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2009 Supreme(Del) 321
IN THE HIGH COURT OF DELHI
Honble Judge: Manmohan Singh, J.
Kunj Bihari Construction Co. Pvt. Ltd. – Appellants
Vs.
Nidhi Builders Pvt. Ltd. and Ors. – Respondent
OMP No. 699/2008 and CCP No. 14/2009
Decided On: 20.03.2009
For Appellant/Petitioner/Plaintiff: S.D. Singh, Adv., Rahul K. Singh and Bharti Tyagi, Advs.
For Respondents/Defendant:Rajeev Mehra and Arvind Sharma, Adv. for Respondents No. 1 and 2 and Sanjeev Bhandari, Adv. for Respondent No. 3
The main legal point established in the judgment is that disputes arising from a construction contract should be adjudicated by an arbitrator as per the arbitration clause, and interim relief in the form of status quo or injunction should not unduly delay the project's completion.
Headnote:
Arbitration and Conciliation Act - Construction Contract - Section 9
Fact of the Case:
The petitioner filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996, seeking interim orders to maintain status quo with regard to a construction project. The controversy arose from a contract for the construction of Married Accommodation Project at Kabul Lines, New Delhi, where the petitioner was assigned the remaining work by the respondents.
Finding of the Court:
The court found that the dispute regarding the termination of the contract and the entitlement to payment for the work done should be adjudicated by an arbitrator as per the arbitration clause in the agreement. The court vacated the status quo order and directed the respondents to deposit a security amount, allowing them to execute the remaining work while maintaining the petitioner's rights to raise claims before the arbitrator.
Issues: The main issue was whether the termination of the contract was justified and whether the petitioner was entitled to payment for the work done. The court also considered the concealment of facts by the petitioner and the appointment of an arbitrator.
Ratio Decidendi: The court held that the dispute regarding contract termination and payment entitlement should be decided by an arbitrator as per the arbitration clause. It emphasized that the interim relief in the form of status quo or injunction could not be continued as it would further delay the project's completion, and the disputes should be adjudicated by the arbitrator.
Final Decision: The court directed the respondents to deposit a security amount, allowing them to execute the remaining work while maintaining the petitioner's rights to raise claims before the arbitrator. The main petition and the contempt petition were disposed of with these directions.
Manmohan Singh, J.
1. This petition under Section 9 of the Arbitration and Conciliation Act, 1996 (for short the Act) has been filed by the petitioner before this Court which was listed on 26th December, 2008 and on the said date the following interim orders were passed:
In the meanwhile the respondents shall maintain status quo with regard to the material and the work at the construction site of Provision of Married Accommodation Project for ORS (196 DUS) JCO (53 DUS) including external allied services at Kabul Lines, New Delhi.
2. The controversy in the matter arises out of a contract whereby the respondents No. 1 and 2 were awarded the contract by Respondent No. 3 Director General, Marketing Accounts Project (for short DG, MAP) vide work order dated 28th August, 2005 with respect to construction of Married Accommodation Project including external allied services of Kabul Lines, Delhi Cantt, New Delhi commonly known as Kabul Line Project. The value of the contract was Rs. 23,14,68,336/-. The project was to be completed by Respondents No. 1 and 2 till 15th June, 2007 who were unable to execute the works. Admittedly, the respondents had completed and executed the work to the value of Rs. 8,74,56,426/- but due to the ill health of respondent No. 2, the work got adversely affected and on the request of respondent No. 3 to make alternate arrangements, the Respondents No. 1 and 2 decided to give the remaining work to the petitioner herein pertaining to Kabul Line Project.
3. The work order in this respect dated 28th November, 2007 was issued to the petitioner for balance/left out work. The value of the work assigned to the petitioner by respondent Nos. 1 and 2 was of the value of Rs. 15 crores plus additional value of Rs. 1.50 crores. Hence, the net value of the contract assigned to the petitioner was approximately Rs. 16.50 crores. The mode of payment of the contract between the petitioner and respondent Nos. 1 and 2 was back to back in nature. Clause F(b) of the contract contemplates the mode of payment of Rs. 1.50 crores in the following manner:
i) Rs. 10,00,000/- as advance paid to the petitioner.
ii) Rs. 40,00,000/- payable on back to back basis ("Received Rs. 24,35,000/- by way of adjustment towards unbilled works done by respondent Nos. 1 and 2). The petitioner further received a sum of Rs. 6,92,162/- and Rs. 10 lakhs by way of cheques.
iii) Rs. 36,27,162/- was to be adjusted towards materials lying at the site as on 28th November, 2007 (adjusted).
iv) Rs. 43,72,838/- on back to back basis towards S.D. deducted from the bills of Respondent Nos. No. 1 and 2.
v) Rs. 20,00,000/- was payable on completion of the Project.
.4. A formal agreement dated 25th January, 2008 was entered into between the parties. Most of the clauses in the formal agreement were same except the arbitration clause No. 9 which provides as under :
.In case of dispute between the First and Second Party in connection with the interpretation and application of any term, condition or otherwise, first the matter shall be resolved by mutual consultation and discussion and in case it is not possible then through arbitration to be appointed by the First Party from the panel of CPWD arbitrators.
5. The value of the material lying on the site at the time of handing over the site to the petitioner was accessed at Rs. 35 lakhs. At the time of the agreement, the unbilled amount of work was to the tune of Rs. 24,35,000/-. The said amount was to be adjusted later on. Most of the material left at the site and unbilled amount formed part of the contract and agreement.
6. As per agreement, it was the petitioners obligation to seek extension of time from respondent No. 3. However, it is not in dispute that respondent Nos. 1 and 2 had been obtaining extension of time from respondent No. 3.
7. Admittedly the 15th running bill of the Project was raised by respondent Nos. 1 and 2 prior to 28th November, 2007 i.e. on 28th May, 2007. The cumulative value of the 15th runni
