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Power Under Section 9 Of The A&C Act Cannot Be Exercised For Directing Specific Performance Of The Contract: Reiterates Delhi High Court

Parina Katyal
30 Jun 2022 2:00 PM GMT
Power Under Section 9 Of The A&C Act Cannot Be Exercised For Directing Specific Performance Of The Contract: Reiterates Delhi High Court
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The Delhi High Court has reiterated that power under Section 9 of the Arbitration and Conciliation Act, 1996 (A&C Act) cannot be exercised for directing specific performance of the contract itself.

The Division Bench of Justices Jyoti Singh and Anoop Kumar Mendiratta held that a direction to the opposite party to extend the contract for a further period would amount to granting specific relief of the contract, which is beyond the scope of the powers of the Court under Section 9 of the A&C Act. The Court ruled that power under Section 9 can only be exercised for preservation of the subject matter of the dispute till the decision of the Arbitral Tribunal.

A Concession Agreement was entered into between the appellant Pink City Expressway Private Limited and the respondent National Highways Authority of India (NHAI). Under the said Concession Agreement, the appellant was required to undertake certain work on a particular section of the National Highway 8. The appellant also operated a toll plaza for collection of toll.

The appellant sought approval of the respondent for extension of the Concession Period under the said Concession Agreement. The respondent did not grant extension for the entire period claimed by the appellant and the appellant was granted interim extension only up to a certain date. The respondent also threatened to forcibly takeover the toll plazas operated by the appellant. Thereafter, the respondent issued a notice inviting a fresh tender, calling for bids from third-parties to collect toll on the said section of the National Highway, for the period post the expiry of the Concession Period granted to the appellant. Consequently, the respondent awarded a fresh tender to the selected third-parties.

The appellant filed a petition under Section 9 of the A&C Act seeking interim protection of its rights under the Concession Agreement. The Single Judge dismissed the petition of the appellant. Thereafter, the respondent forcibly took possession of the toll plazas.

Against the order of the Single Judge, the appellant filed an appeal before the Division Bench of the Delhi High Court.

The appellant Pink City Expressway submitted before the High Court that as per the Concession Agreement, the Concession Period was deemed to be automatically extended if the Actual Traffic at the Highway fell short of the Specific Target Traffic. The appellant averred that an Independent Engineer (IE) made a factual determination regarding the same and recommended extension of the Concession Period up to a certain date.

The appellant contended that the respondent by refusing to extent the Concession Period as recommended by the Independent Engineer, contravened the Concession Agreement. The appellant added that once the Independent Engineer had factually determined the extension of the Concession Period, there was no scope for further approval from the respondent.

The appellant averred that the fresh tender floated by the respondent was illegal since the Concession Agreement between the parties was not terminated.

The respondent NHAI submitted that the appellant did not challenge the decision of the respondent of granting an extension only up to a certain period. Thus, the respondent contended that no further extension of the Concession Period could be granted to the appellant.

The respondent averred that the appellant had filed a writ petition against the fresh tender awarded by the respondent to the third parties, however, the same was withdrawn by the appellant due to the pendency of its petition under Section 9 of the A&C Act. The respondent added that the appellant failed to challenge the tender awarded by the respondent to the third-parties in its petition filed under Section 9 of the A&C Act.

The respondent added that no specific performance of the Contract between the parties could be granted in a petition filed under Section 9 of the A&C Act for interim measures.

The Court observed that the Single Judge, in its order dismissing the petition under Section 9 of the A&C Act, had held that prima facie there was no automatic extension of the Concession Period. The Single Judge had noted that the appellant had failed to challenge the decision of the respondent of granting an extension of the Concession Period only up to a certain period.

The High Court noted that the Single Judge had also observed that the appellant had withdrawn its the writ petition challenging the award of tender in favour of the third parties and that the said third-parties were not impleaded in the petition filed under Section 9 of the A&C Act for interim measures. Therefore, the Court observed that the Single Judge had ruled that the issuance of tender by the respondent in favour of the third-parties had attained finality.

The High Court further observed that the Single Judge had held that grant of the relief sought by the appellant in its petition under Section 9 would amount to extending the Contract between the parties in contrivance to the decision of the respondent, wherein the respondent had agreed to extended the Concession Agreement only up to a certain period. The Single Judge had also ruled that grant of the said relief sought by the appellant would also contravene the provisions of the Specific Relief Act, 1963.

The High Court held that the appellant had failed to challenge the decision of the respondent of not granting any further extension under the Concession Agreement, beyond the extension already granted to the appellant. The Court ruled that in the absence of the said challenge, the appellant could not seek further extension of the Concession Period.

The Court added that the law regarding the scope of interference in a petition under Section 9 of the A&C Act for interim measures is no longer res integra.

The Court ruled that power under Section 9 of the A&C Act can only be exercised for preservation of the subject matter of the dispute till the decision of the Arbitral Tribunal. The Court added that the power under Section 9 cannot be exercised for directing specific performance of the contract itself.

The Court held that a direction to the respondent to extend the Contract for a further period, beyond the extension already granted by the respondent, would amount to granting specific relief of the contract. The Court ruled that this is beyond the scope of the powers of the Court under Section 9 of the A&C Act.

The Court observed that the Division Bench of the Delhi High Court in the case of DLF Ltd. versus Leighton India Contractors Private Ltd. & Anr. (2021) had held that the scope of relief under Section 9 of the A&C Act cannot be extended to directing specific performance of the contract.

The Court held that since the appellant had withdrawn the writ petition filed by it against the fresh tendering process initiated by the respondent, the appellant cannot challenge the award of tender by the respondent in favour of the third-parties.

The Court noted that the appellant had not challenged the tendering process and the consequent award of the fresh tender to the third parties, in the petition filed by it under Section 9 of the A&C Act. The Court further observed that even after withdrawing the writ petition, the appellant did not amend its petition under Section 9 to incorporate the said challenge.

Thus, the Court dismissed the appeal.

Case Title: Pink City Expressway Private Limited versus National Highways Authority of India & Anr.

Citation: 2022 LiveLaw (Del) 598

Dated: 15.06.2022 (Delhi High Court)

Counsel for the Appellant: Mr. Manoj Swarup, Senior Advocate with Mr. Suryadeep Singh, Ms. Radha R. Tarkar, Ms. Vidisha Swarup, Ms. Kriti Dang, Mr. Aaron Shaw and Mr. Kaustabh, Advocates

Counsel for the Respondents: Mr. Parag P. Tripathi, Senior Advocate with Mr. Ankur Mittal, Mr. Abhay Gupta and Mr. Debojyoti Sengupta, Advocates for Respondent No.-1.

Mr. Raunak Dhillon and Ms. Ananya Dhar Choudhury, Advocates for Respondent No. -2.

Click Here To Read/Download Order

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