The court emphasized the importance of fulfilling the conditions specified in the contract for the release of the performance guarantee, and upheld the Arbitrator's finding that the contractor failed to discharge its obligations under the contract.

Prathiba M. Singh, J.

1. The present petition under Section 34 of the Arbitration & Conciliation Act, 1996 has been filed challenging the Award dated 23rd August, 2012 passed by the learned Sole Arbitrator.

2. The Petitioner - Shri Arjun Jain, Prop. M/s. Vishesh Builders (hereinafter ‘Contractor) was awarded the work of “Improvement of Footpath at Sikandra Road, Hailey Road, and Mandi House Roundabout and its Channelizers” vide agreement No.2/EE(R-1)/2010-11. The stipulated date for commencement of the contract was 12th March, 2010 and the time allowed for completion was 6 months. The actual date of completion was not recorded as the same was one of the disputes raised. The amount for which the contractor had tendered was Rs.1,39,27,351/-. The case of the contractor was that it had executed and performed its part of the contract and thus the contract ought to be treated as having been completed. Disputes had arisen during the currency of the contract itself. There were some works which had to be executed by the contractor, in respect of which letters were exchanged by the parties. Even as of December, 2010 the contract was neither terminated nor foreclosed, and sometime in March, 2011, the contractor invoked arbitration. The Arbitrator entered reference and then passed the impugned award. Some corrections to the award were made by means of corrigendum dated 21st September, 2012. The said award has been challenged before this Court.

3. The only issue on which objections have been pressed today is in respect of release of the performance bank guarantee. It is submitted by learned counsel for the Petitioner that the Arbitrator having arrived at a finding that the extended period of the contract would be treated to be up to 11th December, 2010, the security deposit, also having been returned to the contractor, the Arbitrator erred in not releasing the performance bank guarantee. It is submitted on behalf of the contractor that the performance bank guarantee could have been invoked/forfeited only under the conditions specified in clause 1 (iii) of the contract and under no other circumstances. Learned counsel submits that the validity of the contract being neither terminated nor extended, the performance guarantee could not have been invoked.

4. It is further submitted that only if the termination of the contract was done under clause 3 (xii) (a), could the performance bank guarantee have been forfeited. It is his submission that the Arbitrator having arrived at a finding that the contract was extended only till 11th December, 2010, any works which the contractor did not perform post the said date could not have been taken into consideration for the purposes of forfeiting the amount of the performance guarantee. Specific reliance is placed on the discussion in the award under claim No.4.

5. On the other hand, Ms. Kanika Agnihotri, learned counsel appearing for the Respondent-NDMC, submits that in the findings under claim No.1, the learned Arbitrator has held clearly that the contractor was guilty of non-performance and had failed to execute the works which it had agreed to. Specific reliance is placed on the conclusions of the Arbitrator at internal page 8 of the award where the Arbitrator held that the Claimant did not execute a major agreement item of work despite agreeing to do so.

6. The Court has heard the submissions on behalf of the parties. The first and the foremost issue is as to the interpretation of clause 1 read with clause 3 of the agreement. For the sake of convenience, clause 1 and 3 are set out herein below: -

“Clause 1

Performance Guarantee

(i) The contractor shall submit an irrevocable PERFORMANCE GURANTEE of 5% (Five Percent) of the tendered amount in addition to other deposit mentioned elsewhere in the contract for his proper performance of the contract agreement, (not withstanding and/or without prejudice to any other provision in the contract) within 15 days of issue of letter of acceptance. This period can