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IN THE HIGH COURT OF DELHI AT NEW DELHI
NAVIN CHAWLA, J.
National Highways Authority Of India – Petitioner
Versus
DIC - NCC (JV) - Respondent
O.M.P. (COMM) 416 of 2017 & I.A. No. 13742 of 2017(Stay)
Decided On : 12-10-2018
ARBITRATION - PRICE ADJUSTMENT - WEEKLY/MONTHLY INDICES - DELAY IN RAISING DISPUTE - EXTRA COST OF STAGING - VARIATION - PROLONGATION COSTS - EMPLOYER'S RISK - ADDITIONAL COST DUE TO CESS - INTEREST ON DELAYED PAYMENTS - INTERPRETATION OF CONTRACT - FACTUAL FINDINGS - JUDICIAL REVIEW.
Fact of the Case:
The petitioner, a construction company, challenged the arbitral award passed in favor of the respondent, another construction company, for various claims arising out of a contract for the construction of a road project. The petitioner contended that the arbitral tribunal erred in its interpretation of the contract, particularly with respect to the use of weekly/monthly indices for price adjustment, the delay in raising the dispute regarding the change in methodology of price indices, the grant of extra cost for staging, the award of prolongation costs, the reimbursement of additional cost due to cess, and the grant of interest on delayed payments.
Finding of the Court:
The court upheld the arbitral award, finding that the arbitral tribunal had provided cogent reasons for its findings and that its interpretation of the contract was not perverse or unreasonable. The court held that the arbitral tribunal had duly considered the submissions of the parties and the relevant contractual provisions in arriving at its conclusions. The court also found that the arbitral tribunal had not committed any error in granting interest on delayed payments, as the contract provided for such interest.
Issues: 1. Interpretation of the contract, particularly with respect to the use of weekly/monthly indices for price adjustment, the delay in raising the dispute regarding the change in methodology of price indices, the grant of extra cost for staging, the award of prolongation costs, the reimbursement of additional cost due to cess, and the grant of interest on delayed payments. 2. Whether the arbitral tribunal erred in its interpretation of the contract. 3. Whether the arbitral tribunal committed any error in granting interest on delayed payments.
Ratio Decidendi: 1. The court held that the arbitral tribunal had provided cogent reasons for its findings and that its interpretation of the contract was not perverse or unreasonable. The court found that the arbitral tribunal had duly considered the submissions of the parties and the relevant contractual provisions in arriving at its conclusions. 2. The court held that the arbitral tribunal had not committed any error in granting interest on delayed payments, as the contract provided for such interest.
Final Decision: The court dismissed the petition, upholding the arbitral award in favor of the respondent.
1. The petitioner by way of this present petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the ‘Act’), challenges the Arbitral Award dated 18.07.2017 passed by the Arbitral Tribunal (hereinafter referred to as ‘Impugned Award’), partially awarding certain claims in favour of the respondent, while rejecting the counter-claims raised by the petitioner. The Impugned Award allowed an amount of Rs. 66,00,02,997/- inclusive of pre-award interest and alongwith post award interest in favour of the respondent, while also directing the petitioner to release the Bank Guarantee of Rs. 3,93,77,776/- furnished by the respondent in respect of labour cess, to the respondent.
2. The challenge in the petition is made against the claims of the respondent allowed by the Arbitral Tribunal, that is, Claim Nos. 1, 2, 3(a) and (c), 4, 6 and 7, as also to the rejection of the Counter Claims and grant of interest.
3. Before dealing with the objections against each of the claims, the following basic facts regarding the dispute may be noted.
4. Pursuant to the submission of its bid for the work of construction and completion of East-West Corridor Project Package III: Rehabilitation and Upgrading of Bamanbore – Garamore Road Section of NH-8A from Km. 182.60 to Km.254.00 in the State of Gujarat (hereinafter referred to as “Project work”) vide letter dated 10.12.2003, the respondent was awarded the Project work by the petitioner vide the Letter of Acceptance dated 22.11.2004 at the Contract Price of Rs. 289,92,46,020/-. In terms of the Acceptance Letter, the respondent furnished two Performance Bank Guarantees dated 06.12.2004 for Rs.14,49,62,310/- (Rupees Fourteen Crores Forty Nine Lakhs Sixty Two Thousand Three Hundred and Ten) each. The scope of work encompassed rehabilitation of existing 2 lanes, construction of additional 2 lanes with the provision of Service Roads, Underpasses, At-Grade Intersections, Grade Separators, Drainage and Protective Works, safety works and maintenance works.
5. The parties thereafter entered into an Agreement dated 23.12.2004, incorporating terms contained in inter alia the ‘Conditions of Particular Application’ (hereinafter referred to as ‘COPA’) and the ‘General Conditions of Contract’ (hereinafter referred to as ‘GCC’). The stipulated time for completion of the work was thirty-three months. The notice for commencement of the work was dated 11.02.2005 and accordingly, the Scheduled Date of Completion was 11.11.2007. The project however, was actually completed on 16.08.2009, with the value of the executed work being Rs.278,14,89,533/-.
6. For the delayed completion, extensions of time were sought for on various grounds not attributable to the respondent inter alia adverse climatic conditions, strikes and granted to the respondent on recommendation of the Engineer appointed by the petitioner, M/s Stanley – CES (JV). The final extension was granted by the petitioner vide letter dated 22.12.2009 upto the actual date of completion, that is, 16.08.2009. Admittedly, the respondent submitted three undertakings dated 14.07.2008, 20.12.2008 and 21.09.2009 to the petitioner in the course of applying for the extensions of time and prior to being allowed the extensions, not to claim additional costs for the extended period. The final extension was subsequently granted with price escalation and without any levy of liquidated damages, under Clause 44 of the GCC.
7. Upon completion of the work, the respondent was issued a ‘Taking Over Certificate’ dated 12.09.2009 and thereafter, a ‘Defects Liability Certificate’ dated 25.03.2011 with effect from 07.01.2011.
8. As per sub-clause 60.11 of the COPA, the respondent submitted a ‘Draft Final Statement’ dated 26.03.2011 describing the value of work done as well as the amounts due as payable by the petitioner to the respondent, inclu
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