Arbitration rulings require justifiable reasons for contract termination, affirming that unilateral actions without attributed fault violate contractual obligations.

JUDGMENT

Vibhu Bakhru, J. (Oral)--Steel Authority of India Limited (hereinafter `SAIL'), a company incorporated under the Companies Act, 1956, has filed the present appeal under Section 37 (2)(b) of the Arbitration and Conciliation Act, 1996 (hereinafter the `A&C Act'), inter alia, impugning an order dated 21.08.2020 (hereinafter `the impugned order') passed by the learned Arbitral Tribunal (by majority) under Section 17 of the A&C Act.

Factual Context

2. SAIL issued a Notice Inviting Tenders (Tender Notice bearing no. DGM/PCC/TK/5(749) R/2009/3090) inviting tenders from eligible/pre-qualified bidders for the construction of flyovers for its steel plant located at Bhillai on a Divisible Turnkey Contract basis.

3. Thereafter, on 18.06.2010, SAIL issued the Notification of Award/Letter of Acceptance in favour of the respondent. On 14.07.2010, SAIL and the respondent entered into a Contract for "Construction of Flyover at 3 locations and Road Network (Package no.: 111-01) at Bhillai Steel Plant, Bhillai" (hereinafter `the Project'). In terms of the contract dated 14.07.2010 (hereinafter `the Contract'), the Project was to be completed within a period of two years, that is, on or before 14.07.2012.

4. Admittedly, the said Project was not completed within the stipulated time period. SAIL alleges that the delay in completion of the Project is attributable to the respondent as it failed to take the applicable permits as and when required under the Contract and, deliberately and intentionally ignored the time schedules and instructions under the Contract, the General Clauses of the Contract (GCC) and the Schedules stipulated therein.

5. The aforesaid disputes between the parties were referred to arbitration before the Arbitral Tribunal comprising of three members and the arbitration proceedings commenced on 07.01.2019.

6. Thereafter, on 18.07.2019, SAIL issued a letter to the respondent providing details for the balance work to be completed, and requested the respondent to resume the works regarding flyover no. 2 within a period of ten days and to start the piling work for the two abutments of ROB-1 within a period of fifteen days.

7. On 03.08.2019, SAIL once again requested the respondent to resume the balance works within seven days of receipt of the letter, failing which it would be presumed that the respondent was not interested in resuming the said works. The said letter also stated that the respondent was not performing its obligations in accordance with Clause 6.2 of the GCC, which stipulated the performance of contractual obligations by both the parties during the pendency of conciliation or arbitration proceedings.

8. On 23.08.2019, SAIL issued a Notice of Negligence under Clause 37 of the GCC to the respondent. In the said notice, SAIL referred to Clause 6.2 of the GCC and put the respondent to notice to resume the balance works of all the flyovers within fourteen days from the issuance of the said notice and to perform and complete its contractual obligations, failing which, SAIL would be compelled to initiate appropriate action. The respondent responded to the aforesaid notice by a letter dated 05.09.2019 and stated that the notice issued by SAIL under Clause 37 of the GCC "is an operative repudiation of contract, unconstitutional, illegal and unconscionable, would be defended by us at the risk and cost of the Employer".

9. On 29.08.2019, the respondent filed an application under Section 23 (3) o