Delhi High Court
Union Of India Represented By Dg ... vs Ncc Limited on 12 March, 2021
$~38
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Judgment: 12th March, 2021
+ O.M.P. (COMM) 112/2021
UNION OF INDIA REPRESENTED
BY DG MAP ..... Petitioner
Through: Mr Rakesh Kumar, CGSC with
Mr Raghav Nagar, Advocates.
versus
NCC LIMITED ..... Respondent
Through: Ms Priya Kumar, Mr Tejas
Chhabra and Mr Kunal Dhawan,
Advocates for NCC Ltd.
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
[Hearing held through video conferencing]
VIBHU BAKHRU, J. (ORAL)
I.A. 3836/2021 & I.A. 3840/2021
1. For the reasons stated in the application, the delay in filing as
well as re-filing is condoned.
2. The application is disposed of.
I.A. 3837/2021 & I.A. 3838/2021
3. Allowed, subject to all just exceptions.
Signature Not Verified
Digitally Signed
By:DUSHYANT
RAWAL
O.M.P. (COMM) 112/2021 & I.A. 3839/2021
4. The petitioner has filed the present petition under Section 34 of
the Arbitration and Conciliation Act, 1996 (hereafter the 'A&C Act'),
impugning the interim award (hereafter 'the impugned award') passed
by the Arbitral Tribunal comprising of a Sole Arbitrator. By the
impugned award, the Arbitral Tribunal had directed that the
Performance Bank Guarantee (Bank Guarantee No. 130391 BG
0000505) for a sum of ₹15,06,31,160/-, furnished by the respondent
(hereafter 'NCC') be returned to NCC, with the attendant direction to
replace the same by a Bank Guarantee in the sum of ₹1.5 crores.
5. The petitioner contends that the impugned award is patently
illegal as it effectively dilutes the security available with the petitioner,
to recover its counter-claims. According to the petitioner, the
performance of the contract was delayed inordinately and it is entitled
to recover damages, which have been articulated as counter-claims. The
petitioner contends that such an interim award, without adjudication of
its counter claims, is patently illegal and is liable to be set aside.
6. The controversy in the present case arises in the following
context:-
7. On 21.12.2009, the petitioner issued a Notice Inviting Tenders
(NIT) for "Construction of Dwelling Units including allied services for
officers, Senior Sailors & Junior Sailors at Naval Station (Dolphin Hill,
DGNP site), Bheemunipatnam (Navy), Vizag". NCC submitted its bid
pursuant to the said NIT.
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Digitally Signed
By:DUSHYANT
RAWAL
8. On 05.03.2010, the petitioner issued the Letter of Award (LoA),
awarding the contract for the construction of dwelling units including
allied services for officers, senior sailors and junior sailors at three sites
- Dolphin Hill, DGNP Site and Bheemunipatnam (Navy site) - at
Vizag. In terms of the LoA, NCC was required to construct 1,369
Dwelling Units (hereafter DUs). The construction was planned in three
Pockets and one hundred and seven blocks as under:
Srl No Pockets No of DUs Blocks
9. The period of completion of the works was stipulated as twenty-
five months. The construction was to be completed in five phases and
separate dates for commencement and completion of construction for
each phase were stipulated in the Work Order - Work Order No.1 was
issued on 18.03.2010.
10. In terms of the contract between the parties, the original date for
completion of the last phase of the contract (Phase-V) was stipulated as
17.04.2012. The work in respect of the other phases was to be
completed earlier. However, the dates of completion in respect of the
five phases were extended from time to time.
11. The work commenced as per Work Order-I on 18.03.2010 and
was completed on 13.08.2015.
Signature Not Verified
Digitally Signed
By:DUSHYANT
RAWAL
12. The contract between the parties stipulated the defect liability
period as two years. This period expired on 12.08.2017.
13. The respondent submitted its Final Bill on 09.11.2016, which
included an undisputed amount as well as the disputed amount. Though
the undisputed portion of the Final Bill was for a sum of
₹1,31,02,606.50, however, a sum of ₹1,07,91,165/- was released to the
respondent.
14. The disputes between the parties have been referred to
arbitration. The same also includes NCC's claim regarding return of the
Bank Gurantee (Bank Guarantee No. 130391 BG 0000505) for a sum
of ₹15,06,31,160/-, which was furnished by NCC as a performance
security.
15. The Arbitral Tribunal has decided NCC's claim regarding the
return of the aforesaid Bank Guarantee, in terms of the impugned award.
16. It is NCC's case that its Final Bill was prepared and therefore,
there was no ground for the petitioner to withhold the Performance
Security and the same was liable to be refunded in terms of Condition
58 of the General Conditions of Contract (GCC). The said clause is set
out below:-
"58 Refund of Performance Security
The Performance Security deposit mentioned in
Condition 19 above may be refunded to the Contractor
after the expiration of the defects liability period (vide
condition 40) by the P.M. provided always that the
Signature Not Verified
Digitally Signed
By:DUSHYANT
RAWAL
contractor shall first have been paid the final bill and
have rendered a No-Demand Certificate on the form at
Annexure 'G' of these conditions."
17. The petitioner contested NCC's claim for refund of performance
security, inter alia, on the ground that defects in certain DU's, which
were required to be cured by NCC, had not been cured.
18. In the aforesaid context, a joint verification was conducted and it
was found that there were no defects pending rectification in any of the
DU's constructed at the two sites. However, there were defects in
certain DUs constructed at the DGNP site (Naushakti Vihar). There
were 829 DUs constructed at this site, out of which 665 DUs contained
some defects. Admittedly, the defects in 652 DUs out of the aforesaid
665 DUs had been rectified and defects in only 13 DUs remained.
19. It is also material to note that although NCC had taken steps to
cure the defects, it maintains that it was not obliged to do so as the defect
liability period had expired. It is also noted that there is some
controversy as there were two agencies handling the DUs at the material
time.
20. However, the Arbitral Tribunal was of the view that it would not
be necessary to examine this dispute at this stage since there were only
thirteen units that required rectification. It is noted that the cost of each
DU was only ₹18.74 lakhs. It is also estimated that not more than
₹2,50,000/- would be required for rectification of the defects in each
DU and a maximum of ₹25,00,000/- would be required to cure the
defects. In addition, a sum of ₹1,50,000/- would be required for the
Signature Not Verified
Digitally Signed
By:DUSHYANT
RAWAL
Over Head Tanks as per NCC's estimate and therefore, NCC contended
that a maximum of ₹25,50,000/- plus 18% GST would be required to
cure the alleged defects. The petitioner did not dispute the aforesaid
estimate.
21. In the aforesaid circumstances, the Arbitral Tribunal concluded
that in terms of clause 58 of the GCC, the Performance Security was
liable to be refunded and delivered the impugned award.
22. It is the petitioner's case that the impugned award passed by the
Arbitral Tribunal is patently illegal, as it fails to take into account that
there were counter claims raised by the petitioner. Mr Rakesh Kumar,
the learned counsel for the petitioner referred to clause 58 of the GCC
and submitted that the said clause required submission of a No-Demand
Certificate in the form annexed as Annexure 'G'. He pointed out Part B
of the said No Demand Certificate, which is set out below:-
"PART 'B'
Certified that there are no demands outstanding against the
contractor in respect of the Contract agreement
No................................ dated ............................................
for ......................................................
AAO,PCDA/CDA Project Manager
SAO,PCDA/CDA
Receive from ......................................The sum of Rupees
....................................being the amount in refund of my
security deposits in full which was deposited in the form of
........................................................
Signature Not Verified
Digitally Signed
By:DUSHYANT
RAWAL
Stamp for Sums
Exceeding ₹500/-
Signature
Dated........................
NOTES
1. When only the official Appointment held by the
paying officer is stated in the certificate, a short reference
the fact of payment should be written on or across the
certificate and signed by the disbursing officer (addition
his rank) who refunds the security.
2. Here mention the full particulars of the security e.g.
Post Office Cash Certificate No and date and the G.P.
Notes No and date, Post Office Savings Bank Account No.
Fixed Deposit Receipts etc."
23. He earnestly contended that since a No Demand Certificate in the
said format had not been issued therefore, the question of refund of
Bank Guarantee would not arise. He further submitted that the
petitioner had pointed out various counter claims and the Performance
Security could not be released before the said claims were decided.
24. Ms Priya Kumar, the learned counsel for the respondent has
pointed out that, in fact, a No Demand Certificate in the format as
required under Annexure 'G' was issued by the petitioner and the
contention that the same was not issued, is erroneous. She also referred
to the copy of the pleadings filed by the respondent, which is annexed
along with the present petition. The same encloses the said No Demand
Certificate as Annexure 'C/8'. The copy of the same has been handed
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Digitally Signed
By:DUSHYANT
RAWAL
over by the learned counsel and the same is taken on record.
25. This Court had pointedly asked Shri Rakesh Kumar, whether
there is any averment in the present petition that NCC had not submitted
the No Demand Certificate, in the prescribed format (Part B of
Annexure 'G'). He fairly states that there is no such averment. But there
is an averment that a No Demand Certificate could not be issued without
the counter claims being satisfied.
26. Since it is not disputed that in fact a No Demand Certificate has
been issued; the requirements of Clause 58 of the Contract are fully
satisfied. Thus, the finding of the Arbitral Award in this regard cannot
be faulted.
27. Insofar as the petitioner's counter-claims are concerned, the
Arbitral Tribunal had noted that the counter claims had not been raised
at any stage prior to filing the same before the Arbitral Tribunal, that is,
much after the claims had been filed. Keeping in view all the facts, the
Arbitral Tribunal directed the petitioner to release the Bank Guarantee.
28. It is trite law that scope of interference in Arbitral Award is
limited. This Court finds no flaw in the reasoning of the Arbitral Award
in directing that the Performance Security be released. The contention
that the Arbitral Tribunal had erred in noting that No Demand
Certificate in the requisite format, which was a pre-condition to the
release of the Performance Bank Guarantee, was furnished, is also
unmerited. Notwithstanding the same, it is apparent from a plain
reading of the Award that the Arbitral Tribunal had found that at the
Signature Not Verified
Digitally Signed
By:DUSHYANT
RAWAL
material time, there were no demands pending against NCC. In other
words, the petitioner was in any event, obliged to issue the No Demand
Certificate. And, the fact that it had defaulted in doing so cannot be held
to NCC's prejudice.
29. It is also important to note that prima facie, the counter claims
raised by the petitioner appear to be time barred. The petitioner does
not dispute the finding of the Arbitral Award that the counter claims
had been raised only at the stage after NCC had filed its claims. It is
also not in dispute that the petitioner had not issued any notice setting
out its claims. As noticed above, the contract was completed on
13.08.2015. The defect liability period had also expired on 12.08.2017.
Undisputedly, a portion of the Final Bill was released on 20.03.2019.
The Statement of Claim was filed on 18.10.2019. The petitioner filed
its counter claim on 14.01.2020. It is seen from the counter claims that
the claim is in the nature of damages on account of delay on completion
of works. The said claim has been made for the first time after the works
were completed. The Supreme Court in the case of State of Goa. v.
Praveen Enterprises: (2012) 12 SCC 581 has held that the question
whether the counter claim is filed within the period of limitation would
be determined whether the date on which the counter claim is made is
within the prescribed period. The only exception is cases where a notice
under Section 21 of the A&C Act have been issued by the party prior to
filing the counter claim. Admittedly, in this case, no notice under
Section 21 of the A&C Act was issued by the petitioner.
30. This Court is refraining from making any final observations in
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Digitally Signed
By:DUSHYANT
RAWAL
this regard as the matter is pending before the Arbitral Tribunal and the
Arbitral Tribunal will obviously consider this aspect as well.
31. The petition is unmerited and is accordingly, dismissed with the
aforesaid observations.
32. The pending applications are also disposed of.
VIBHU BAKHRU, J
MARCH 12, 2021
MK
Signature Not Verified
Digitally Signed
By:DUSHYANT
RAWAL
