Delhi High Court
M/S Janta Associates And Co Ltd vs Indian Oil Foundation & Anr. on 6 October, 2022
IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 06.10.2022
+ ARB. P. 792/2020 & I.A. 1807/2021
M/S JANTA ASSOCIATES AND CO. LTD. ..... Petitioner
versus
INDIAN OIL FOUNDATION & ANR. ..... Respondents
Advocates who appeared in this case:
For the Petitioner : Mr. Vineet Bhagat, Mr. Mohit Gulati &
Mr. Tejas Singh, Advocates.
For the Respondents : Ms. Priya Puri & Mr. Rishabh Sharma,
Advocates.
CORAM
HON'BLE MR JUSTICE VIBHU BAKHRU
JUDGMENT
VIBHU BAKHRU, J
1. The petitioner (hereafter 'JACL') has filed the present petition
under Section 11 of the Arbitration and Conciliation Act, 1996
(hereafter 'the A&C Act') praying that a sole arbitrator be appointed in
accordance with Clause 9.0.1.1 of the General Conditions of Contract
(GCC).
Factual Matrix
2. Respondent no.1 (hereafter 'IOF') appointed respondent no.2
(hereafter 'EIL') as the Engineering Project Construction Management
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(EPCM) to complete the work of developing infrastructure facilities at
Khajekhalan Ghat, Patna Sahib, Patna (hereafter 'the Project').
Thereafter, EIL issued an Open Tender Notice dated 14.06.2018,
inviting e-bids for execution of the Project.
3. Pursuant to the aforesaid tender notice, JACL submitted its bid
for the contract to execute the Project. JACL's bid was the lowest (L1)
and was accepted in terms of the Letter of Acceptance (LoA) dated
13.09.2018. Thereafter, on 10.10.2018, the parties entered into an
agreement (hereafter 'the Contract'). The Project was to be completed
within a period of twelve months from the date of issuance of the LoA,
that is, on or before 13.09.2019.
4. The Project, inter alia, entailed construction of the staircase area,
which included the foundation of the staircase that was to be made
below the river water level. This required building a cofferdam to
prevent the water from entering the area where the construction work
was to be done.
5. JACL, inter alia, claims that the respondents provided them with
the structural designs and drawings for the construction of the
cofferdam. The design provided was of a sandbag design cofferdam that
was 0.5 meters above water level with no wall covering on the
downstream side of the cofferdam.
6. JACL claims that it followed the respondents' instructions and
design and made the cofferdam accordingly. However, the design was
not based on sound engineering principles and was not in conformity
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with the standard industrial practice of using sheet pile cofferdam for
alluvial river beds where discharge is unpredictable.
7. On 12.04.2019, due to heavy rainfall, there was heavy flow of
water leading to a rise in the water level of the river Ganga, which
resulted in the destruction of the cofferdam. Additionally, machines and
equipment in the surrounding area were damaged or washed away in
the river. JACL claims that it suffered losses due to this and the
respondents did not reimburse them for such losses.
8. Thereafter, to make the site ready for the Project again, there was
a need for dewatering of the site. JACL was granted permission for the
same. JACL claims that the respondents were aware of the fact that
dewatering and removal of debris were not covered under the insurance
policy, as they had approved the policy. JACL claims that
notwithstanding the same, the respondents refused to pay for the
dewatering and related works after the same were completed.
Resultantly, JACL had to bear the expenses.
9. Subsequently, a new cofferdam was required to be constructed.
JACL contends that the respondents denied its suggestions to make the
new cofferdam by sheet piling method or raise the height of the sandbag
cofferdam to at least one meter above water level. The only change
allowed was the addition of a wall on the downstream side of the
cofferdam. On 04.05.2019, due to an increase in the water level, the
cofferdam was again destroyed.
10. On 21.08.2019, JACL raised the Fifth Running Account (RA)
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Bill to the respondents for the work completed by them. On the
instruction of the respondents, this bill was revised and sent to the
respondents by an e-mail dated 27.08.2019. JACL claims that the
respondents refused payment of the bill and denied the existence of any
such claim due to JACL.
11. Thereafter, the respondents, through letters/notices dated
06.01.2020, 13.01.2020, 28.01.2020, threatened to terminate the
Contract due to inaction and delay in completion of the Project on the
part of JACL.
12. On 07.02.2020, a meeting was held between the parties and
JACL claims that it reassured the respondents that it would complete
the Project and requested for the payment of the outstanding dues.
13. Thereafter, on 24.02.2020, the respondents issued a show cause
notice to JACL, alleging that it was responsible for the delay in
completing the Project and calling upon JACL to show cause why the
Contract should not be terminated.
14. JACL, by way of a petition under Section 9 of the A&C Act
[being O.M.P. (I) (Comm) No. 74 of 2020], approached this Court
seeking interim relief. By an order dated 16.03.2020, this Court ordered
the parties to maintain status quo on the site.
15. JACL responded to the show cause notice through an e-mail
dated 21.03.2020. It claimed that it was not responsible for the delay
and demanded that the initiation of termination proceedings be
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withdrawn. Further, JACL offered to complete the Project subject to the
condition that the amount due to them be paid by the respondents.
16. The disputes could not be resolved between the parties. On
07.11.2020, JACL issued a notice invoking arbitration in terms of
Clause 9.0.1.1 of the GCC and nominated its arbitrator. JACL further
requested the respondents to nominate an arbitrator and thereafter, the
two nominated arbitrators would appoint the third arbitrator to
constitute an arbitral tribunal.
17. EIL and IOF replied to the aforesaid notice through letters dated
01.12.2020 and 06.12.2020 respectively. It rejected the name proposed
by JACL and did not nominate a panel of persons to be selected as the
sole arbitrator in terms of Clause 9.0.1.1 of the GCC. Further, the
respondents demanded that JACL withdraw the notice invoking
arbitration.
Reasons and Conclusion
18. It is contended on behalf of IOF that the arbitration notice issued
by the petitioner is pre-mature as it has not submitted the Final Bill as
yet. IOF relies on Clause 9.0.1.0 of the GCC and, on the strength of the
said clause, submits that only disputes arising out of the Notified
Claims, which are noted in the Final Bill, can be referred to arbitration.
19. The learned counsel appearing for IOF also referred to the recent
decision of the Supreme Court in Indian Oil Corporation Limited v.
NCC Limited: 2022 SCC OnLine 896, in support of his aforesaid
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contention.
20. Mr. Bhagat, learned counsel appearing for JACL, contended that
JACL had already issued the Final Bill dated 21.08.2019. At the
material time, it was referred to as the Fifth RA Bill, however, the said
bill ought to be treated as the Final Bill as no further work was carried
out thereafter. He also submitted that JACL had, by a letter dated
25.09.2021, notified its claim in relation to the Project.
21. It is relevant to note that subsequent to the filing of the present
petition, IOF had terminated the Contract by a letter dated 24.08.2021.
The Chief Executive Officer of IOF had, in terms of the said letter, also
called upon JACL to join in a final survey and conduct joint
measurement of the work performed under the Contract up to the date
of termination, for the purposes of determining the final amounts due to
it. JACL was called upon to depute a representative to be present at site
on 02.09.2021 for the aforesaid purpose.
22. In response to the aforesaid letter of termination, JACL sent a
letter dated 25.09.2021, whereby JACL refuted the allegations made
against it and further set out the summary of its claims aggregating to
an amount of ₹1,89,95,737/-.
23. There is merit in the contention advanced on behalf of IOF that
the Final Bill is yet to be prepared. JACL had submitted the Fifth RA
Bill. Subsequently, it claimed that the same ought to be treated as the
Final Bill. However, IOF has not processed the same and the Engineer
is also required to examine the same.
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24. At this stage, it is also relevant to refer to Clause 9.0.1.0 of GCC,
which reads as under:
"9.0.1.0 Subject to the provisions of Clauses
6.7.1.0, 6.7.2.0 and 9.0.2.0 hereof, any dispute
arising out of a Notified Claim of the
CONTRACTOR included in the Final Bill of the
CONTRACTOR in accordance with the provisions
of Clause 6.6.3.0 hereof, and any dispute arising out
of any claim(s) of the OWNER against the
CONTRACTOR shall be referred to the arbitration
of a Sole Arbitrator selected in accordance with the
provisions of Clause 9.0.1.1 hereof. It is specifically
agreed that the OWNER may prefer its claim(s)
against the CONTRACTOR as counter-claim(s) if a
Notified Claim of the CONTRACTOR has been
referred to arbitration.
The CONTRACTOR shall not, however, be
entitled to raise as a set-off defence or counterclaim
any claim which is not a Notified Claim included in
the CONTRACTOR's Final Bill in accordance with
the provisions of Clause 6.6.3.0 hereof."
25. The opening sentence of Clause 9.0.1.0 of the GCC indicates that
disputes arising out of a Notified Claim as included in the Final Bill are
required to be referred to an arbitral tribunal. In the present case, the
petitioner has notified its claims by the letter dated 25.09.2021. The
same are required to be considered while making the Final Bill.
26. There is merit in IOF's contention that since the Final Bill has
not been finalised, the question whether the claims made by the
petitioner are Notified Claims has not been determined as yet.
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27. It is also material to note that the Supreme Court in Indian Oil
Corporation Limited v. NCC Limited (supra) had also observed that
certain matters as specified in Clause 9.0.2.0 of the GCC are specifically
excluded from the scope of arbitration. This includes the dispute
whether a claim is a Notified Claim.
28. In view of the above, the petitioner's request to refer the disputes
to arbitration cannot be acceded to at this stage. IOF is bound down to
the statement made by the learned counsel on its behalf that the General
Manager or the concerned authority shall consider the question
including the petitioner's claim as Notified Claims, in accordance with
the Contract between the parties, within a period of two weeks. It is so
directed.
29. The petitioner is at liberty to invoke arbitration in respect of such
claims that are included as Notified Claims in the Final Bill in
accordance with the Contract between the parties.
30. It is also clarified that the petitioner is entitled to avail its
remedies in respect of claims that are not included as Notified Claims.
31. The petition is disposed of in the aforesaid terms. The pending
application is also disposed of.
VIBHU BAKHRU, J
OCTOBER 06, 2022
RK
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