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2018 Supreme(Del) 738
IN THE HIGH COURT OF DELHI AT NEW DELHI
YOGESH KHANNA, J.
INDIAN OIL CORPORATION LTD - Petitioner
Versus
SPS ENGINEERING LTD - Respondent
O.M.P. (COMM) 21 of 2017
Decided On : 14-03-2018
For the Petitioner:Mr. V.N.Kaura, Ms. Mona Aneja and Mr. Abhinav Tandon, Advocates.
The main legal point established in the judgment is the applicability of the Limitation Act to the claims for damages and the entitlement of the owner to recover costs from the contractor.
Headnote:
Arbitration and Conciliation Act - Indian Oil Corporation Ltd. vs. SPS Engineering Ltd. - 7.0.9.0, 7.1.0.0, 7.2.0.0 - The court discussed the termination of the contract, the entitlement of the owner to recover costs from the contractor, and the applicability of the Limitation Act to the claims for damages.
Fact of the Case:
The case involved objections under Section 34 of the Arbitration and Conciliation Act, 1996 against an award related to a contract between Indian Oil Corporation Ltd. (IOCL) and SPS Engineering Ltd. (SPSEL) for infrastructure works.
Finding of the Court:
The court analyzed the termination of the contract, the entitlement of IOCL to recover costs from SPSEL, and the application of the Limitation Act to the claims for damages. The court set aside the award and referred the matter to a new arbitrator to determine the claim of IOCL regarding the final bill submitted by the substitute contractor.
Issues: The issues included the termination of the contract, entitlement to recover costs, and the applicability of the Limitation Act to the claims for damages.
Ratio Decidendi: The court held that the claims for damages were not time-barred and referred the matter to a new arbitrator to determine the claim of IOCL regarding the final bill submitted by the substitute contractor.
Final Decision: The petition was allowed, and the matter was referred to a new arbitrator to determine the claim of IOCL regarding the final bill submitted by the substitute contractor.
YOGESH KHANNA, J.
1. These are objections under Section 34 of the Arbitration and Conciliation Act, 1996 against an award dated 17.09.2012 passed by Mr.P.K. Bahri (Retd.) the learned sole arbitrator in the matter between Indian Oil Corporation Ltd. vs. SPS Engineering Ltd.
2. The objector/petitioner Indian Oil Corporation Ltd. (hereinafter referred as "IOCL") is a Government of India Undertaking, incorporated under the Indian Companies Act, 1956, having its registered office at G-9, Ali Yavar Jung Marg, Bandra (East), Mumbai - 400 051 and its refineries headquarter at Core-2, Scope Complex, 7, Institutional Road, Lodhi Road, New Delhi -110003.
3. IOCL awarded to the respondent, SPS Engineering Ltd. (hereinafter referred as "SPSEL"), the contract for infrastructure works of supply and installation of construction water system and drinking water system for Paradip refinery project at Paradip (Orissa) under tender No.4635/T/124/99-2K/104/04 by issuing its fax of acceptance No. PJ/PDRP/PMC/CL/-FOA-06 dated 17.10.2000 ("FOA") followed by a detailed letter of acceptance No. PJ/PDRP /PMC/CL/LOA/06 dated 30th November 2000, ("LOA") and a formal contract between IOCL and SPSEL was executed on 18.01.2001;
4. The resident construction manager, Engineers India Ltd. (RCM, EIL) was appointed as the engineer-in-charge for the works under the contract. EIL was the consultant appointed by IOCL for the project. The total nominal value of the contract was Rs.15,89,17,473/ - based on the quantities and unit rates specified in the schedule of rates.
5. (A) The contract, interalia, comprised of the following documents (a) contract agreement dated 18.1.2001; (b) FOA dated 17.10.2000; (c) LOA dated 30.11.2000 along with its annexures; (d) tender documents along with all the annexures; and (e) further amendments thereto. (B) the tender documents referred to above included the following 2 volumes: volume No.1 (Techno-Commercial) (a) notice inviting tender (b) general instructions to tenderers (c) general conditions of contract (GCC) (d) special conditions of contract (SCC) (e) specifications, drawings and formats volume II (Priced) schedule of rates.
6. SPSEL was to complete the work within 13 (thirteen) months to be reckoned from the date of issue of Fax of Acceptance. It is alleged from the inception of the contract, SPSEL showed a lack of interest in the timely completion of the works, and for the initial 11 (eleven) weeks undertook virtually no mobilization at site. Since inspite of repeated reminders from IOCL, SPSEL showed no signs of improvement in its otherwise poor performance resulting in a continuous decline in the progress of the work, such that SPSEL had achieved a meager total progress of 27.12% in the work as on 30th April 2002 (i.e. 51/2 months beyond the scheduled completion date fixed under the contract), the engineer-in-charge was left with no option but to recommend to IOCL the termination of the contract.
7. Therefore, after issuing the show cause-notice dated 27/07/2002 to SPSEL as to why the contract be not terminated for the reasons stated therein and after considering SPSEL's replies thereto, IOCL in exercise of its powers under clause 7.0.1.0 of the GCC read with associated clauses in Chapter 7 of the GCC, terminated the contract by its letter dated 29/10/2002. By the aforesaid communication, IOCL also called SPSEL to conduct joint measurements to determine the final amount, if any, due to SPSEL. In the said letter IOCL informed SPSEL, inter-alia, as follows: "This is to inform you that without prejudice to any other remedy available to the corporation under the contract, the corporation shall also be entitled, pursuant to clause-7.0.9.0 of the general conditions of contract to appoint another contractor at your risk and cost to complete to its entirely the work as contemplated in the scope of works and recover from you in addition to any other amount, charges, compensation or damages that the corporation may be entitled to
