Arbitration Appeal No.219 of 2022

1.

Neutral Citation No. - 2023:AHC:184463-DB

A.F.R

Reserved

Case :- APPEAL UNDER SECTION 37 OF ARBITRATION AND

CONCILIATION ACT 1996 No. - 219 of 2022

Appellant :- Hindustan Steelworks Construction Limited

Respondent :- New Okhla Industrial Development Authority

Counsel for Appellant :- Varad Nath, Agarwal Archi Piyush

Counsel for Respondent :- Kaushalendra Nath Singh

Hon'ble Manoj Kumar Gupta,J.

Hon'ble Vikram D. Chauhan,J.

(Per Manoj Kumar Gupta, J.)

1.

The instant appeal has been filed under Section 13 of the

Commercial Courts, Commercial Division and Commercial Appellate

Division of High Courts Act, 2015 read with Section 37 of the

Arbitration and Conciliation Act, 1996 (for the sake of brevity

hereinafter referred to as 'the Act') challenging the order of the

Commercial Court, Gautam Budh Nagar dated 23.5.2022 in Arbitration

Case No. 13 of 2015, setting aside the Arbitral Award dated 15.12.2014,

by the Sole Arbitrator, in a dispute between the parties.

BACKGROUND

2.

In the year 2002, the New Okhla Industrial Development

Authority (NOIDA), the respondent herein, entered into negotiation

with U.P. State Bridge Corporation Limited for construction of two

flyovers with clover leaves and allied work at M.P. Road No.3 Express

Highway near Amity School and at T-junction near Film City, Gautam

Arbitration Appeal No.219 of 2022

2.

Budh Nagar. It submitted a proposal of Rs.106.10 crores for execution

of the Project on turnkey basis, including centage charges but which

was not accepted.

3.

The appellant herein, i.e. Hindustan Steel Works Construction

Limited (HSCL), is a Government of India Undertaking, registered

under the Companies Act, 1956. It also gave proposal to NOIDA to

execute the Project at the same cost of Rs.106.10 crores. The offer of

HSCL was accepted by NOIDA and the parties entered into a formal

contract- a Memorandum of Understanding (MoU) on 27.03.2003. The

work under the contract was to be completed by the HSCL within 27

months from the date of start, which was to be counted from 30 days

after the receipt of deposit advance from NOIDA or from the date of

possession of land, which ever is earlier. The HSCL was obliged to

submit performance security equivalent to 5% of the contract value in

shape of bank guarantee. NOIDA was under obligation to pay interest

free deposit advance of 15% of project cost secured by the bank

guarantee (excluding centage charges) within thirty days from the date

of award of work. The advance so paid was to be adjusted in the

subsequent demand of funds on the basis of actual work executed by

HSCL. The subsequent demand was to be submitted after utilization of

75% of the deposit advance released as above. Under Clause 7, HSCL

was entitled to price variation in cost of building material as per NHAI

Arbitration Appeal No.219 of 2022

3.

guidelines and formula for computing the same was provided for in the

General Conditions of Contract (GCC) executed between the parties in

addition to the MoU. Clause 11 stipulated that if the work is

temporarily suspended due to any reason which is not attributable to

HSCL, suitable extension of time shall be granted by the NOIDA on the

request of HSCL. In case the work is delayed due to reasons

attributable to HSCL, it was made liable to penalty at the rate of 5% per

month of centage charges to NOIDA. The period for which extension

would be granted is provided in the GCC. The GCC also provided for

compensation to HSCL in case of suspension of work exceeding 30

days in certain circumstances. Clause 14 made the agreement

irrevocable till the expiry of defect liability period unless there has been

breach of any terms and conditions of the MoU. Clause 22 contained an

arbitration clause for resolution of disputes or differences between the

parties, arising out of the contract. It reads thus: -

“In the event of any