The main legal point established is the interpretation and application of contractual clauses, specifically Clause 29(1) and Clause 29(2), in determining the entitlement of the claimant for the release/payment of Retention Money and interest on delayed payment.

1. This petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the ‘Act’) has been filed by the petitioner New Delhi Municipal Council challenging the Arbitral Award dated 16th June, 2017 passed by the Sole Arbitrator. The petitioner confines challenge only to issue no. 11 and 15 decided by the Sole Arbitrator.

2. The disputes between the parties arise out of the work contract awarded by the petitioner in favor of the respondent for the upgradation and re-modeling of Palika Bazar, New Delhi vide Agreement No. 19/EE (Bm-II) 2009-10 dated 22nd December, 2009.

3. The tendered amount was Rs. 23,02,03,333/- (Twenty Three Crore Two Lakh Three Thousand Three Hundred and Thirty Three). The stipulated period for completion of work was ten months from the tenth day of issue of work award letter dated 12th November, 2009 and was accordingly to be completed by 28th September, 2010. The work was eventually completed on 23rd August, 2011. In the meantime, the respondent/claimant, claiming that the work had been completed raised its final bill for an amount of Rs. 27,86,85,775/- on 31st March, 2011.

4. Clause 9 of the agreement provides that where the tendered value of the work exceeds Rs. 15 lacs, as far as possible, payment of the final bill shall be made within a period of six months from the date of receipt of the bill by the Engineer in Chief. As an amount of Rs. 16,96,48,797/- had already been received by the respondent against the Running Account bills submitted by the respondent from time to time, the respondent claimed that it was entitled to the balance payment of Rs.10,90,36,978/- by September, 2011 whereas the balance payment was received by it only on 24th December, 2014.

5. Issue no. 11 framed by the Sole Arbitrator is as under:-

ISSUE N0.11

Whether the claimant are entitled for the release/payment of Retention Money amounting to Rs.38,75,971/- (Rupees Thirty Eight Lacs Seventy Five Thousand Nine Hundred Seventy One only) retained/withheld by the Respondent/Opposite party out of various RA Bills submitted by the Claimants?

6. The arbitrator has held the respondent to be entitled to receive its security money and has held that the same was being illegally and unauthorizedly invariably retained by the petitioner NDMC. The arbitrator has also allowed interest on the amount of Rs.38,75,971/- from 18th December, 2012 till realization at the rate of 12 percent per annum.

7. The learned counsel for the petitioner, relying upon clause 29 of the agreement, submits that the petitioner had a right to retain the security deposit. He further submits that on such security amount being retained, the respondent would have no claim for interest till the same is adjudicated by the arbitrator. He, therefore, relying upon the judgment of Supreme Court in Sayeed Ahmed & Company vs. State of UP (2009) 12 SCC 26 submits that award of interest in favor of the respondent is liable to be set aside, the same being contrary to the provisions of the agreement.

8. On the other hand, it is submitted by the counsel for the respondent that clause 29 of the agreement pre-supposes and is applicable only when the Engineer-in-Charge or the NDMC decides to withhold or exercise its lien to retain the security deposit for payment of any claim or claims arising out of or under the contract. Therefore, the retention of the amount has to be shown against a specific claim. Mere non-payment of the security deposit, without any justified cause would not attract the provisions of clause 29 and equally grant protection to the petitioner from payment of interest for the amount so illegally withheld. He submits that in the present case, there was no order of the petitioner deciding to withhold the security deposit against any claim made by it. He further submits that in the present case, the only dispute that was sought to be raised by the petitioner was with respect to Chiller No. 2 for which the petitioner had separately stopped