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IN THE HIGH COURT OF DELHI
VIBHU BAKHRU, J.
Beigh Construction Company Private Limited - Appellant
Versus
Varaha Infra Limited - Respondent
O.M.P.(I) (COMM.). No. 372 of 2020 & I.A. No. 207 of 2021
Decided On : 07-01-2021
Section 9 - Arbitration and Conciliation Act, 1996 - [Restraint on coercive steps, appropriation of monies, and enjoying rights] - [Section 9 of the Arbitration and Conciliation Act, 1996] - The court discussed the petitioner's prayer under Section 9 of the Act, seeking restraint on coercive steps, appropriation of monies, and enjoying rights under the Memorandum of Understanding dated 09.01.2019. The court highlighted the principles applicable for exercising the power under Section 9 and emphasized the need to establish a strong prima facie case and the defendant's actions to defeat the realization of a potential decree. The court found that the petitioner failed to satisfy these conditions, leading to the dismissal of the petition.
Fact of the Case:
The petitioner filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996, seeking restraint on coercive steps by the respondent and appropriation of monies from the project. The disputes arose from a Memorandum of Understanding dated 09.01.2019, related to the execution of an Engineering, Procurement and Construction Contract.
Finding of the Court:
The court found that the petitioner failed to establish a strong prima facie case and the defendant's actions to defeat the realization of a potential decree, as required under Section 9 of the Act. The court dismissed the petition but clarified that it would not preclude the petitioner from moving an appropriate application before the Arbitral Tribunal.
Issues: The issues revolved around the petitioner's claims of non-compliance with the Agreement, coercion by the respondent, and the need for restraining the respondent from terminating the Agreement.
Ratio Decidendi: The court emphasized the need to establish a strong prima facie case and the defendant's actions to defeat the realization of a potential decree when seeking interim measures of protection under Section 9 of the Act. The court also highlighted the inapplicability of the principles for restraining the respondent from terminating the Agreement, as it was determinable.
Final Decision: The court dismissed the petition under Section 9 of the Act but clarified that the dismissal would not preclude the petitioner from moving an appropriate application before the Arbitral Tribunal.
JUDGMENT :
[Hearing held through videoconferencing]
1. The petitioner has filed the present petition under Section 9 of the Arbitration and Conciliation Act, 1996 (hereafter the Act), inter alia, praying as under:-
(b) Restrain the Respondent from appropriating monies from the Project in any manner other than in the manner prescribed in Memorandum of Understanding dated 09.01.2019, till the final adjudication of the disputes by the Arbitral Tribunal.
(c) Restrain the Respondent from taking any coercive steps against the Petitioner which would adversely affect the Petitioner in undertaking its obligations and enjoying its rights under the Memorandum of Understanding dated 09.01.2019, till the final adjudication of the disputes by the Arbitral Tribunal.
(d) grant ad-interim ex-parte reliefs in terms of Prayers (a) to (c) above”
2. The respondent was awarded the contract for executing an Engineering, Procurement and Construction Contract for “Rehabilitation & Up-gradation to 2 Lane with Paved shoulder/4 laning configuration of Wakan Pali Khopoli Road NH-548A(SH93) connecting New NH (SH88), MPEW, AH47 (NH4) and NH66 (NH17) from KM.0/000 to 40/600 in the state of Maharashtra on Engineering, Procurement & Construction (EPC) mode” by the Maharashtra State Road Development Corporation (MSRDC). And, the said parties (respondent no.1 and MSRDC) entered into the “Engineering, Procurment and Construction Agreement” (hereafter ‘the EPC Contract’) on 07.04.2017.
3. The present petition arises out of disputes that have arisen between the parties in connection with a Memorandum of Understanding dated 09.01.2019 (hereafter ‘the Agreement’), whereby the respondent had agreed to sub-contract the execution of the EPC Contract to the petitioner.
4. In terms of the Agreement, it was agreed that the petitioner would execute the EPC Contract and the entire amount received from the employer (MSRDC) would be deposited in an escrow account. The petitioner would be entitled to 99% of the said amounts and the respondent would be entitled to the balance 1%.
5. It is the petitioner's grievance that the terms of the Agreement are not being complied with. The petitioner claims that it has executed works for an amount of Rs.39,29,44,384.07 against which a payment of Rs.32,00,60,345.20 has been released by MSRDC after retaining a sum of Rs.1,93,52,129.72. However, the petitioner has not received 99% of the said amounts disbursed by MSRDC. The petitioner alleges that the respondent has illegally and in breach of its obligations retained substantial portion of the same.
6. Mr Kathpalia, learned senior counsel appearing for the petitioner submitted that MSRDC is now in the process of releasing the retention money in proportion to the work completed in terms of a policy circular (Atmanirbhar Bharat: Relief for Contractors/Developers of Road Section no. Ro/MUM/GEN-Corrs/2020- 21/210 dated 08.06.2020) issued by the Ministry of Road Transport and Highways, Government of India. He submits that since the said amounts are directly relatable to the works executed by the petitioner, directions ought to be issued to the respondent to ensure that it does not receive the said sums and makes over the said sums directly to the petitioner. He earnestly contends that the amounts received or to be received by the respondent from MSRDC are in the nature of amounts received in trust and therefore, cannot be appropriated by the respondent.
7. Mr Rajeev Sharma, learned counsel appearing for the respondent has countered the aforesaid submission. He points out that the Agreement dated 09.01.2019 was terminated on 04.10.2020 and this was also communicated to MSRDC on 06.10.2020. He referred to a letter dated 19.10.2020 sent by MSRDC, acknowledging that the sub-contract between
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