Point of Law: Arbitration agreement - Order of termination of contract - Jurisdiction of learned Arbitrator having been circumscribed by the order of reference of this Court, no fault can be found with interpretation, by learned Arbitrator, that reference did not encompass legality, or otherwise, of order of termination, which came to be passed later.

JUDGMENT :

C. HARI SHANKAR, J.

1. By order dated 11th October, 2019 in OMP (I) (Comm) 336/2019, OMP (I) (Comm) 337/2019 and order dated 14th October, 2019 in OMP (I) (Comm) 343/2019, a learned Single Judge of this Court referred the disputes, arising between the appellant and the respondent, to arbitration by an eminent retired Chief Justice of the High Court of Jammu and Kashmir. The appellant is the claimant in the said arbitral proceedings, and the respondent before me is also the respondent therein. These appeals, under Section 37(2)(a) of the Arbitration and Conciliation Act, 1996 (“the 1996 Act”) impugn the order, dated 5th March, 2021, passed by the learned Arbitrator on applications, preferred before him by the respondent under Section 16 of the 1996 Act.

Factual Conspectus

2. The offer of the appellant, in response to the notice, dated 24th March, 2019, of the respondent, inviting tenders for certain civil works, was accepted by the respondent vide Letter of Acceptance dated 11th May, 2017. As required by the conditions stipulated in the notice inviting tender and the Letter of Acceptance, Performance Bank Guarantees No 17793BG00038, 17793BG00040 and 17793BG00041, dated 17th July, 2017, 31st August, 2017 and 31st August, 2017 respectively (collectively referred to, hereinafter, as “the BGs”) and extended subsequently, were furnished by the appellant. Formal contracts, between the appellant and the respondent were executed on 26th September, 2017. Clauses 8.4, 50 and 50.2 of the General Conditions of Contract (GCC) are relevant, and the relevant parts thereof may be reproduced thus:

“8.4 Release of Performance Security:

(a) Performance Security shall be returned to the Contractor, subject to the issue of Completion Certificate by the Engineer in accordance with clause 65 of these conditions. This shall not relieve the Contractor from his obligations and liabilities, to make good any failures, defects, imperfections, shrinkages, or faults that may be detected during the defect liability period specified in the Contract.

(b) Wherever the contract is rescind (sic), the security deposit shall be forfeited and the Performance Security shall [be encashed] and the balance work shall be got done independently without risk and cost of the failed contractor. The failed contractor shall be debarred from participating in the tender for executing the balance work.

If the failed contractor is a JV or a partnership firm, then every member/partner of such a firm shall be debarred from participating in the tender for the balance work either in his/her individual capacity or as a partner of any other JV/partnership firm.

(c) The Engineer shall not make a claim under the Performance Guarantee (PG) except for amounts to which Ircon International Limited is entitled under the contract (not withstanding and/or without prejudice to any other provisions in the contract agreement) in the event of:-

1. Failure by the contractor to extend the validity of the PG as described herein above, in which event the Engineer may claim the full amount of the PG.

2. Failure by the contractor to pay Ircon International Limited any amount due, either as agreed by the contractor or determined under any of the Clauses/Conditions of the agreement, within 30 days of the service of notice to this effect by Engineer.

3. The contract being determined or rescinded under the provision of the GCC the PG shall be forfeited in full and shall be absolutely at the disposal of the Engineer.”

“50.0 DETERMINATION OF CONTRACT DUE TO CONTRACTOR’S DEFAULT

50.1 Conditions leading to determination of contract

1.1.1 If the Contractor

*** *** ***

(h) fails to adhere to the agreed programme of work or fails to complete the works or parts of the works within the stipulated or extended period of completion, or is unlikely to complete the whole work or part thereof within time because of poor record