Contract Clause Favouring Employer Over Contractor In Claiming Damages Are Deemed Knowingly Included If Not Challenged Before Tribunal: Delhi HC
The Delhi Excessive Courtroom bench of Justice Manoj Kumar Ohri has held that clauses of the contract giving a bonus to the employer over the contractor in claiming damages, if not questioned earlier than the Arbitral Tribunal or on the time of formation or execution of the contract, can’t be questioned beneath part 34 of the Arbitration Act because the events are deemed to have knowingly integrated such clauses within the contract.
Temporary Details:
The current petition has been filed beneath part 34 of the Arbitration and Conciliation Act, 1996 (Arbitration Act) towards an award handed by the Arbitral Tribunal (AT) by which the declare No. 1 with respect to idling of males, equipment and sources of the petitioner was rejected.
The impugned award was delivered in context of contract executed between the events beneath which the work was to be accomplished inside 30 months from the date of letter of acceptance. The date by which the work was to be accomplished was 20.04.2014 and the work was accomplished on 30.06.2018.
The claims had been filed by the Petitioner earlier than the AT. The AT after listening to the submissions of each the events rejected the declare No. 1 which has been challenged within the current petition. The AT held that clause 8.3 of the topic contract gives that the delay by the engineer in handing over the positioning and different mandatory issues wouldn’t entitle the contractor to damages or compensation thereof.
The AT whereas rejecting the stated declare noticed that the Respondent has supplied extension of completion interval whereas taking into consideration the delay which was not attributable to the Petitioner together with not making work websites obtainable and the Respondent had admitted to compensation for value variation in the course of the prolonged interval.
The Petitioner submitted that the AT mechanically utilized clauses 2.2 and eight.2 and rejected the declare with out giving any causes or contemplating the deserves of the declare. Time was of the essence of the contract and the AT failed to contemplate whether or not the employer may very well be exempted from paying damages as per Clause 8.3 GCC even after failing to carry out its obligations beneath part 55 of the Indian Contract Act and any declare arising therefrom beneath part 73 of the Contract Act.
It was additional submitted that clause 8.3 GCC which disentitles the contractor from claiming any damages is opposite to part 73 of the Indian Contract Act and elementary coverage of Indian Legislation. Reliance was positioned on the Judgments in Simplex Concrete Piles (India) Ltd vs. Union of India and G. Ramachandra Reddy vs. UOI.
It was additional submitted that the Respondent dedicated delay in offering work fronts on time and the handing over the land was additionally delayed.
It was additional submitted that clause 17.1 of the GCC is couched in a broad language and empowers the AT to award compensation on account of extension of time and extra fee based mostly on proof.
Per contra, the Respondent submitted that the plea that clauses 2.2 and eight.3 of the GCC are opposite to the elemental coverage of Indian Legislation was not taken earlier than the Arbitrator nor was judgment of the Supreme Courtroom in Simplex Concrete (Supra) cited subsequently this plea can’t be allowed to be raised for the primary time beneath part 34 of the Arbitration Act.
It was additional submitted that the petitioner didn’t intimate its intention to hunt compensation when a letter was despatched in search of extension of time subsequently part 55 of the Indian Contract Act is just not relevant to the details of the current case.
In rejoinder, the Petitioner submitted that Petitioner had reserved the appropriate to prices and that it was conveyed to the Respondent that there can be price implications.
Observations:
The court docket famous that clause 2.2 offers with entry to and possession of the positioning and gives for the results of delay in offering the work web site to the contractor. It additional states that if the work web site is just not supplied inside the stipulated time interval, the contractor can intimate the engineer inside 28 days after the failure of handing over of the positioning. The Engineer can solely lengthen the time interval and talk the identical to the contractor. Nonetheless, no financial claims will be sought by the contractor on this floor.
It additional famous that Clause 8.3 of the GCC bars the contractor from claiming any financial compensation on the bottom of failure of the Employer or the Engineer in handing over the positioning, issuing notices, giving directions or offering mandatory supplies. It’s additional supplied that this doesn’t change the character of the contract and the contractor is just entitled to hunt extension of time, not financial compensation.
The court docket additional noticed that in distinction, the employer is entitled to say damages for any loss suffered on account of any delay dedicated by the contractor. This scheme was knowingly adopted by each the events and it was not even challenged neither earlier than the AT nor on the time of formation and execution of the contract subsequently the Petition is now allowed to problem the award beneath part 34 of the Arbitration Act by not directly difficult clause 8.3.
It additional noticed that the petitioner’s conduct exhibits that it was conscious of the association entered into between the events as no compensation was claimed whereas in search of extension of time on account of the failure of the Respondent in handing over the positioning and acquiring approvals. The extension of time was granted by the Respondent with out imposing any penalty.
It additional noticed that nevertheless, the declare for compensation was raised subsequently by way of a letter which was denied by the Respondent citing clause 2.2 of the GCC. It’s effectively settled that the AT is the grasp of details and proof and is in a greater place to interpret the clauses of the contract based mostly on the factual context. Moreover, the Supreme Courtroom in Union of India v. Susaka (P) Ltd held {that a} plea not raised earlier than the AT quantities waiver or clear abandonment and can’t be raised later in the proceedings beneath part 34 of the Arbitration Act.
The court docket held that because the clauses in query within the current petition weren’t questioned earlier than the AT, the court docket beneath part 34 of the Arbitration Act is just not empowered to enter right into a detailed evaluation beneath the restricted scope of interference beneath part 34 of the Arbitration Act.
Accordingly, the current petition was dismissed.
Case Title: M/S LARSEN & TOUBRO LIMITED. Versus RAIL VIKAS NIGAM LIMITED
Case Quantity: O.M.P. (COMM) 278/2017
Judgment Date: 01/07/2025
For Petitioner: Mr. Manu Seshadri, Mr. Siddharth Shekliar, Mr. Rishi Rai Mukherjee, Mr. Sahil Manganani and Ms. Aakriti Gupta, Advocates.
For Respondent: Mr. Udit Seth, Mr. Anil Seth, Mr. Divyanshu Singh and Mr. Vivek, Advocates
