel for the petitioner.
19.1 For the sake of convenience, the same is extracted hereafter:-
"Issue No.1
Whether the Claimant has not referred the disputes to
Dispute Review Expert under clause 19.1 of the
Contract before invoking arbitration and if not the
claims of the Claimant and not maintainable?
The Contract was started on 03.01.2013 for completion of
work on 02.01.2014. However, due to non availability of
work front the work worth 5% financial progress was
completed when the Respondent terminated the contract
on 22.01.2015 in terms of contract clause 40 and
encashed the bank guarantees. The Contract from
03.01.2014 remained at large.
The Claimant on 26.05.2014 requested the Respondent
for appointment of Dispute Review Board (DRE) within
14 days of the said letter as per contract clause 19.
Although, the Respondent should have appointed the DRE
soon after 24.12.2012. But the DRE was not appointed in
spite of Claimants request on 26.05.2014. The Claimant
on termination on 22.01.2015 repeatedly requested but
the Respondent didn't respond. The Claimant approached
the Hon'ble High Court, Calcutta and as directed by the
Court, the Arbitration Tribunal members thereafter, were
appointed. The Respondent didn't press for appointment
of DRE, the parties have rightly formed the Arbitral
Tribunal. There is thus no case now, for appointment of
DRE. The blame lies with the Respondent. The AT
considers the Respondent belated request defeated the
purpose of the DRE who was required to perform work
during currency of the contract.
The AT considers this demand as too late therefore
redundant. The AT unanimously rejects the same. Inter-
alia constitution of Arbitration Tribunal following the
Hon'ble High Court direction, is considered as valid."
(emphasis is mine)
20. The above finding clearly notes that the respondent approached the
petitioner on several occasions, despite which the petitioner did not move to
appoint a DRE, and when, the Calcutta High Court embarked upon the
exercise of appointing an A.T., no such aspect was put forth. The
submission, in my opinion, is completely unsustainable.
21 Given the aforesaid, I am of the view that no interference is called for
with the award.
22. The petition is, accordingly, dismissed.
RAJIV SHAKDHER, J
JANUARY 07, 2019
c
