The court ruled that unreasonable delays by one party in fulfilling contractual obligations can lead to frustration of contract, justifying the other party's claims for relief.

JUDGMENT :

B.V. NAGARATHNA, J.

1. Two appeals, namely, Civil Appeal No. 6162 of 2016 and Civil Appeal No. 10490 of 2017, are disposed of by this common judgment.

Civil Appeal No. 6162 of 2016

2. The appellant in Civil Appeal No. 6162 of 2016, M/s Parsvnath Film City Limited (hereinafter “appellant”) has approached this Court against the impugned judgment of the High Court of Punjab and Haryana at Chandigarh in FAO No. 5816 of 2015 (O&M) partially allowing the appeal filed by the respondents (i) Chandigarh Administration and (ii) the Secretary, Information Technology, Chandigarh Administration under Section 37 of the Arbitration and Conciliation Act, 1996 (for short “the Act”). The High Court, vide the impugned judgment, set aside the award of the Arbitral Tribunal dated 10.03.2012 and the order of the Additional District Judge, Chandigarh in Arbitration Case No. 530 of 2013 dated 08.04.2015, thereby sustaining the respondent’s action in forfeiting 25% of the bid amount, i.e. Rs. 47.75 crores.

3. The respondents have filed Civil Appeal No. 10490 of 2017 against the same impugned judgment on the ground that it did not allow the other claims raised by them, such as (i) interest on delayed payment of Annual Ground Rent; (ii) forfeiture of Rs. Five crores paid by the appellant towards the bid security; (iii) recovery of performance security shortfall of Rs. Five crores along with interest and (iv) recovery of other miscellaneous expenses.

4. Respondent Nos. 3-5 in both these appeals are the members of the Arbitral Tribunal who have been added as only proforma respondents.

5. The facts of the case relate to the respondents deciding to establish a Multimedia-cum-Film City at Chandigarh. To that end, it published an advertisement dated 29.03.2006 inviting “Expression of Interest for Multimedia-cum-Film City” as an integrated project in Sarangpur, Chandigarh on a leasehold land admeasuring thirty acres. The project involved setting up of state-of-the-art facilities for:

(i) a multimedia-cum-film centre.

(ii) a multimedia park.

(iii) a multimedia information-cum-entertainment centre.

(iv) a multimedia college.

The expression of interest complete in all respects was to be submitted on or before 28.04.2006. Out of the fourteen companies which submitted the expression of interest, six were selected, including the appellant herein. Consequent upon technical presentations and submission of technical bids, four companies were shortlisted, including the appellant herein. A copy of the Request for Proposal and the Draft Development Agreement was sent to the appellant by the respondent on 24.11.2006.

6. On receipt of the same, a pre-bid meeting was held on 08.12.2006 and various clarifications were sought on the proposal, which were furnished by the respondents vide letter dated 15.12.2006. Thereafter, the shortlisted companies, including the appellant, submitted their respective bids, and since the offer of the appellant was the highest, the respondents issued letter of acceptance in favour of the appellant on 18.01.2007. In that letter, the appellant was asked to take steps for execution of the Development Agreement within a period of twenty days from the letter and to also arrange the upfront amount.

7. By letter dated 21.02.2007, appellant stated that they would sign the Development Agreement, but requested (i) for demarcation of the project site, as without the same, they could not proceed with the work and (ii) preparation of the layout plan to be annexed with the Development Agreement. Thereafter, on 01.03.2007, appellant furnished 25% of the bid amount, i.e. Rs. 47.75 crore, by way of Demand Draft.

8. On 02.03.2007, the appellant expressed its readiness to sign the Development Agreement. However, as the final demarcation was yet not settled, it requested that:

(i) The date of start of the development period be the date on which the final demarcation plan is issued to them.

(ii) The payment of next instalment due which was 75% of the bid price to be pai