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2012 Supreme(Del) 2615
DELHI HIGH COURT
S.Muralidhar, J.
Indian Oil Corporation Ltd. - Appellant
Versus
Era Construction (India) Ltd. - Resopndent
O.M.P. No. 104 of 2006
Decided On : 27-04-2012
For the Respondent:Mr. Manoj Singh, Advocate.
The cause of action for a claim may not commence from the date of an event, but from the date when the necessary information to support the claim becomes available. Additionally, for a claim to be arbitrable, it must comply with the specific procedures outlined in the contract.
Headnote:
Arbitration - Indian Oil Corporation Limited - Arbitration and Conciliation Act, 1996 - 34
Fact of the Case:
Indian Oil Corporation Limited (IOCL) challenged an Award dated 15th January 2006 of the sole Arbitrator in disputes with Era Constructions (India) Limited (ECIL) arising from a civil and structural works contract. IOCL claimed that ECIL failed to complete the work in accordance with the contract and offloaded the remaining work to other contractors. IOCL made claims for extra expenditure, liquidated damages, supervision charges, and costs.
Finding of the Court:
The court found that IOCL's claims were not time-barred as the cause of action for the claims against ECIL did not commence from the date of offloading the work, but from the date the subcontractors raised final bills. The court set aside the Arbitrator's decision and remitted IOCL's claims for a fresh decision. The court also held that ECIL's counter claims were not arbitrable and set aside the Award allowing them.
Issues: The issues included whether IOCL's claims were time-barred, whether ECIL's counter claims were arbitrable, and the amount payable by IOCL to ECIL.
Ratio Decidendi: The court held that the cause of action for IOCL's claims against ECIL commenced from the date the subcontractors raised final bills, not from the date of offloading the work. The court also found that ECIL's counter claims were not arbitrable as they were not notified claims included in the final bill.
Final Decision: The court set aside the Arbitrator's decision, remitted IOCL's claims for a fresh decision, and held that ECIL's counter claims were not arbitrable. The court upheld the Award ordering IOCL to pay the admitted amount to ECIL with interest.
S. Mralidhar, J.
1. Indian Oil Corporation Limited (‘IOCL’) in this petition under Section 34 of the Arbitration and Conciliation Act, 1996 (‘Act’) has challenged an Award dated 15th January 2006 of the learned sole Arbitrator in the disputes between it and the Respondent, Era Constructions (India) Limited (‘ECIL’) arising out of the award of civil and structural works for IOCL’s Catalytic Reformer Unit (‘CRU’), Utilities and Off-sites at Mathura Refinery, to ECIL by IOCL by a telegram of Acceptance dated 4th January 1995 followed by a Letter of Acceptance (‘LOA’) dated 22nd February 1995. By the impugned Award, the learned Arbitrator rejected IOCL’s claims as being time barred and allowed ECL’s counter claims in part.
Background facts
2. In terms of the LOA the work was to be completed within 12 months to be reckoned from the date of issue of the LOA. A formal contract was entered into between the parties on 3rd May 1995. According to IOCL, ECIL failed to carry out the work in accordance with the contract despite repeated warnings. By December 1995 the Respondent had completed the work of a value of approximately Rs. 91 lakhs against the job of the value of Rs. 3.25 crores on the fronts that were made available to it. It was apparent to IOCL, therefore, that ECIL would be unable to complete the work within the stipulated time. According to IOCL, in order to save time it decided to offload the balance part of the contractual scope of work and award it to another contractor in exercise of the rights vested in IOCL under Clause 4.6.4.0 of the General Clauses of Contract (‘GCC’). IOCL issued a show cause notice dated 5th December 1995 to ECIL as to why the remaining scope of the work should not be offloaded to the another contractor at the risk and cost of ECIL in terms of Clause 4.6.4.0 GCC.
3. Thereafter, the work was offloaded to two agencies. The work of a value of Rs. 5,99,32,605 was awarded to RSB Projects Ltd. (‘RPL’) and the work of a value of Rs. 7,96,250 was awarded to M/s. Ram Sudhisht Singh & Sons (‘M/s. RSSS’). IOCL states that both contractors were selected through a re-tendering process which was initiated in December 1995 itself. In terms of the GCC both the contractors would be deemed to be the sub-contractors of ECIL and appointed at the risk and cost of ECIL.
4. IOCL states that RPL completed the work awarded to it on 15th November 1997 whereas M/s. RSSS completed the work awarded to it on 21st September 1997. The final bill in respect of the work performed by RPL was jointly signed in June 1999 for a sum of Rs. 5,73,31,218.71. According to IOCL, for this part of the work, it incurred an extra cost of approximately Rs. 1,92,67,113.44. As regards M/s. RSSS, the final bill was signed on 27th July 1999 for a sum of Rs. 5,37,377.50. IOCL claims that it incurred an extra cost of Rs. 1,97,866.75.
5. IOCL, therefore, under Claim No. 1 before the Sole Arbitrator, demanded that ECIL should pay it Rs. 1,94,64,980 being the total extra expenditure incurred as a result of offloading of the contract in favour of the other subcontractors to save time and costs. The case of IOCL is that the claim to the above extent could be made by it only after the final bills in respect of the work undertaken by RPL and M/s. RSSS were reconciled upon completion of the respective works performed by them and, therefore, the claim is not barred by limitation.
6. IOCL’s second claim was for Liquidated Damages (‘LD’) on account of delay in ECIL completing the work. According to IOCL, ECIL completed the work remaining with it, upon offloading in the manner explained hereinbefore, after a delay of nine months. IOCL computed the LD as Rs. 90,50,159. Again it was contended by IOCL that till such time RPL and M/s. RSSS completed their respective works on 15th November 1997 and 21st September 1997, the total value of the contract could not be computed and correspondingly the percentage thereof i.e. minimum of 1% and maximum of 10% being the permis
