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IN THE HIGH COURT OF DELHI AT NEW DELHI
Vibhu Bakhru, J.
Ircon International Limited - Appellant
Versus
GPT-Rahee JV - Respondent
O.M.P. (COMM) 273/2021 and IA Nos. 11808/2021 & 11810/2021
Decided On : 25-03-2022
Arbitral Award - Delay in Completion of Works - Contracts - Clause 49.5 of the GCC, Asian Techs Ltd. v. Union of India & Ors.: (2009) 10 SCC 354, Board of Trustees for the Port of Calcutta v. Engineers-De-Space-Age: (1996) 1 SCC 516, Syed Israr Masood, Forest Contractor, Ret Ghat, Bhopal v. State of Madhya Pradesh: (1981) 4 SCC 289, Associated Engineering Co. v. Govt. of Andhra Pradesh & Anr.: (1991) 4 SCC 93, Simplex Concrete Piles (India) Ltd. v. Union of India: 2010 (115) DRJ 616, Nabha Power Ltd. v. Punjab State Power Corporation Limited & Anr.: (2018) 11 SCC 508 - The Arbitral Tribunal partly allowed the claims of the respondent under the Fabrication Contract and Erection Contract. The Arbitral Tribunal concluded that Clause 49.5 of the GCC did not prohibit the Arbitrator from entertaining a claim in regard to compensation. The Arbitral Tribunal held that Clause 49.5 of the GCC would be applicable only in cases of reasonable delay. The Arbitral Tribunal held that the said clause would not be applicable where the delay is unreasonable and of a long duration. The Arbitral Tribunal held that in the present case, the delay was abnormal and therefore, the exclusionary clause (Clause 49.5 of the GCC) would not preclude the respondent from raising a claim for compensation. The Arbitral Tribunal was of the view that a 'Business Efficacy Test' was required to be applied while considering the exclusionary clause.
Fact of the Case:
The petitioner, Ircon, challenged the Arbitral Award dated 19.12.2020 passed by the Arbitral Tribunal comprising of a Sole Arbitrator. The disputes arose from the delay in completion of works under the Fabrication Contract and Erection Contract between the parties. The respondent claimed financial hardships and losses due to the delay, while Ircon claimed that the respondent was responsible for the delay. The respondent executed a No Claim Certificate (NCC) in lieu of settling all claims, but later raised additional claims. The Arbitral Tribunal partly allowed the respondent's claims, leading to the present challenge by Ircon.
Finding of the Court:
The Court found that the Arbitral Tribunal's decision to allow the respondent's claims was based on a plausible interpretation of the exclusionary clause in the contracts. The Court held that the Arbitral Tribunal's decision fell within its jurisdiction and did not amount to patent illegality. The Court also found that the respondent had furnished the NCC under duress and was facing financial stress, justifying the continuation of its claims. The Court concluded that the Arbitral Tribunal had examined various facets of the disputes and had taken an informed decision, and therefore, dismissed the petition.
Issues: The issues revolved around the interpretation of the exclusionary clause in the contracts, the validity of the NCC furnished by the respondent, and the awarding of claims based on delay in completion of works despite the respondent's partial responsibility for the delay.
Ratio Decidendi: The Arbitral Tribunal's decision to allow the respondent's claims was based on a plausible interpretation of the exclusionary clause in the contracts, and fell within its jurisdiction. The respondent had furnished the NCC under duress and was facing financial stress, justifying the continuation of its claims. The Arbitral Tribunal had examined various facets of the disputes and had taken an informed decision.
Final Decision: The petition was dismissed, and the pending applications were also disposed of.
JUDGMENT
Vibhu Bakhru, J. - The petitioner (hereafter "Ircon") has filed the present petition impugning the Arbitral Award dated 19.12.2020 (hereafter the "impugned award") passed by the Arbitral Tribunal comprising of a Sole Arbitrator (hereafter the "Arbitral Tribunal").
Factual Background
2. On 10.02.2009, the East Central Railways under the Ministry of Railways through its Tender No. 22 of 2008-2009 awarded Ircon the project of "Construction of Steel Superstructure and Other Ancillary Works of Rail-cum-road Bridge Across River Ganga at Patna" (hereafter the "Project").
3. Ircon, in turn, issued a Notice Inviting Tender (NIT) on 27.06.2008, in respect of works pertaining to "Fabrication of 17x 123 m + 2 x 64m triangulated steel bridge girders for new rail-cum-road bridge over river Ganges (Ganga) at Patna by setting up of field workshop on the Dighaghat end (South End) of river Ganges including leading of structural steel from Fatuha Stockyard, shop painting and trail assemble of one span of each type in the shop as a complete job", arising out of the aforesaid Project.
4. The respondent was declared as the lowest bidder and accordingly, Ircon issued a Letter of Award (LoA) dated 22.08.2008 in favour of the respondent for execution of the aforesaid works, for a total contract value of ? 135.39 crores.
5. Subsequently, on 22.01.2009, the parties entered into a Contract bearing number IRCON/2044/Ganga Bridge/05 for "Fabrication of 17 x 123 m + 2 x 64m span triangulated steel bridge girders for new rail-cum-road bridge over river Ganges (Ganga) at Patna " (hereafter the "Fabrication Contract").
6. Thereafter, on 27.03.2009, the parties also entered into a Contract bearing number IRCON/2044/Ganga Bridge/07 for "Assemble, Erection/Launching of18 x 123 m + 1 x 64m span triangulated steel girders for new Rail-Cum-Road bridge across river Ganga at Patnafrom Digha Ghat end (South End) including transportation of fabricated components of (17 X 123 m + 1 X 64m)" (hereafter the "Erection Contract") for a total contract value of ? 107.08 crores.
7. The Fabrication Contract and the Erection Contract are hereafter collectively referred to as the "Contracts".
8. In terms of the Fabrication Contract, the works were to commence on 22.08.2008 and were to be completed within a period of forty-two months, that is, on or before 21.02.2012. Admittedly, the respondent completed the said works on 30.09.2015.
9. In respect of the Erection Contract, the works were to commence on 18.02.2009 and were to be completed within a period of forty-five months, that is, on or before 17.11.2012. However, works in respect of the Erection Contract were completed by the respondent after a period of eighty-six months from the date of commencement of the said Contract, that is, on 30.04.2016.
10. The respondent claimed that there was a delay in completion of the works under the Contracts for reasons attributable to Ircon as a result of which, it had suffered financial hardships and incurred heavy losses. Ircon, on the other hand, claimed that the respondent was responsible for the delay in performance of the Contracts.
11. In view of the disputes between the parties, a meeting was held on 10.09.2015 and certain issues were settled as recorded in the Minutes of the Meeting dated 10.09.2015.
12. On 13.12.2016, the respondent executed a No Claim Certificate (hereafter "NCC"). Ircon states that in lieu of the NCC, all claims of the respondent were settled and thus, the respondent was precluded from raising any further claims.
13. However, the respondent by its letter dated 25.01.2018 raised additional claims for losses suffered by it due to Ircon's failure of performing its obligations in a timely manner under the Contracts. The respondent received no response to the aforesaid letter by Ircon. Thereafter, by a letter dated 27.03.2018, the respondent invoked the Arbitration Agreem
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