Delhi High Court
National Highways Authority Of ... vs M/S Uem-Essar Joint Venture on 22 March, 2022
IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 22.03.2022
+ O.M.P. (COMM) 18/2021, & I.A. Nos. 655/2021 & 659/2021
NATIONAL HIGHWAYS AUTHORITY
OF INDIA ..... Petitioner
versus
M/S UEM - ESSAR JOINT VENTURE ..... Respondent
Advocates who appeared in this case:
For the Petitioner : Mr Manish K. Bishnoi, Ms Pallavi Singha
: and Mr Anish Chawla, Advocates.
For the Respondent : Mr Vivek Chib, Senior Advocate with Mr
: Asif Ahmed, Mr Prateek Dhanda and
: Ms Unnati Jhunjhunwala, Advocates.
CORAM
HON'BLE MR JUSTICE VIBHU BAKHRU
JUDGMENT
VIBHU BAKHRU, J
1. The National Highway Authority of India (hereinafter 'NHAI')
has filed the present petition under Section 34 of the Arbitration and
Conciliation Act, 1996 (hereinafter 'the A&C Act') impugning an
arbitral award dated 01.09.2020 (hereinafter 'the impugned award')
passed by an Arbitral Tribunal comprising of three members [Justice
(Retd.) Iqbal Ahmed Ansari, Shri A.B. Desai, Chief Engineer and
Justice (Retd.) C.K. Thakkar as the Presiding Arbitrator].
2. The impugned award was rendered in the context of disputes
that had arisen between the parties in connection with the Agreement
dated 16.01.2002. The principal dispute between the parties was
Signature Not Verified
Digitally Signed
Signing Date:22.03.2022
regarding the respondent's claim for payment of a sum of
₹4,95,02,980/- for the works executed by it and certified by the
Engineer appointed by NHAI. The majority of the Arbitrators [Shri
A.B. Desai and Justice (Retd.) C.K. Thakkar] allowed the aforesaid
claim, in favour of the respondent. The said learned Arbitrators also
awarded interest in favour of the petitioner; however, there is a
difference of opinion as to the date from which the said interest would
run. Justice (Retd.) Iqbal Ahmed Ansari entered a dissenting opinion.
3. NHAI has assailed the impugned award (by majority) on the
ground that it is vitiated by patent illegality on the face of the award.
According to NHAI, the claims raised by the respondent were barred by
limitation. Thus, neither the principal claim for payment of the work
done nor the claim for interest on the said amount, could be entertained.
4. Briefly stated, the facts necessary to address the aforesaid
controversy, are as under:-
4.1 On 18.09.2001, NHAI had invited tenders for execution of the
work relating to "Western Transport Corridor, Tumkur- Haveri Section
of NH4 - Rehabilitation and upgrading of Sira-Chitrdurga Section (Km.
122.3 to Km. 189) in the State of Karnataka - Package 2" (hereinafter
'the Project'), on the terms and conditions stipulated thereon.
4.2 The respondent had submitted its bid and the contract for
executing the Project works for a consideration of ₹253,24,41,361/- was
awarded to the respondent in terms of the Letter of Acceptance dated
Signature Not Verified
Digitally Signed
Signing Date:22.03.2022
28.11.2001 (hereinafter the 'LoA'). Thereafter, on 16.01.2002, the
parties entered into a formal agreement (hereinafter 'the Contract').
4.3 In terms of the Contract, the execution of the works was to
commence on or before 01.03.2002 and completed within a period of
thirty months from the commencement date. Thus, the entire works
were required to be completed on or before 31.08.2004. The execution
of the works was delayed and the respondent sought Extension of Time
(hereinafter 'EOT') for completion of the works on successive
occasions, which were approved by NHAI.
4.4 There is some controversy regarding the approvals of the EOT.
According to NHAI, it had agreed to EOT on four occasions (that is, till
the 4th EOT) but had not approved the subsequent three requests for
EOT (that are, requests for the 5th, 6th and 7th EOT).
4.5 NHAI claims that the said works could not be completed within
the stipulated period of time due to delay on the part of the respondent;
the said works were completed by 26.03.2008. Thereafter, the Engineer
(appointed by NHAI) issued the Taking Over Certificate (hereinafter
'TOC'). And, on 11.01.2011, the Engineer issued the Defect Liability
Certificate (hereinafter 'DLC') with effect from 31.01.2010.
4.6 Pursuant to the issuance of the DLC, on 22.04.2011, the
respondent submitted a Draft Final Statement, in accordance with
Clause 60.11 of the Conditions of Particular Application (hereinafter
the 'COPA'). The Engineer certified an aggregate payment of
₹4,95,02,980/- for the work done against certain items but rejected the
Signature Not Verified
Digitally Signed
Signing Date:22.03.2022
Draft Final Statement in regard to the other payments. The respondent
submitted further information to the Engineer in support of its claim for
the amounts that were rejected by the Engineer, however, the Engineer
did not accept the same.
4.7 It is stated that in view of the above, the Final Statement could
not be prepared. In respect of the payment certified by the Engineer for
an aggregate amount of ₹4,95,02,890/-, the respondent accepted the
same. The said certification issued by the Engineer on 10.01.2012 was
considered as an Interim Payment Certificate (IPC no. 66).
4.8 The petitioner referred the disputes regarding the claims that
were not accepted by the Engineer to the Dispute Adjudication Board
(hereinafter 'DAB'). The DAB rendered its decision. The respondent
did not accept the decision of the DAB and those disputes were referred
to arbitration. Thereafter, on 06.08.2012, an arbitral tribunal was
constituted to adjudicate the said disputes. This Court is informed that
the arbitral proceedings have culminated into awards, which is the
subject matter of challenge by NHAI in another proceeding.
4.9 The payments, as certified by the Engineer under IPC no. 66
dated 10.01.2012, were not paid (the payment certificate accepted and
certified by the Engineer. By various communications, the respondent
requested NHAI to pay the outstanding amount as certified by the
Engineer. However, the respondent claims that NHAI did not make the
payments due.
Signature Not Verified
Digitally Signed
Signing Date:22.03.2022
4.10 Certain letters were written by the Project Director, NHAI, which
indicate that some of the Non-BOQ Variation Orders required the
approval of the Competent Authority. And, the payments certified by
the Engineer were withheld for want of the said approvals.
4.11 The respondent states that it sent letters dated 29.01.2013,
21.03.2013 and 30.05.2013 requesting NHAI to make the payments as
certified by the Engineer under IPC no. 66.
4.12 Since NHAI failed to make the payments, the respondent invoked
the Disputes Resolution Mechanism Clause by a letter dated 23.09.2013
and communicated its intention to refer the disputes to the DAB, in
terms of Clause 67.1 of the COPA.
4.13 Thereafter, the respondent issued a letter dated 21.04.2015
referring the disputes to the DAB. The DAB rendered its decision on
03.08.2015 accepting the respondent's claim for payment of
₹4,95,02,890/- as certified under IPC no. 66. However, the DAB did not
accept the respondent's claim for interest in entirety and allowed
interest only up to 03.08.2015.
4.14 Both the parties were dissatisfied with the decision of the DAB.
NHAI issued a notice dated 20.08.2015 expressing its dissatisfaction
with the decision of the DAB and the intention to refer the disputes to
arbitration. The respondent also issued a letter dated 27.08.2015
expressing its dissatisfaction with the DAB's decision to limit the
interest till 03.08.2015 and regarding certain other issues. However, it
Signature Not Verified
Digitally Signed
Signing Date:22.03.2022
accepted the DAB's decision insofar as its claim for payment of the
amounts certified under IPC no. 66.
4.15 Thereafter, by a letter dated 30.08.2017, the respondent invoked
the Arbitration Agreement and sought reference of the disputes to
arbitration.
4.16 On 30.04.2018, the respondent filed its Statement of Claims. The
claims made by the respondent in the Statement of Claims are tabulated
below:
CLAIM PARTICULARS AMOUNT
Claim No.1 Payment against certified IPC ₹4,95,02,980
no. 66
Claim No.2 Payment of interest at the rate ₹5,49,05,164/-
of 12% per annum
compounded monthly, in
terms of Clause 63.8 of the
COPA from the date of IPC
till the date of payment
4.17 NHAI filed its Statement of Defence contesting the claims made
by the respondent, inter alia, on the ground that the same were barred
under the Limitation Act, 1963. In addition, NHAI also raised counter
claims of ₹25.32 crores towards liquidated damages for delay in
execution of the works and sought a set off of the said amount. It also
raised a counter-claim for interest: pendente lite interest calculated on
the awarded amount at the rate of 24% per annum and future interest
calculated on the awarded amount at the rate of 18% per annum.
Signature Not Verified
Digitally Signed
Signing Date:22.03.2022
Reasons and Conclusion
5. Mr Bishnoi, learned counsel appearing for NHAI, confined the
challenge to the impugned award to the extent that it rejects NHAI's
contention that the claims were barred by limitation. He submitted that
since the Majority Arbitrators had not concurred on awarding interest
from the date of IPC no. 66 till 30.08.2017, there was no award for the
same and NHAI was not required to challenge the award of interest.
6. Since NHAI does not press its challenge to award of interest, this
Court is refraining from making any objection in regard to award of
interest. The only question that is required to be examined by this Court
is whether the impugned award is vitiated by patent illegality as the
Arbitral Tribunal (by majority) has accepted that the respondent's claim
was within the period of limitation.
7. Mr Bishnoi earnestly contended that the cause of action for
claiming the amount of ₹4,95,02,980/- (the payment as certified by the
Engineer under IPC no.66) had arisen when the work was completed.
He submitted that since the works were completed way back on
26.03.2008 - the date on which the TOC was issued by the Engineer -
the period of limitation had expired on 25.03.2011. He submitted that if
the date of the DLC is considered as the date of cause of action, the
period of limitation would expire on 10.01.2014 (that is, three years
from the date of DLC dated 11.01.2011). He submitted that in any
event, the amount claimed by the respondent was certified by the
Engineer on 10.01.2012 and therefore, at the latest, the period of
limitation expired on 09.01.2015.
Signature Not Verified
Digitally Signed
Signing Date:22.03.2022
8. The Arbitral Tribunal had considered the aforesaid issue and the
learned Arbitrator (Shri A.B. Desai) had rejected the said contention.
The learned Arbitrator had found that NHAI had not disputed the
amounts certified by the Engineer under IPC no. 66 and therefore, there
was no reason for the respondent to immediately invoke the Disputes
Resolution Mechanism. The learned Arbitrator also noted that in terms
of Clause 60.8 of the COPA, NHAI was obliged to make the payments
under any Interim Payment Certificate within a period of thirty days of
the monthly statement being submitted to the Engineer for certification.
In the event of failure to make the payment within the stipulated period,
NHAI was liable to pay interest on the amount certified under the
Interim Payment Certificate from the date on which such payments are
due.
9. The Arbitral Tribunal held that the cause of action for the dispute
did not arise immediately on completion of the works on 26.03.2008, as
on that date no dispute had arisen. The Arbitral Tribunal noted that the
Contract stipulated a mechanism for resolution of the disputes and in
terms of Clause 67.1 of COPA, any dispute in the first instance is
required to be referred to the DAB. Clearly, no such dispute had arisen
on the date of completion of the works or on the date of the TOC. In
terms of Clause 60.11 of the COPA, the Draft Final Statement was
required to be submitted within a period of fifty-six days after issuance
of the DLC.
10. The dispute in the present case had arisen on account of non-
payment of certain payments included in the Draft Final Statement as
Signature Not Verified
Digitally Signed
Signing Date:22.03.2022
certified by the Engineer. Thus, the question of seeking a reference of
any dispute prior to that date, did not arise.
11. Clearly, there is no infirmity with this reasoning of the Arbitral
Tribunal. The contention that the respondent was required to make a
claim within a period of three years from the date of completion of the
works on 26.03.2008 or the DLC dated 11.01.2011, is unmerited
considering that IPC no. 66 was issued by the Engineer on 10.01.2012.
12. The dispute arises in respect of non-payment of the amount as
certified by the Engineer on 10.01.2012. There is no dispute that the
letter dated 10.01.2012 issued by the Engineer certifying some of the
amounts claimed under the Draft Final Statement submitted by the
respondent constituted an Interim Payment Certificate (IPC no. 66). The
Final Statement could not be prepared in view of the disputes regarding
the claims included in the Draft Final Statement, which were not
certified by the Engineer. It is important to note that the Final Statement
had not been prepared till the filing of the Statement of Claims by the
respondent.
13. Since the dispute relates to non-payment of the amounts certified
under the IPC, the period of limitation could not commence prior to
10.01.2012.
14. The Arbitral Tribunal had noted that in terms of the Contract, it
was not open for NHAI to completely disregard the Interim Payment
Certificate. NHAI was either required to pay the same or dispute the
same. In the present case, the Arbitral Tribunal found that NHAI had
Signature Not Verified
Digitally Signed
Signing Date:22.03.2022
not disputed IPC no.66. On the contrary, the Project Director had, in
fact, acknowledged that the payment was due. There were two letters
issued by the Project Director - letters dated 30.05.2012 and 14.08.2012
- copies of which the respondent claims, were received by email. In its
letter dated 30.05.2012, the Project Director had, inter alia, stated as
under: -
"Some Non-BOQ variation orders have to be got
approved by the Competent Authority. The Final
Bill of the Contractor has been checked and final
net payment to the Contractor works out to
₹4,95,02,980/-, but the payment is kept pending
for want of approval for the above."
15. The Arbitral Tribunal (by majority) had construed the said letter
as a clear acknowledgement. The learned Arbitrator had noted that
while the liability to pay ₹4,95,02,980/- was not disputed, the same had
been withheld for want of approval regarding non-BOQ Variation
Orders. Since, it was acknowledged that the payments were due but
were awaiting approvals, it was clearly not necessary for the
respondents to initiate any immediate action. The Arbitral Tribunal was
of the view that the respondent could not be expected to immediately
invoke the Disputes Resolution Mechanism and that the period of
limitation stood extended. This Court finds no infirmity with the said
view.
16. The question as to interpretation of the said communication
clearly falls within the jurisdiction of the Arbitral Tribunal and this
Court finds no infirmity with the manner in which the said
communications have been interpreted. Since, the certified payments
Signature Not Verified
Digitally Signed
Signing Date:22.03.2022
were not made despite sending various letters (that are, letters dated
29.01.2013, 21.03.2013 and 30.05.2013), the respondent invoked the
Disputes Resolution Mechanism and by a letter dated 21.04.2015,
sought reference of the disputes to the DAB. This was in conformity
with the Disputes Resolution Mechanism, as agreed between the parties
in terms of Clause 67 of the COPA.
17. It is important to note that the DAB accepted the respondent's
claim for the amount certified under IPC no. 66 (₹4,95,02,980/-) in its
decision dated 03.08.2015. At that stage, NHAI issued a 'Notice of
Dissatisfaction' dated 20.08.2015 and expressed its intention to refer
the disputes to arbitration in terms of Clause 67.4 of the COPA.
18. However, NHAI did not take steps to refer the disputes to
arbitration. In the circumstances, the respondent invoked the Arbitration
Clause. In the given facts, the decision of the Arbitral Tribunal holding
that the respondent's claim was not barred by limitation cannot, by any
stretch, be stated to be patently illegal or one that vitiates the impugned
award under Section 34(2A) of the A&C Act.
19. The petition is unmerited and is, accordingly, dismissed. The
pending applications are also disposed of.
VIBHU BAKHRU, J
MARCH 22, 2022
pkv/v
Signature Not Verified
Digitally Signed
Signing Date:22.03.2022
