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IN THE HIGH COURT OF DELHI AT NEW DELHI
VIPIN SANGHI, J.
Tiong Woon Project & Contracting Pvt. Ltd. - Plaintiff
Versus
Naftogaz India Pvt. Ltd. & Ors. - Defendants
CS(OS) 2850/2011
Decided on : 04.02.2016
Arbitration - Work Order Contract - Arbitration & Conciliation Act 1996 - Section 8 - [Arbitration] - [Work Order Contract] - [Section 8 of the Arbitration & Conciliation Act, 1996] - The court discussed the work order contract dated 14.11.2008, the arbitration clause contained in the contract, and the disputes between the parties. The court highlighted the correspondence exchanged between the parties, the issuance of a comfort letter, and the lack of surviving arbitrable disputes between the plaintiff and defendant No.1. The court dismissed the application under Section 8 of the Arbitration & Conciliation Act, 1996, as it found no outstanding arbitrable dispute between the parties.
Fact of the Case:
The plaintiff entered into a work order contract with defendant No.1, containing an arbitration clause. Disputes arose regarding payments for the work done by the plaintiff. Defendant No.1 sought reference of disputes to arbitration under Section 8 of the Arbitration & Conciliation Act, 1996. The plaintiff opposed the application, claiming no surviving arbitrable disputes. The court heard the counsels and found no outstanding arbitrable dispute between the parties.
Finding of the Court:
The court found that no outstanding arbitrable dispute existed between the plaintiff and defendant No.1. The court dismissed the application under Section 8 of the Arbitration & Conciliation Act, 1996, as it found no surviving arbitrable dispute between the parties. The court also decreed the suit of the plaintiff for the principal amount of Rs.3.22 Crores along with interest.
Issues: The main issue was whether there were any surviving arbitrable disputes between the plaintiff and defendant No.1, and whether the application under Section 8 of the Arbitration & Conciliation Act, 1996 should be dismissed.
Ratio Decidendi: The court's decision was based on the lack of surviving arbitrable disputes between the parties, as evidenced by the correspondence exchanged, the issuance of a comfort letter, and the lack of outstanding payments. The court also considered the frivolous and sham nature of the defenses raised by the defendants.
Final Decision: The court dismissed the application under Section 8 of the Arbitration & Conciliation Act, 1996, and decreed the suit of the plaintiff for the principal amount of Rs.3.22 Crores along with interest.
Vipin Sanghi, J.
1. Since Mr. Mayank Goel has appeared for Official Liquidator as defendant No.1 company is under liquidation, Mr. Siddharth Khattar is discharged in the matter.
I.A. No. 10958/2012
2. This application has been moved by defendant No.1 under Section 8 of the Arbitration & Conciliation Act, 1996 to seek reference of disputes between the plaintiff and defendant No.1 to arbitration on the premise that the work order contract dated 14.11.2008 entered into between the plaintiff and defendant No.1 contains an arbitration clause. The defendant No.1 is the principal contractor in respect the contract awarded by defendant No.2. A part of the work was sub-contracted to the plaintiff, namely for provision & erection of cranes of coke drums (2 Nos.) and fractionators column (1 No.). The work order issued by defendant No.1 in favour of the plaintiff dated 14.11.2008, no doubt, contains an arbitration clause in clause 24 of the work order, which reads as follows:-
“Unless otherwise specified in all cases of dispute that cannot be settled by mutual negotiations, the matter shall be referred for arbitration in accordance with the Arbitration & Conciliation Act 1996 of India with seat at New Delhi. Work under the contract shall be continued by the supplier during arbitration proceedings unless otherwise directed in writing by the Purchaser. All disputes shall be subject to the sole jurisdiction of Delhi Courts alone.”
3. The application is opposed by the plaintiff, who submits that there are no surviving arbitrable disputes between the plaintiff and defendant No.1 in view of the correspondence exchanged between the parties, and thus, the present application is liable to be dismissed. I have, accordingly, heard learned counsels on this application.
4. Under the work order, the tentative period for which the cranes of the plaintiff were required for completion of job work was stated to be from 15th April to 15th May of 2008. Clause 9 of the work order stipulated that - being a lump sum contract, over time charges of 7 days working is included in the cost for 4 weeks. It was agreed that if the job goes beyond 4 weeks plus 1 week, per day charges payable will be INR 18,26,925. It also provided that TDS will be deducted on every bill and service tax/ WCT, if any, would be extra, as applicable. Under clause 12, defendant No.1 agreed to pay INR 475 Lakhs as lump sum amount towards the scope of work as defined. The payments had to be released to the plaintiff as per the following schedule:
“Following will be the payment terms
5% advance along with the order against ABG for an equal amount.
15% on arrival of equipments at site.
20% on ready for erection.
60% on completion of the job and to be paid within 15 days.”
5. It is not in dispute that the plaintiff raised its bill towards 5% advance; 15% upon arrival of crane at site; 20% on crane being readied for erection and; 60% on completion of the job. The bill for 20% of the contract sum - on the crane being ready for erection was raised on 08.06.2009, and the bill for 60% of the contract sum - on completion of the job, was raised on 16.07.2009.
6. The plaintiff thereafter raised additional bills for variation i.e. for usage of the cranes even after the expiry of period of 4 weeks plus 1 week, in terms of clause 9 of the work order. The bills were raised by the plaintiff towards variations on 11.08.2009 (for INR 1,27,88,475/-), 12.08.2009 (for INR 3,44,23,050/-), 17.08.2009 (for INR 49,41,425/-) and 23.09.2009 (for INR 3,44,23,450/-). In the meantime, it appears that on 25.09.2009, defendant No.1 addressed a communication to defendant No.2, requesting defendant No.2 to issue a letter of comfort to the plaintiff “for the outstanding amount of Rs.6,36,13,136/-” which could be released to the plaintiff “on submission of progressive invoices to BORL certification of invoices by M/s NG”. Defendant No.1 requested defendant No.2 “to kindly issue the letter at the earliest to insure timely erection o
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