IMPORTANT POINT
The court emphasized the need to balance equities between the parties and highlighted the importance of following contractual provisions for submission of the final bill and processing thereof.

JUDGMENT :

SUNITA AGARWAL, J.

1. The instant Appeal under Section 37 of the Arbitration and Conciliation Act, 1996 is directed against the order dated 11.03.2024 passed by the Commercial Court, Surat in Commercial Civil Misc. Application No. 39 of 2023, whereby an application preferred by the respondent (PSP Projects Ltd.) under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Act, 1996’) has been partly allowed. By the impugned order, the appellant herein (SDB Diamond Bourse) has been directed to furnish irrevocable bank guarantee to the tune of Rs. 125 crores within a period of four weeks from the date of the order and further that the appellant has been restrained from auctioning, transferring or creating third party rights in the remaining portion of the Surat Diamond Bourse.

2. The order impugned is challenged on the ground that the directions contained in the order based on the observations therein are running against the agreed terms and conditions of the contract. There is a procedure prescribed for processing of the final bill as laid down in the contract and as agreed upon by the parties, which is required to be followed. It was urged by Mr. Kamal Trivedi, the learned Senior Advocate appearing for the appellant that the Commercial Court has erred in taking into consideration the only fact that virtual completion certificate has been issued by the appellant on 21.10.2022. It may be noted that the virtual completion date stated therein is 30.06.2022 and in view thereof the defects liability period started from 01.07.2022 and the same is to end on 30.06.2024. The Commercial Court has, thus, completely ignored that though as per the virtual completion certificate, the defects liability period ends on 30.06.2024, but if by the said date all defects are not resolved/rectified, the said period automatically gets extended till the defects are resolved. It has further ignored that the virtual completion certificate issued by the appellant is subject to successful completion of all the snags and handing over the project. Out of the total 165 areas, only 155 areas have been handed over by the respondent to the appellant during the period from October, 2022 to March, 2023 and even as on the date of filing of the instant Appeal, handing over of 10 areas are still to be completed.

3. The submission is that the conditions of contract for construction as issued by the FIDIC (the International Federation of Consulting Engineers) as also the conditions stipulated under the head “particular conditions” of the contract agreement, have been ignored. The contract laid down the process, which is required to be followed for the purpose of disbursement of the final bill as stipulated in the aforesaid conditions.

4. It was urged that as per the contractual conditions pertaining to the defects liability clause, after all the obligations of the contract are completed, the Engineer is to issue performance certificate in favour of the contractor stating the date on which the contractor completed his obligation under the contract and the said certificate is to be issued within 28 days after the latest of expiry date of defects notification period or soon thereafter, once the contractor has supplied all the documents and completed the tests with regard to all the work including remedying any defect. As stipulated in the contract under Clause No. ‘14’ pertaining to the final payment within 56 days after receiving the performance certificate, the contractor shall have to submit to the Engineer six copies of the draft final statement, which is required to be then verified by the Engineer, but the said process of issuance of final payment is to be undertaken after issuance of performance certificate. The performance certificate, in turn, has to be issued only after the defects liability period is over and thereafter only, the final payment is required to be undertaken. Admittedly, the defects liability period, in the