M/S GEO MILLER & CO PVT LTD v. INDIAN OIL CORPORATION LIMITED

13. Learned Senior Counsel for the Petitioner further contends that time could no longer be treated as the essence of the contract once the Respondent was permitted to continue the work beyond the stipulated completion date, irrespective of whether the contractual owner had formally decided the issue of extension of time or levy of liquidated damages.

14. Learned Senior Counsel for the Petitioner placed reliance on Kailash Nath Associates v. Delhi Development Authority and Anr.[2] to contend that Respondent could not justify an automatic deduction of the maximum 10% merely upon proof of delay and the amount recoverable had to constitute reasonable compensation for a breach attributable to the petitioner.

15. Further, reliance was placed on J.G. Engineers Private Limited v. Union Of India and Anr.[3] to contend that Respondent could not unilaterally decide that the contractor was responsible for the delay and then impose liquidated damages.

16. Lastly, learned Senior Counsel for the Petitioner contended that the learned Sole Arbitrator failed to evaluate whether the stipulated deduction constituted reasonable compensation under Section 74 of the Indian Contract Act, 1872.

17. On these grounds, the Petitioner prays for setting aside the impugned order.

18. Upon reviewing the material on record, the controversy narrows down to two principal issues:-

(i) Whether the Respondent was justified in withholding 10%

(ii) Whether the Petitioner was entitled to additional compensation for extended stay at the project side.

19. There is no challenge pertaining to the clause of the contract which permits 10% liquidated damages. The case of the Petitioner is that since delay is attributable to Respondent, he cannot deduct 10% liquidated damages as per contract. In essence, the Petitioner invites this Court to reexamine factual questions regarding causation of delay and whether extension letters operated as unconditional waivers.

20. Adjudicating the submission as to who really caused the delay, would require a fresh appraisal of evidence and contractual correspondence, and exercise power well beyond the limited supervisory scope under Section 34 of the Act.

21. However, according to this Court, after analysing the evidentiary record, the learned Arbitrator led the plausible finding that the Respondent delayed the project by 270 days.

22. The impugned Award expressly considers the delay attributable to the Petitioner in mobilising resources at the project site, as well as the delays relating to the issuance and availability of Approved for Construction drawings.

23. It further records the Petitioner’s failure to expedite the execution of the works and to deploy adequate manpower, machinery, and other resources, despite repeated notices, reminders, by respondents.

24. The learned Arbitral Tribunal has thus examined the relevant correspondence, and the conduct of the parties, and the contemporaneous project records before determining responsibility for the delay.

25. The relevant findings from the arbitral award in this regard are reproduced as below: “I have carefully considered the facts and circumstances of the matter and the arguments of both sides. A perusal of the facts of the matter substantiated by the plethora of communication exchanged between the parties show that the Claimant was slow and negligent in fulfilling his obligations as specified under the contract. The slow pace of work can be ascertained from the fact that the Claimant deputed his authorized representative only on 2nd Feb 1997 after a delay of 2 months. Letter dated 17th January 1997 sent by EIL, Power of Attorney holders of the Respondent also show the delay on part of the Claimant. Provision of Clause 4.4.0.0 of the Contract provides that if there has been any delay in the final completion of the work at any job site or specific works in respect of which a separate progress schedule has been established, beyond the date for the final completion of the work or works aforesaid at job site as stipulated in the progress scheduled, the owner shall (without prejudice to any other right of owner in this behalf) be entitled to reduction in price % (one half percent of the total contract value for each week of delay or part thereof limited to a max. of 10% (ten percent) of the total contract value. Further provisions of Cl. 4.3.5.0 provides for procedure for obtaining extension of time which was not complied with by the Claimant. Contract Clause 4.3.5.0 provides as follows: “Within 7 (seven) days of the occurrence of any act, event or omission which, in the opinion of the Contractor, is likely to lead to delay in the commencement or completion of any particular work(s) or operation(s) or the entire work at any job site(s) and as such it would entitle the Contractor for an extension of the time specified in this behalf in the Progress Schedule (s), the contractor shall inform the site engineer and the engineer-in-charge in writing of the occurrence of the act, event or omission and the date of commencement of such occurrence. Thereafter, if even upon the cessation of such act or event of the fulfillment of the omission, the contractor is of opinion that an extension of the time specified in the Progress Schedule relative to any particular operation(s) or item(s) of work of the entire work at any job site is necessary, the contractor shall within 7 (seven) days after the cessation or fulfillment as aforesaid make a written request to the Engineer-in-charge for extension of the relative time specified in the progress schedule, and the Engineer-in-charge may at may time prior to completion of the work extend the relative time of completion in the progress schedule for such period(s) as he considers necessary, if he is of the opinion that such act/event/omission constitutes a ground for extension of time in terms of the Contract and that such act/event/omission has in fact resulted in insurmountable delay to the contractor. The opinion/decision of the Engineer-in-charge in this behalf and as to the extension necessary shall, subject to the provisions of Clause 4.3.6.0 hereof be final and binding upon the contractor.” The Claimants have argued that Owner doesn't include representative or agents and that only IOCL as an owner was empowered to terminate the agreement however IOCL did not choose to terminate the contract. The Claimant has further argued that till date there is no complaint about the quality of the work executed by the Claimant and the same is being fully used by the Respondent. The Claimants have further stated that the Respondent does not have any right to withhold the amount by permitting the Claimant to execute the work and without terminating the contract and suspending the work and that there was De-facto extension of the contract which is evidenced by the communication between the parties evidently showing that the contract has been extended mutually between the parties. The Counsel for the Claimant has also stated that if there is extension clause in the contract, time cannot be said to be the essence. The Claimant has relied on Section 55 of the Contract Act and states in the present case, the conduct of the parties clearly shows that the Respondent never treated time as an essence and permitted the claimant to continue the execution of the work. The Counsel has relayed on Arosan Enterprises Ltd V. UOI & Ano. (1999) 9 SCC 449 (para 14) and states that when the contract itself provides for extension of time, the same i.e. time cannot be termed to be essence of contract. The counsel also argues that due to the delay caused in the completion of the project no damages or loss was caused to the Respondents. I have also considered the arguments of counsel for the Respondent that the payment for the execution of work has already been made to the satisfaction of the Claimant and subsequent to which it has issued the 'NOC' on 03.11.99 without any undue pressure. The Respondent states the present claim of the Claimant is therefore, liable to be dismissed on this ground alone. The counsel has further argued that the time was the essence of the contract and the entire work was to be completed Arbitral within 9 months from the date of fax of intent. This Arbitral tribunal attention has also been drawn to Clause 2.3.1.0 of GCC wherein the Claimant had to submit all the drawings within 15 days from the date of acceptance of the Tender or 15 days before the proposed date of commencement of the relative work, whichever shall be earlier. Clause 4.3.7.0 of the Contract has also been mentioned which defines the circumstances under which the contractor is eligible for extension of time for completion of work and for such extension rain is not covered including Clause 4.3.5.0 which provides if any extension had to be obtained for any hindrances then the contractor had right to apply for time extension under this provision failing which it is assumed that all the works would be executed as per the contract which in this case the Claimant did not do. It is also pointed out by the Respondent that scheduled date of completion of work was September 5, 1997 whereas the date of rain is November 7, 1997. Thus after hearing both the sides and after examination of the plethora of communication exchanges between the parties it is clear that the Respondent repeatedly communicated to the Claimant regarding the delay of the project. From the facts and circumstances of the matter, it is clear that there has been a delay in executing the work and it cannot be said that time was not the essence of the contract. There is also no document to show that the Claimant complied with the provisions of cl. 4.3.6.0 as was required under the contract. The arguments of the Claimant that only the owner could have taken the decision and the Engineer Incharge was not competent to take the decision of not allowing the extension of time does not hold water as Engineers India Limited (EIL) are clearly the power of attorney holders for Indian Oil Corporation Limited (IOCL) and therefore, this argument of the Claimant also fails. Hence I hold the Respondent are well within their legal rights to price reduction as envisaged under the provisions of cl. 4.4.0.0 of the contract up-to maximum of 10% of the total contract value as there was a delay in completing the work.”

26. It is evident from the record that the view taken by the learned Sole Arbitrator is entirely plausible. This Court in exercising its constraint jurisdiction under Section 34 cannot interfere merely because another view is possible, unless the findings are shown to be by no evidence, ignored vital evidence and adopt an interpretation so irrational as to be impermissible.

27. The Hon’ble Supreme Court in Associate Builders v. DDA[4], reiterated that the Court exercising jurisdiction under Section 34 does not seek as a Court of appeal and cannot re-appreciate evidence. Interference is limited strictly to cases where findings are perverse based on no evidence or fundamentally irrational. Paragraph 33 reads as under:

28. The Apex Court had emphasized that plausible construction of contractual terms by Arbitrator must be respected.

29. It is also held time and again by Hon’ble Apex Court that Courts cannot re-evaluate evidence under Section 34 simply to determine whether an ultimate factual conclusion could have been reached unless the award is based on no evidence or a vital evidence is ignored.

30. Further, it is also borne out from the contract itself that the clause permits a damage of 10%, which does not seem to this Court to be unreasonable or in access.

31. The contention of learned Senior Counsel for the Petitioner relying on J.G. Engineers (P) Ltd. v. Union of India (supra) that the disputed question as to which party caused the delay must be adjudicated independently is not convincing. In the present case, that requirement was satisfied because the Arbitrator himself examined the correspondence and contractual provisions and recorded a finding that the Claimant was responsible for the delay, therefore, J.G. Engineers (supra) does not by itself invalidate the award.

32. With regards to reliance placed on Kailash Nath (supra), in the present case, the Arbitrator has expressly found that the contractor committed breach by failing to complete the work by 05.09.1997 and did not establish compliance with the contractual procedure for extension of time and was repeatedly informed about the delay.

33. Further, Clause 4.4.0.0 of the subject agreement does not provide for forfeiture of a fixed deposit, but prescribes a graded price reduction of 0.5% for each week of delay, capped at 10%, thereby linking compensation to the duration of the breach.. Thus, unlike Kailash Nath (supra), the present case involves an adjudicated breach and a delay based compensation clause.

34. The remaining objections raised by the Petitioner are consequential to the primary findings on responsibility for delay, once the Arbitrator determine that the delay was attributable to the Petitioner, thereby entitling Respondent to invoke Clause 4.4.0.0 is sustained under reasonable and plausible view, the foundation of the challenge to the liquidated damages collapsed.

35. In view of the above, the Petitioner’s objection to the impugned arbitral award dated 30.11.2011 is devoid of merit and stands rejected.

36. Accordingly, the present petition is dismissed along with all pending applications with no orders as to costs.

OM PRAKASH SHUKLA, J. JULY 27, 2026/at/gunn