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IN THE HIGH COURT OF JAMMU & KASHMIR AND LADAKH AT SRINAGAR
VINOD CHATERJI KOUL, J.
Union Territory of J.&K. – Petitioner
Versus
S.P. Singla Constructions Pvt. Ltd. – Respondent
AA No. 06 Of 2020
Decided On : 02-02-2023
Arbitration and Conciliation Act - Delay in Completion of Work - FIDIC Contract - Notice of Claim Provision
Fact of the Case:
The appellant, Chief Engineer Mughal Road Project, filed an appeal against the judgment of the Principal District Judge, Srinagar, in a petition under Section 34 of the Arbitration and Conciliation Act, 1997. The respondent, M/s S.P. Singla Constructions Private Limited, had raised a dispute regarding the prolongation of time and entitlement for extension of time due to delay allegedly attributable to the appellant. The Arbitral Tribunal passed an award in favor of the respondent, which was challenged by the appellant.
Finding of the Court:
The court found that the Arbitral Tribunal had failed to consider the mandatory notice of claim provision in the FIDIC Contract, which required the contractor to notify the Engineer within specified time frames to be entitled to additional payments. The court also noted that the respondent had not raised any dispute or claim with the appellant until the final bills were submitted, and bills were accepted without protest. The court set aside the impugned award and judgment on various claims made by the respondent.
Issues: The issues included the delay in completion of work, entitlement for extension of time, compliance with the notice of claim provision, and the arbitrability of the disputes raised by the respondent.
Ratio Decidendi: The court held that the Arbitral Tribunal had failed to consider the mandatory notice of claim provision in the FIDIC Contract, and the respondent had not raised any dispute or claim with the appellant until the final bills were submitted. The court also found that the claims made by the respondent were not sustainable under the terms of the agreement.
Final Decision: The court allowed the appeal and set aside the impugned award and judgment, along with the principal district judge's order, on various claims made by the respondent.
JUDGMENT :
1. This Appeal under Section 37 of J&K Arbitration and Conciliation Act, 1997 (for short “Act”) has been preferred against judgement dated 1st February 2020, passed by Principal District Judge, Srinagar, in a petition under Section 34 of the Act, titled as Chief Engineer Mughal Road Project v. M/s S.P. Singla Constructions Private Limited in File no.02/2018 Arbitration and for setting aside the same on the grounds mentioned therein.
2. The case set up by appellant is that an/ NIT no. 01/2020 dated 31st April 2010, was issued by Superintending Engineer, Mughal Road Project, on behalf of Governor of erstwhile State of J&K, inviting tenders for construction of seven bridges on Shopian-Bafliaz Section of Mughal Road. Respondent also participated and being successful in bidding process was awarded the contract on Turnkey Basis for a contract price of Rs.55.75 Crores vide Agreement no. CE/MRP Agreement/2 of 2010 dated 14th October 2010. The contract was for design and construction of Seven number of steel trussed girder (double lane) bridges of different spans having aggregate length 461 RM (Approx.) on Mughal Road Project from Shopian to Bafliaz in J&K State, which included planning, detailed survey, soil investigation, collection of hydraulic data and structural design along with execution (complete job) on Turnkey Basis as per scope of the work. The work was to be completed within 24 calendar months as per the terms and conditions of the contract and the work had to be completed up to 8th November 2012. However, the work completed on 18th September 2013, i.e., it took more 387 days. In terms of the contract between the parties no further compensation was payable as the contract was a Turnkey Contract and the claims were raised by contractor after completing construction and after receiving full and final payment and closure of contract.
3. It is stated that contractor/respondent raised dispute as regards prolongation of time and entitlement for extension of time on account of delay allegedly attributable to appellant (employer). Contractor is stated to have appointed its nominee to Arbitral Tribunal on 19th June 2015 and on 11th August 2015 appellant/employer appointed its nominee to act as an arbitrator. Appellant nominated its Arbitrator as Shri Khalid Muzaffar. Presiding Arbitrator, namely, Justice T.S. Doabia (Retd.) was appointed by two nominated arbitrators. Preliminary notice was issued and first meeting proposed on 26thAugust 2015. Award dated 20th July 2017 was passed in favour of respondent. Challenge was thrown to the Award under Section 34 of Act before the Principal District Judge, Srinagar, who rejected the challenge. This is how the instant appeal has come before this Court.
4. Impugned Award and judgement passed by court below have been, inter alia, challenged on the grounds that the award as well as impugned judgment of court below, upholding the award is patently illegal being against the policy of the State and the same is in breach of the terms and conditions of contract; that the court below and Arbitral Tribunal have not considered the relevant material/documents, arguments and the law points raised by petitioner and neither clear findings have been returned on the matter nor the case law been dealt with, thus, making the entire exercise a nullity; that arbitrators as well as court below have failed to appreciate Clause 20.1 GCC of the FIDIC Contract mandatorily prescribes that the contractor is obliged to notify the Engineer within specified time frames; that the contractor considers itself entitled to additional payments on account of any event or circumstance giving rise to the said claim; that the said requirement is in the nature of a condition precedent for the contractor to be entitled to any additional payments under the contract; that that this provision is referred in international jurisprud
The main legal point established in the judgment is the importance of compliance with the notice of claim provision in the FIDIC Contract and the requirement for the contractor to raise disputes or c....
An arbitrator's award may be upheld if it conforms to contract terms, despite challenges regarding procedural compliance or interpretation, provided it does not contravene public policy.
Arbitration awards may be set aside if contrary to public policy or fundamental legal principles, emphasizing the importance of adhering to contractual terms regarding extensions and compensations.
Judicial review of arbitral awards is limited; courts should not interfere unless there is clear evidence of perversity or violation of public policy.
The court emphasized the requirement for the arbitrator to assign reasons in support of the award and the limited scope of interference by the court in arbitration awards.
Setting aside arbitral award – Courts, while adjudging whether an arbitration award calls for interference has to be conscious that Arbitrator is sole Judge of facts – Unless an error of law is shown....
An arbitrator may award escalated costs due to employer delay despite prohibitory clauses, reinforcing that delays affecting contractor performance can lead to compensatory claims.
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