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National Highway Authority of India v/s M/s. Oriental Structural Engineers Pvt. Ltd.

    O.M.P. (COMM). No. 443 of 2018

    Decided On, 25 October 2018

    At, High Court of Delhi


    For the Petitioner: Manish Kumar Bishnoi, Tanvi Sapra, Sarthak Ahuja, Advocates. For the Respondent: Anil Airi, Sr. Advocate, Ravi Chandna, Bindiya Logawney, Sukanya Lal, Advocates.

Judgment Text


I.A. No. 14634/2018 (for exemption)

1. Exemption allowed, subject to all just exceptions. I.A. stands disposed of.

I.A. No. 14635/2018 (for delay)

2. For the reasons stated in the application the delay of 5 days in re-filing the petition stands condoned, subject to all just exceptions. I.A. stands disposed of.

O.M.P. (COMM) No. 443/2018

3. The present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter ‘the Act’) is filed by the petitioner/employer impugning the Award passed by the Arbitration Tribunal (hereinafter 'AT') on 21.04.2018 by which the AT has awarded Claim no. 2 to the respondent/contractor. Claim no. 2 of the respondent/contractor was the claim made for the expenses incurred in the period for which the Performance Bank Guarantees (hereinafter 'PBGs') and Retention Bank Guarantees (hereinafter 'RBGs') were illegally directed to be continued by the petitioner/employer beyond the requisite dates provided by t

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he contract, and thus causing incurring of expenses towards the continuation of the bank guarantees. The PBGs or RBGs had to be returned, by a particular date of taking over of the project by the petitioner/employer, so far as the RBGs are concerned these were to be returned on completion of the Defect Liability Period. The petitioner/employer also impugns the Additional Award dated 07.06.2018 by which the AT under Section 33 of the Act has amended the Award dated 21.04.2018 and has directed that the charges payable by the respondent/contractor to the banks for continuing the validity of these RBGs, will continue to be payable to the respondent/contractor till the RBGs are returned by the petitioner/employer to the respondent/contractor.

4. The facts of the case are that the petitioner/employer awarded to the respondent/contractor a contract/project pertaining to 'Allahabad Bypass Project-Construction from Km 198 to Km 242.708 of NH-2 Construction: Contract Package ABP-3'. The date of issuing of the letter of acceptance of the contract by the petitioner/employer was 06.09.2004, with commencement date being 04.11.2004. The time for completion of the contract originally was thirty months i.e. by 04.05.2007, with the actual date of completion being 15.10.2009. Since the respondent/contractor had to remove certain defects in the work, the handing over of the project to the petitioner/employer by the respondent/contractor took place subsequently on 11.12.2009. The Defect Liability Period was of 365 days and this period of 365 days would commence from 11.12.2009 when the project was handed over to the petitioner/employer. Disputes between the parties arose because the respondent/contractor claimed that it had to incur unnecessary charges for keeping alive the PBGs upto a date beyond the stipulated date as provided in the contract. The respondent/contractor also had to keep alive the RBGs till date, being well beyond the stipulated date as provided in the contract.

5(i). As per Clause 10.2 of Conditions of Particular Application, the PBGs were to be valid until a period of twenty eight days from the date of issue of the Taking Over Certificate and that these PBGs were to be returned to the respondent/contractor within fourteen days after this aforesaid twenty eight day period. Since the PBGs had to be returned within twenty eight days plus fourteen days from 11.12.2009, the last date for returning the PBGs would be 22.01.2010. The PBGs were however returned by the petitioner/employer to the respondent/contractor only subsequently on 08.05.2010. The respondent/contractor, therefore, claimed charges for keeping the PBGs alive from 22.01.2010 to 08.05.2010.

5(ii). The second part of the claim of the respondent/contractor was for the charges incurred for the period for keeping the RBGs alive beyond the stipulated date as required under the contract. The stipulated date for keeping the RBGs alive was a period of 365 days after the completion of the project. This period of 365 days is mentioned in Clause 49 of the General Conditions of Contract read with Clause 49.1 of the Appendix to the Bid Documents. Since the contract was completed on 11.12.2009, therefore the Defect Liability Period came to an end on 11.12.2010. Since, the petitioner’s/employer's Engineer had during the Defect Liability Period pointed out various defects in the project work undertaken by the respondent/contractor for the petitioner/employer, such defective works were rectified by the respondent/contractor even beyond 11.12.2010, and the defects were ultimately removed by 12.01.2012, and on this date of 12.01.2012, the Engineer issued the unqualified Defect Liability Certificate (hereinafter 'DLC') i.e. the Engineer certified that no defects remained in the project/contract performed by the respondent/contractor.

6. As per the contract, from every Interim Payment Certificate, the petitioner/employer could retain certain amounts, but these retained amounts could be received by the respondent/contractor on furnishing bank guarantees for such amounts. The total defective work, as pointed out by the engineer appointed by the parties, was of the value of Rs. 6.50 crores whereas the RBGs which were available to the petitioner/employer were of a larger amount of Rs. 12.63 crores. The difference of the RBGs beyond Rs. 6.50 crores was hence released by the petitioner/employer to the respondent/contractor, but the balance amount of the bank guarantees of Rs. 6.50 crores were retained by the petitioner/employer on the ground that there existed defects in the works executed by the respondent/contractor and that the respondent/contractor is liable to remove the defects in the work. This retention was done although the Engineer designated by the parties had issued an unconditional DLC that no defects remained which were required to be rectified.

7. Therefore, it is seen that there were two disputes which arose before the AT, and which are the subject matter of the present petition under Section 34 of the Act as under:-

(i) Claim of the respondent/contractor for charges for keeping the PBGs alive from 22.01.2010 till 8.05.2010, and

(ii) Keeping the RBGs alive till date and from the date beyond the fourteen day period of issuing of the DLC dated 12.01.2012 by the Engineer appointed by the parties under the contract.

8. It is not disputed before this Court that as per the contractual provisions, the PBGs were to be released by the employer on 22.01.2010, but were actually released only later on 08.05.2010. Therefore, since the respondent/contractor has incurred charges to keep the PBGs alive, beyond the date from 22.01.2010 and till 08.05.2010, the AT in my opinion has committed no illegality or perversity or in any manner acted beyond the contract by holding that the charges incurred by the respondent/contractor for keeping the PBGs alive from 22.01.2010 to 08.05.2010 have to be awarded to the respondent/contractor.

9. On the second dispute between the parties, it is seen that it is an undisputed position in terms of the contract that the RBGs were to be returned immediately after completion of the one year of the Defect Liability Period. This is clearly provided in Sub Clause 62.1 of the General Conditions of Contract, and this clause makes it further clear that this liability of the petitioner/employer to return the RBGs is even independent of the Engineer failing to issue the DLC. The DLC is dated 12.01.2012, and therefore within 14 days of this date i.e. by 26.01.2012, the RBGs had to be released to the respondent/contractor. Admittedly, the RBGs for the disputed amounts have not been released till date, and consequently by the impugned awards, the respondent/contractor has been rightly awarded charges to keep these RBGs alive from 26.01.2012 till the RBGs are returned by the petitioner/employer to the respondent/contractor.

10(i). Learned counsel for the petitioner/employer very vehemently argued that the claim petition with respect to PBGs charges was filed by the respondent/contractor in the year 2017, although the cause of action had arisen to claim these PBGs charges on 08.05.2010 when the PBGs were admittedly released back to the respondent/contractor, and hence it is argued that the AT has committed an illegality in awarding time barred claims.

10(ii). The learned senior counsel for the respondent/contractor argues that no doubt the issue of limitation is an issue of law, however an issue of limitation can always be waived by a person in whose favour the right to plead the bar of limitation arises. It is argued on behalf of the respondent/contractor that admittedly at no stage in the arbitration proceedings, i.e. either in the pleadings of the petitioner/employer, or during the course of evidence, or even during the course of final arguments, the petitioner/employer ever urged before the AT this ground of limitation, and the same is now urged for the first time in this petition under Section 34 of the Act.

11. In my opinion, the argument urged on behalf of the respondent/contractor is justified that the plea of limitation if not raised, is deemed to be waived. In my opinion, an issue of limitation cannot be raised for the first time in a petition under Section 34 of the Act because a petition under Section 34 of the Act has to challenge the Award on the ground that what the award decides is violative of the provisions and ingredients of Section 34 of the Act. Once there is nothing decided in the Award with respect to the issue of limitation, then how can the petitioner/employer argue that Award is wrong on the ground of awarding time barred claims. The Award has not decided this issue of limitation as this issue was admittedly never raised by the petitioner/employer in the arbitration proceedings. An issue before being argued as wrongly decided, has to first be decided on raising of such a defence, and once there is no decision on the issue of limitation, as it was not raised by the petitioner/employer, then how can the petitioner/employer urge that the issue of limitation is wrongly decided. This argument of the petitioner/employer is wholly misconceived and is therefore rejected.

12. In view of the aforesaid facts, I do not find that the impugned Awards in any manner violate any provisions of law or the contract between the parties, or that the Awards can be said to be in any manner wholly perverse, for this Court to interfere under Section 34 of the Act.

13. The petition is therefore dismissed.

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