Mere Grant Of Extension Of Time To Contractor Does Not Necessarily Mean That NHAI Was Responsible For The Delays: Delhi High Court

The High Court of Delhi has held that mere recommendation by Independent Engineer (IE) for Extension of Time (EOT) to the contractor does not necessarily mean the NHAI was responsible for the delays in the completion of the project work. The division bench of Justices Vibhu Bakhru and Amit Mahajan held that when the agreement between the parties provides for compensation and extension of concession period in favour of the contractor only in the eventuality of a material breach by NHAI, the arbitrator cannot award damages or grant extension of concession period, without first determining the issue of breach of material breach of the agreement by NHAI, simply for the reason that the IE has recommended EoT in favour of the Contractor. The Court held that recommendation by IE for EoT could be for a variety of reasons such as justifiable delays beyond the control of the contractor, force majeure events, etc., and does not always mean that NHAI has been in breach of its obligation or the reasons for delays were attributable to it. Facts The parties entered into a Concession Agreement dated 16.11.2009 on BOT basis. The project work under the agreement was to be completed within a period of nine hundred and ten days. Admittedly, the completion of the project got delayed substantially. Accordingly, the Respondent (Contractor) had applied to EoT on various occasions and requested for the issuance of Provisional Completion Certificate (PCC). On 13.10.2014, respondent furnished an undertaking not to raise any cost claims with regard to resources (manpower and machinery) which had remained idle during the construction period. On 05.11.2014, the parties entered into a Supplementary whereby respondent agreed not to raise any claim in respect of idling of resources (manpower and machinery), increase in costs of material, delay in construction of the highway etc. It further agreed not to seek any extension of the concession period. However, it retained the right to seek extension of the concession period on account of any valid factors arising after the actual construction of the highway project in terms of the CA. Thereafter, on 27.11.2014, the IE issued the PCC and the respondent commenced toll collection with effect from 28.11.2014 (PCOD). The IE recommended an interim EoT for construction upto 27.11.2014 (that is, extension of time for a period of 518 days). The IE subsequently also reiterated its recommendation for EoT by its letter dated 23.09.2015. On 19.06.2017, the respondent sought compensation under Clauses 35.2 and 35.3 of the CA on account of delay of 518 (five hundred and eighteen) days without quantifying the same. In addition, IRB also sought extension of concession period by 518 days to compensate the delay which it claimed was attributable to “NHAI / Railway Authority / Irrigation Authority”. Thereafter, the respondent invoked the dispute resolution clause and sought conciliation of the disputes. Subsequently, the respondent issued a notice of arbitration and the dispute was referred to an arbitral tribunal consisting of three members. The arbitrator allowed the claims filed by the respondent. Aggrieved thereby, NHAI challenged the award under Section 34 of the Act. However, the Ld. Single judge dismissed the challenge petition. Accordingly, NHAI filed the appeal under Section 37 of the Act. Impugned Award The arbitral tribunal, by way of a 2:1 majority, allowed the claims of the respondent. It held that the IE was the final authority qua the issue of EoT and that it had recommended the EoT after being satisfied that the reasons for delay were not attributable to the respondent, ergo, it was entitled to get compensation for the delay and also seek extension of operation period. The tribunal held that the delays were attributable to NHAI and it was in material breach of the CA. The tribunal also held that the Supplementary Agreement was an outcome of economic duress and coercion, therefore, it would not preclude the Respondent from claiming damages. It held that the Respondent entered into the supplementary agreement as it was made a pre-condition to the issue of PCC. It held that the execution of Supplementary Agreement would not act as waiver of the rights by the respondent as there was no consideration for it to waive its right under the Supplementary Agreement as the delay was purely attributable to NHAI. The Arbitral Tribunal also rejected NHAI’s contention that there was delay on the part of the respondent in raising the claims including the claim that the Supplementary Agreement was executed by it under duress. It held that the respondent did not immediately raise the issue of coercion for the reason that there was threat of termination of the CA. In the alternative, the Arbitral Tribunal also held that even if the Supplementary Agreement was held to be valid, it did not preclude respondent...

Mere Grant Of Extension Of Time To Contractor Does Not Necessarily Mean That NHAI Was Responsible For The Delays: Delhi High Court

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