M/S SLR CONSTRUCTION PVT LTD v. GAIL INDIA LTD AND ANR

1. The present Petition under Section 9 of the Arbitration and Conciliation Act, 1996 has been filed by the Petitioner principally for securing and releasing the Petitioner’s admitted dues of Rs.2.08 crore; protection against unlawful cross-recoveries; securing/release of retained and guarantee amounts; and interim safeguarding of the larger arbitral claim before commencement of arbitration under the dispute resolution clauses contained in the contract entered into between the Petitioner and the Respondent.

2. The present Petition arises out of a long chain of contractual disputes, payment certification disputes, attempted cross-recoveries, and continued withholding of admitted dues by GAIL, all rooted in the Terminal Station Works (Part-E), Gorakhpur, under the Auraiya-Phulpur and Gorakhpur Spur Lines of the Phulpur-Haldia Pipeline Phase-I Project.

3. The genesis of the dispute traces back to 15.06.2017, when GAIL floated E-Tender No. 8000010840 for construction of four Sectionalizing Valve terminals (SV-5G, SV-6G, SV-7G and SV-8G) along with a Receiving Terminal at RT-HURL Gorakhpur. It is stated that the Petitioner participated in the aforesaid tender and emerged as the successful bidder. The Petitioner was awarded the Letter of Acceptance dated 28.05.2018. It is stated that the work was to be completed within a period of eight months, i.e. on or before 27.08.2018. However, it is stated that from inception the project was plagued by serious impediments, including non-availability of encumbrance-free sites despite, restricted access, waterlogging, pipeline interferences, delayed drawings and interdependent delays attributable to the larger integrated pipeline project. It is stated that the terminal works were never standalone works capable of completion within eight months but were intrinsically linked to the phased execution of the 165 km spur pipeline project.

4. It is stated that as execution progressed, the project timeline kept extending alongside the parent pipeline network. It is stated that the Gas supply under the network commenced on 06.11.2020, the integrated project was dedicated to the nation on 07.12.2021, and the RT-HURL terminal operations commenced on 08.12.2021. Material on record indicates that though valid extensions were granted up to 28.02.2022, and later up to 30.11.2022, disputes began surfacing regarding delayed processing of Running Account (RA) bills, especially the 23rd RA Bill amounting to approximately Rs.1.44 crores, allegedly withheld on pretexts of time extension issues and arbitrary deductions by the Operations and Maintenance team of the Respondent at Gorakhpur. The petitioner alleges that from January 2022 onward, Respondent imposed obligations beyond contractual scope, withheld payments through heavy retentions, and continued to interfere with bill processing, causing severe financial prejudice to the Petitioner. It is stated that the subject work was ultimately recorded as completed on 30.11.2022, while the Defect Liability Period expired on 29.11.2023. It is the case of the Petitioner that despite contractual completion and commercial use of the assets, legitimate dues were not released to the Petitioner and even the Performance Security of Rs.54,03,960/- was encashed on 30.12.2024.

5. It is stated that on 14.02.2024, when the Petitioner raised its 24th and Final Bill for Rs.4.32 crores, which was certified by the Project Management Consultant (PMC), M/s MECON, on 25.02.2025 for a cumulative contract value of approximately Rs.15.04 crores (excluding GST), determining immediate payable amount of Rs.2,74,22,708.41/- apart from retentions. It is stated that a Provisional Completion Certificate was simultaneously issued by the GAIL. It is stated that the GAIL itself acknowledged liability of the Petitioner by deducting TDS of Rs.3,89,219/on 31.03.2025, which, according to the Petitioner, is a recognition of payable dues by GAIL. It is stated that instead of paying the certified amount, GAIL withheld the said amount by linking it to disputes in other separate contracts (DDPL Part-A and Part-B), which, according to the Petitioner, had nothing to do with the contract in question. It is stated that DDPL Part-A and Part-B contracts were terminated by the GAIL by issuing letters dated 20.03.2025 and 22.03.2025, and an attempt was made by GAIL to recover the alleged losses from those contracts by adjusting them against money payable in the present contract.

6. Aggrieved by this, the petitioner approached this Court by filing a Petition, being O.M.P.(I)(COMM.) 191/2025, under Section 9 of the Arbitration Act. The said Petition was disposed of on 23.05.2025 on the undertaking furnished by GAIL that no recovery would be made from other contracts of the Petitioner. It is stated that relying on that undertaking, the petitioner sought reprocessing of its certified final RA bill through letter dated 20.07.2025, whereafter PMC, M/s MECON re-endorsed the bill on 06.08.2025 and issued a revised Provisional Completion Certificate. It is stated that although a revised payable figure of Rs.2,61,18,840.17/- was initially reflected, an arbitrary deduction of Rs.53,82,187.60/- was allegedly imposed on the Petitioner the very same day by the Engineer-in-Charge, resulting in a net certified and admitted payable sum of Rs.2,08,07,652.57/-, while substantial retentions were kept pending.

7. It is stated that the said amount has yet not been released by the Respondent despite the Respondent availing GST input credit on the same. The Petitioner has, therefore, filed the present petition seeking interim protection and release of admitted amounts before commencement of arbitration under the contract.

8. It is the case of the Petitioner that the amount of Rs.2,08,07,652.57/has been unduly and unjustifiably withheld by the Respondent/GAIL and the said amount must be released.

9. Section 9 of the Arbitration and Conciliation Act, under which the present Petition has been filed, is reproduced hereinbelow and the same reads as under: “Section 9 — Interim measures, etc. by Court (1) A party may, before, or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to a Court—

(i) for the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings; or

(ii) for an interim measure of protection in respect of any of the following matters, namely:— (a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement; (b) securing the amount in dispute in the arbitration;

(c) the detention, preservation or inspection of any property or thing which is the subjectmatter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;

(d) interim injunction or the appointment of a receiver;

(e) such other interim measure of protection as may appear to the Court to be just and convenient, and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it. (2) Where, before the commencement of arbitral proceedings, a Court passes an order for any interim measure of protection under sub-section (1), the arbitral proceedings shall be commenced within a period of ninety days from the date of such order or within such further time as the Court may determine. (3) Once the arbitral tribunal has been constituted, the Court shall not entertain an application under subsection (1), unless the Court finds that circumstances exist which may not render the remedy provided under section 17 efficacious.”

10. In the opinion of this Court, the relief sought in the present petition does not warrant exercise of jurisdiction under Section 9 of the Arbitration and Conciliation Act, 1996. Though the Petitioner seeks to characterize the prayer as one for securing the amount in dispute, the substance of the petition is for release/payment of alleged contractual dues. Section 9 of the Arbitration Act is intended for interim measures of protection and not as a substitute for adjudication of monetary claims or for granting final monetary relief at a preliminary stage. The disputes raised by the Petitioner as to wrongful withholding, deductions, retentions and alleged cross-adjustments require adjudication in accordance with the dispute resolution mechanism agreed between the parties.