Sugam Constructions (P) Ltd. v. Union of India through Secretary, Ministry of Railways, New Delhi
2022-12-20
ANAND PATHAK
body2022
DigiLaw.ai
ORDER : 1. The present application is preferred by applicant under Section 11 of Arbitration and Conciliation Act, 1996. 2. Precisely stated facts of the case are that applicant is a Private Limited Company registered under the Companies Act, 1956 and is engaged mainly in the work of Civil Construction and specializes in construction of railway related works. Respondent No. 1-is the Union of India, Ministry of Railways and invited the bid for tender for construction of road under a bridge in lieu of level crossing No. 429 between STLI-DHO Section (by box pushing method) vide its notice dated 9/10/2013. Respondents No. 2 and 3 are the Officers of North Central Railways. 3. Respondent No. 1 issued Notice Inviting Tender (NIT) on 9/10/2013 for construction of road as referred above in which applicant responded by quoting its rates vide letter dated 19/11/2013 and negotiations ensued. Later on work was awarded to applicant vide letter dated 24/2/2014 vide Annexure A/2. Letter of Acceptance (LOA) was issued on 7/4/2014 in which applicant was directed to deposit Performance Guarantee (PG) as per subject condition of Contract (Part 1). 4. Applicant completed the formalities as per the contract agreement dated 11/9/2014, executed between applicant and respondent No. 1. As per the terms of contract, work was required to be completed within 10 months of LOA i.e. by 23/12/2014 for a total amount of Rs. 8,05,55,859/-. 5. It appears from the pleadings and submissions that LOA for the subject work was granted to applicant on 26/2/2014 upon which applicant tried to mobilize resources at the site; however, work could not be completed within the stipulated period. Total eight times, extension was sought by applicant and granted by respondents. After eight extensions granted, work was completed in July, 2017 and contract was finalized and closed after passing of all due payments to applicant vide final bill and final PVC bill dated 21/10/2019. All Performance Guarantee (PG) and Security Deposits (SD) were refunded to applicant vide No Claim Certificate dated 13/11/2019 and dated 10/12/2019. In said No Claim Certificate, amount was accepted without any protest and recording decent. 6. It further appears that applicant was aggrieved by the manner, contract was proceeded and therefore, approached respondent No. 3 as per the terms of Contract for appointment of Arbitrator vide letter dated 10/1/2021. Same was replied by respondent No. 3 vide its reply dated 8/2/2021.
In said No Claim Certificate, amount was accepted without any protest and recording decent. 6. It further appears that applicant was aggrieved by the manner, contract was proceeded and therefore, approached respondent No. 3 as per the terms of Contract for appointment of Arbitrator vide letter dated 10/1/2021. Same was replied by respondent No. 3 vide its reply dated 8/2/2021. Thereafter, on 11/4/2021 again notice was issued for settlement of issues and making the payments. Thereafter again notice was issued on 19/1/2022. Thereafter, this application has been preferred. 7. It is the submission of learned counsel for the applicant that because of working of respondents delay has been caused in completing the project. The applicant mobilized all resources to its end, the moment applicant was awarded the contract but time and again, it was respondents who caused delay and therefore, project could not be completed within time. It is submitted that extension was granted 7-8 times but it was because of delay caused by respondents. Certain extra work was executed by applicant while completing the project and this caused over stay of tools and machinery etc. 8. It is the submission of learned counsel for the applicant that because of delay profitability of the applicant reduced. Notice dated 10/1/2021 (filed as Annexure A/39) is exhaustive list of claims raised by application (total 20 in number) and it is the submission that said claims have not been settled by the respondents, therefore, dispute is being raised. As per Section 12(5) of the Arbitration and Conciliation Act, 1996, Departmental Authorities cannot be appointed to act as Arbitrator as per provisions of General Conditions of Contract, 2014, therefore, Arbitrator be appointed for settlement of disputes.
As per Section 12(5) of the Arbitration and Conciliation Act, 1996, Departmental Authorities cannot be appointed to act as Arbitrator as per provisions of General Conditions of Contract, 2014, therefore, Arbitrator be appointed for settlement of disputes. He relied upon decisions of Apex Court in the matter of Ambica Construction vs. Union of India, (2006) 13 SCC 475, National Insurance Company Limited vs. Boghara Polyfab Private Limited, (2009) 1 SCC 267 , R.L. Kalathia and Company vs. State of Gujarat, (2011) 2 SCC 400 , TRF Limited vs. Energo Engineering Projects Limited, (2017) 8 SCC 377 , Perkins Eastman Architects DPC and Another vs. HSCC (India) Ltd. AIR 2020 SC 59 , Union of Inida vs. Pradeep Vinod Construction Company, (2020) 2 SCC 464 , Bharat Sanchar Nigam Ltd. and Another vs. M/s. Nortel Networks Pvt. Ltd. (2021) 5 SCC 739 and Ellora Paper Mills Limited vs. State of Madhya Pradesh, MANU/SC/008/2022 in support of his submissions. 9. Per contra, learned counsel for respondents vehemently opposed the prayer and while referring the return filed by the respondents in which parawise rebuttal has been made to the contentions raised by applicant. In sum and substance, it is the submission of respondents that after award of contract, the applicant on the pretext of one and the other, did not start the work immediately. Applicant submitted Performance Guarantee (PG) on 21/4/2014 and GAD of the work was handed over to the applicant on 6/3/2014. Even after passing of three months period, design and drawing, action plant, Bar Chart for completion of work was not submitted by the applicant. No site representative, man and machinery was deployed at the site by the applicant. Reminders were given many a times vide letters dated 1/5/2014, 26/5/2014 and 30/5/2014 (Annexure R/5 to R/7) but to no avail. 10. When designs and drawings were submitted, same were found incomplete and necessary rectifications/corrections for compliance of observations were noted during checking by Headquarter/Design Office and were informed to applicant from time to time. Headquarter was not able to appreciate the design/calculations submitted by the applicant and finally owing to abnormal delay in clarifying their observations, has decided to adopt the already approved drawing of same type of RUB (Railway Under Bridge).
Headquarter was not able to appreciate the design/calculations submitted by the applicant and finally owing to abnormal delay in clarifying their observations, has decided to adopt the already approved drawing of same type of RUB (Railway Under Bridge). Vide Office letter dated 1/9/2014 (Annexure R/8) applicant was advised to immediately gear up resources and depute site supervisor, engineer and staff for the wrok and complete all preparatory works as mentioned in the previous letter, so that the closing of level crossing could be done in order to start main work. 11. For brevity, the different correspondences made by office of respondents are not reproduced and discussed but through various documents filed with the reply, it was the submission of respondents that applicant caused delay, time and again and it failed measurably to complete the project in stipulated time. Ultimately on 22/2/2016, and aftgerwards invoking clause 17-A of General Conditions of Contract, opportunity was given to complete the work and in July, 2017, the work came to an end. After completion of work in July, 2017, contract was finalized and closed after passing all due payments to the applicant vide final bill and final PVC dated 21/10/2019 and PG and SD submitted by applicant were refunded to him vide No Claim Certificate dated 13/11/2019 and 10/12/2019. 12. Learned counsel for the respondents vehemently raised the point that after completion of work and receiving all dues and endorsing No Claim Certificate, filing of instant application appears to be guided by mala-fide. Applicant kept silent for considerable period of time and now raised the demand for arbitration which is actuated with mala-fide. 13. Respondents further raised the point regarding limitation also because contract came to an end in July, 2017 and till then no dispute was raised by applicant while raising issues and/or raising demand for arbitration but after three and half years of completion of contract, this application is being filed on 23rd February, 2022. Therefore, it is barred by time. 14. He relied upon decision of Apex Court in the matter of Indian Oil Corporation Limited vs. NCC Limited, 2022 Live Law (SC) 616 in support of his submissions.
Therefore, it is barred by time. 14. He relied upon decision of Apex Court in the matter of Indian Oil Corporation Limited vs. NCC Limited, 2022 Live Law (SC) 616 in support of his submissions. It is further submitted by learned counsel for the respondent that aspect with regard to “accord and satisfaction” of the claims can be considered by this Court at the stage of deciding an application filed under Section 11(6) of Arbitration and Conciliation Act, 1996 in the facts and circumstances of the case. Here, aspect of “accord and satisfaction” goes against applicant and favours the cause of respondents. He prayed for dismissal of the application. 15. Heard learned counsel for the parties at length and perused the documents appended thereto. 16. This is a case where applicant is seeking appointment of Arbitrator because disputes raised by applicant vide notice dated 10/1/2021 are not being addressed by the respondents. 17. Contract was executed between the parties on 24/2/2014 by which applicant had to perform the construction of road under a bridge in lieu of level crossing No. 429 between STLI-DHO Section (by box pushing method). It is an admitted fact that total Eight times extensions were given to applicant from time to time. 18. As per the contract, the work was to be completed within 10 months till December, 2014 but extensions were given to applicant from time to time. Different reasons have been assigned by the respondents for extension of time. Correspondences made by respondent right from letter dated 7/4/2014 (Annexure R/3) to letter dated 18/5/2017 (Annexure R/30) indicate that time and again applicant did not mobilize sufficient resources at its end and therefore, work could not be completed within stipulated time. Said communications give the factual narration about exact nature of deficiencies existing at the site and working of applicant. 19. Ultimately, respondents had to resort to Clause 17-A of the Contract to inform applicant that extension of time is being given subject to resort to Clause 17-A of the Contract, meaning thereby, that applicant was not entitled to make any claim whatsoever against the Railways by virtue of extensions granted nor shall the Railway entertain or consider any such claim, if made by the applicant. 20. Letter dated 18/5/2017 (Annexure R/30) was the letter by which the extension of time was granted up to 30th June, 2017 and said extension was granted without penalty.
20. Letter dated 18/5/2017 (Annexure R/30) was the letter by which the extension of time was granted up to 30th June, 2017 and said extension was granted without penalty. Clause 17-A of the contract is reproduced herein-below for ready reference: “17-A Extension Of Time In Contracts: Subject to any requirement in the contract as to completion of any portions or portions of the works before completion of the whole, the contractor shall fully and finally complete the whole of the works comprised in the contract (with such modifications as may be directed under conditions of this contract) by the date entered in the contract or extended date in terms of the following clauses: (i) Extension Due To Modification: If any modifications have been ordered which in the opinion of the Engineer have materially increased the magnitude of the work, then such extension of the contracted date of completion may be granted as shall appear to the Engineer to be reasonable in the circumstances, provided moreover that the Contractor shall be responsible for requesting such extension of the date as may be considered necessary as soon as the cause thereof shall arise and in any case not less than one month before the expiry of the date fixed for completion of the works. (ii) Extension For Delay Not Due To Railway Or Contractor: If in the opinion of the Engineer, the progress of work has any time been delayed by any act or neglect of Railway's employees or by other contractor employed by the Railway under Sub Clause (4) of Clause 20 of these Conditions or in executing the work not forming part of the contract but on which contractor's performance necessarily depends or by reason of proceeding taken or threatened by or dispute with adjoining or to neighbouring owners or public authority arising otherwise through the Contractor's own default etc.
or by the delay authorized by the Engineer pending arbitration or in consequences of the contractor not having received in due time necessary instructions from the Railway for which he shall have specially applied in writing to the Engineer or his authorized representative then upon happening of any such event causing delay, the Contractor shall immediately give notice thereof in writing to the Engineer within 15 days of such happening, but shall nevertheless make constantly his best endeavours to bring down or make good the delay and shall do all that may be reasonably required of him to the satisfaction of the Engineer to proceed with the works. The contractor may also indicate the period for which the work is likely to be delayed and shall be bound to ask for necessary extension of time. The Engineer on receipt of such request from the contractor shall consider the same and shall grant such extension of time as in his opinion is reasonable having regard to the nature and period of delay and the type and quantum of work affected thereby. No other compensation shall be payable for works so carried forward to the extended period of time, the same rates, terms and conditions of contract being applicable as if such extended period of time was originally provided in the original contract itself. (iii) Extension For Delay Due To Railways: In the event of any failure or delay by the Railway to hand over the Contractor possession of the lands necessary for the execution of the works or to give the necessary notice to commence the works or to provide the necessary drawings or instructions or any other delay caused by the Railway due to any other cause whatsoever, then such failure or delay shall in no way affect or vitiate the contract or alter the character thereof or entitle the contractor to damages or compensation therefor, but in any such case, the Railway may grant such extension or extensions of the completion date as may be considered reasonable.” 21. The said clause specifically raised the provisions that Contractor shall not claim any damages or compensation for works so carry forwarded to the extended period of time. Rates, terms and conditions of contract in extended period of time would be same as it was originally provided in the original contract itself. 22.
The said clause specifically raised the provisions that Contractor shall not claim any damages or compensation for works so carry forwarded to the extended period of time. Rates, terms and conditions of contract in extended period of time would be same as it was originally provided in the original contract itself. 22. From the documents filed by both the parties, it appears that work was completed in more than 3 years five months of time period whereas, originally, period of completion of contract was 10 months. Knowing fully well the consequences and the failure to complete the work within the stipulated period, applicant accepted all legitimate dues as per the contract including the receipt of Performance Guarantee and Security Deposits and signed No Claim Certificate on 13/11/2019, therefore, doctrine of “accord and satisfaction” comes into play. Applicant did not complaint for more than one year. Thereafter, he started making complaints and raising the claim. 23. Facts of the case relied upon by the respondents in the case of Indian Oil Corporation (supra) applies in the facts and circumstances of the instant case with full force because facts of present case are much similar. Relevant Para 13 of the aforesaid case is reproduced herein-below for ready reference: “13. Having heard learned Counsel appearing for the respective parties and in the facts and circumstances of the case, the issue/aspect with regard to ‘accord and satisfaction’ of claims is seriously disputed and is debatable. Whether, in view of the acceptance of Rs.4,53,04,021/ by the respondent NCCL which was released by IOCL on the offer/letter made by the respondent NCCL dated 02.11.2016 there is an instance of ‘accord and satisfaction’ of the claims is a good and reasonably arguable case. It cannot be said to be an open and shut case. Therefore, even when it is observed and held that such an aspect with regard to ‘accord and satisfaction’ of the claims may/can be considered by the Court at the stage of deciding Section 11 application, it is always advisable and appropriate that in cases of debatable and disputable facts, good reasonably arguable case, the same should be left to the Arbitral Tribunal. Similar view is expressed by this Court in the case of Vidya Drolia (supra).
Similar view is expressed by this Court in the case of Vidya Drolia (supra). Therefore, in the facts and circumstances of the case, though it is specifically observed and held that aspects with regard to ‘accord and satisfaction’ of the claims can be considered by the Court at the stage of deciding Section 11(6) application, in the facts and circumstances of the case, the High Court has not committed any error in observing that aspects with regard to ‘accord and satisfaction’ of the claims or where there is a serious dispute will have to be left to the Arbitral Tribunal. However, at the same time, we do not agree with the conclusion arrived at by the High Court that after the insertion of Sub Section (6A) in Section 11 of the Arbitration Act, scope of inquiry by the Court in Section 11 petition is confined only to ascertain as to whether or not a binding arbitration agreement exists qua the parties before it, which is relatable to the disputes at hand. We are of the opinion that though the Arbitral Tribunal may have jurisdiction and authority to decide the disputes including the question of jurisdiction and non-arbitrability, the same can also be considered by the Court at the stage of deciding Section 11 application if the facts are very clear and glaring and in view of the specific clauses in the agreement binding between the parties, whether the dispute is non-arbitrable and/or it falls within the excepted clause. Even at the stage of deciding Section 11 application, the Court may prima facie consider even the aspect with regard to ‘accord and satisfaction’ of the claims.” 24. As per the mandate of Apex Court in the case of Indian Oil Corporation Limited (supra), this Court can consider the aspect with regard to “accord and satisfaction” and on close scrutiny of the case, it is found in peculiar facts and circumstances of the case that after completion of contract after receiving due payments and getting Performance Guarantee (PG) and Security Deposit's (SD) to its credit, after sufficient period of time, raised the dispute. Such disputes cannot be countenanced or referred for arbitration because no party can be subjected to procedural formalities of arbitration on such pretext. Even if arguments of applicant are accepted then there may be spree of litigations after culmination of every contract.
Such disputes cannot be countenanced or referred for arbitration because no party can be subjected to procedural formalities of arbitration on such pretext. Even if arguments of applicant are accepted then there may be spree of litigations after culmination of every contract. In the considered opinion of this Court, no case is made out. No dispute existed between the parties prima facie, for referring the matter for arbitration. Therefore, matter cannot be referred for arbitration. 25. There is no subsisting dispute in the given facts and circumstances of the case. Hon'ble Apex Court in the case of Bharat Sanchar Nigam Ltd (supra) held in Para 45.1 as under: “45.1........While exercising jurisdiction under Section 11 as the judicial forum, the court may exercise the prima facie test to screen and knockdown ex facie meritless, frivolous, and dishonest litigation. Limited jurisdiction of the courts would ensure expeditious and efficient disposal at the referral stage. At the referral stage, the Court can interfere “only” when it is “manifest” that the claims are ex facie time barred and dead, or there is no subsisting dispute.” 26. Here, in the present set of facts there is no subsisting dispute exists because here the applicant was paid all his legitimate dues on 21/10/2019 and therefore, after settling the accounts primarily on 21/10/2019, after almost lapse of two and half year, applicant moved this application. Same is frivolous and ex facie meritless. Applicant is trying to take chance much after lapse of considerable period and this case falls under the category of dead wood also. 27. Resultantly, application sans merits and is hereby dismissed.