Non-payment of certified dues does not justify contract suspension if delays are caused by the contractor, constituting a fundamental breach justifying termination.

ORDER :

N. ANAND VENKATESH, J.

This is a petition filed by the petitioner under Section 34 of the Arbitration and Conciliation Act, 1996 seeking to set aside the award dated 25.7.2015 passed by the Arbitral Tribunal to the extent it dismissed the claim petition filed by the petitioner, allow the claim petition filed by the petitioner before the Arbitral Tribunal and dismiss the counter claim filed by the first respondent and for costs.

2. Heard both.

3. The facts leading to filing of this petition are as follows:

(i) The first respondent awarded a work of construction and maintenance of service ducts on IT Corridor and improvement and maintenance of East Coast Road (ECR) Link Road to the petitioner through a letter of intent (LoI) dated 29.9.2005. The parties formally entered into an agreement on 12.10.2005. The agreement originally covered two components of work namely the construction and maintenance of service ducts on the IT Corridor for a length of 37,250 RMTs and the improvement and maintenance of the ECR Link Road to construct four laning ECR Link Road for 2.2 Kms connecting Old Mahabalipuram Road (OMR) and the ECR.

(ii) The duration of the contract was fixed as 7 months (221 days)and the intended commencement date was fixed as 12.10.2005 and the intended completion date was fixed as 12.5.2006. In so far as the first work was concerned, it was divided into three milestones. The first milestone (MS1) was from Madhya Kailash Temple to SRP Tools Km 0/0 - Km 3/050. The second milestone (MS2) was from Karapakkam Bridge to Siruseri Km 20/400 – Km 30/400. The third milestone (MS3) was from SRP Tools to Karapakkam Bridge Km13/282 – Km 20/400.

(iii) Due to delay in the completion of works, the first extension was granted for three months upto 14.8.2006. There was a further delay in the completion of works and hence, the second extension of time was granted for two months upto 14.10.2006.

(iv) In view of the above delay, a separate agreement called as supplemental agreement dated 29.11.2006 was entered into and the work pertaining to the ECR Link Road was specifically excluded from the original contract. A fresh tender was called for by the first respondent and the petitioner submitted a fresh quote on 26.6.2007, based on which, a fresh agreement was entered into on 06.7.2007 for a total contract price of Rs.6,63,44,978/-. The ECR Link Road was supposed to be completed within six months from 03.7.2007. The scope of this work was construction of road and cross drainage, improvement of the existing road, formation of new road and maintenance works.

(v) An additional supplemental agreement dated 04.7.2008 was entered into between the parties and time for completion of work was extended in respect of MS2 for 6½ months and in respect of MS3 for 7½ months. There was a further delay in the completion of works and therefore, the additional supplemental agreement was entered into on04.7.2008. Once again, time was extended for a further period of 15½ months in respect of MS2 and for a further period of 15 months in respect of MS3.

(vi) The petitioner took a stand that the first respondent did not make any payments for the invoices raised and the petitioner addressed various letters dated 18.7.2008, 18.8.2008 and 01.9.2008 regarding pending bills with a request to clear the same immediately. In these letters, the petitioner informed the first respondent that they would not be able to continue with the work on account of financial constraints owing to the delay in payment. Since there was no response from the first respondent, the petitioner suspended the work and stopped all further works after issuing the letter dated 18.8.2008.

(vi