No-Claim-Certificate (NCC) Executed Under Duress, Contractor Entitled For Damages : Delhi HC Reiterates

The bench of Justice Manoj Kumar Ohri held that an endorsement given by Contractor, while seeking extension of time, would not come in its way in seeking escalation cost, especially when the delay was attributable to the employer.

The Court further held that mere absence of an escalation clause would not preclude a party from claiming escalation, as a measure of damages suffered by it, if the other party is guilty of causing delays in the completion of the work.

Facts

The parties entered into an agreement dated 13.09.2014 by which the respondent/contractor was entrusted with the work of widening of a bridge. The work was to be completed within 18 months. Clause 5 of the agreement provided for extension of time in certain situations where the delay was not attributable to the contractor.

There was a delay in the execution of the project work and certain extension of times were sought by the respondent and granted by the petitioner. It is noteworthy that the respondent had given an undertaking not to make any claims for the extended period of project. However, disputes arose between the parties w.r.t payments under the final bill. Accordingly, the respondent/contractor invoked the arbitration and filed its claims before the arbitrator.

The arbitrator, vide the impugned award, allowed the claims of the respondent by holding the petitioner liable for the delays in the completion of the project work. The tribunal rejected the contention of the petitioner that the claims were not maintainable as the respondent had executed an NCC in favour of the petitioner forgoing its claims. The tribunal held that the NCC was executed under duress as respondent’s bills were pending and the retention money was lying with the petitioner and it was a pre-condition to the EOT.

Grounds of challenge

The petitioner challenged the award principally on two heads given hereunder:

• The claims of the respondent regarding escalation and prolongation of the contract were not maintainable as it had already executed an endorsement not to claim any damages qua these heads.
• The plea of duress was never raised by respondent at the time or even after giving the subject endorsement and it was only before the arbitral tribunal that such a ground was taken for the first time.
• The arbitrator erred to award escalation cost in favour of the respondent in absence of any such clause in the agreement, the relief so granted by the arbitrator is beyond the terms of the contract and the award is liable to be set aside to that extent.

Analysis by the Court

At the outset, the Court observed that the arbitral tribunal has categorically held the petitioner liable for causing the delay in the completion of the project work and that this finding of the tribunal remains unchallenged.

The Court held that issuance of NCC or other similar ‘no claim’ certificate by a party, in favour of another contracting party, by itself does not disentitle the party having a claim from explaining the circumstances in which NOC is issued. Reverse of the same is equally true. There is no absolute rule which outrightly negates the evidentiary value of NOC’s or ‘no claim’ certificate. It can’t be said that in every case NOC or ‘no claim’ certificate should be treated as unreliable evidence and the giver of the certificate enjoys some sort of immunity in law that will save his rights despite issuance of a ‘no claim’ certificate. Rather, issuance of ‘no claim’ certificate must be treated as prima facie evidence against the issuer of such certificate, and a heavy burden must be cast upon him to prove that the same was not given voluntarily.

The Court then laid down a list of circumstances that the Court/Tribunal should take into consideration while deciding on evidentiary value of such certificate/endorsements. These are:

• Nature of relationship between the contracting parties;
• Inequality in bargaining power;
• The dominant position that a party may enjoy;
• Nature of transaction;
• Remedies available under the contract.

The Court further held that mere absence of an escalation clause would not preclude a party from claiming escalation, as a measure of damages suffered by it, if the other party is guilty of causing delays in the completion of the work.

Accordingly, the Court dismissed the challenged.

Case Title: Government of NCT of Delhi v. R.S. Sharma Contractors Pvt Ltd, OMP(COMM) 130 of 2023

Citation: 2023 LiveLaw (Del) 716

Counsel for the Petitioner: Mr. Anupam Srivastava, ASC, GNCTD with Mr. Dhairya Gupta and Mr. Vasuh Misra, Advocates.

Counsel for the Respondent: Mr. M.K. Ghosh, Advocate with Mr. H.S. Sharma, AR

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