Government of NCT of Delhi v. R.S Sharma Contractors Pvt Ltd

8. It was further contended that subsequent to such extension, the Contractor never claimed that the said endorsement was made under any duress. In fact, no such allegation was made in its statement of claim filed before the AT. Learned counsel has referred to the decision of the Supreme Court in Associate Builders v. Delhi Development Authority reported as (2015) 3 SCC 49, Ssangyong Engineering & Construction Co. Ltd. v. National Highways Authority of India (NHAI) reported as MANU/SC/0705/2019, and State of Orissa v. Sudhakar Das (Dead) by LRs reported as (2000) 3 SCC 27.

9. Per contra, learned counsel for Contractor has defended the impugned Award, by contending that the delay of 1041 days was attributable to the petitioner, as correctly held by the AT. The Contract had provided for such extension of time per Clause 5.[2] and 5.4. It was further contended that the Contractor was forced to give the endorsement in its letter seeking extension of time, as by that time, its security as well as payments towards final bill amounting to Rs. 66 lacs and Rs. 31 lacs respectively, were pending with the petitioner. Since the contract is silent upon the issuance of any ‘no claims’ certificate, the endorsement was clearly under duress. In support, he has referred to the judgments in P.M. Paul v. Union of India reported as 1989 Supp (1) SCC 368, K.N. Sathyapalan (Dead) By LRs. v. State of Kerala & Anr. reported as (2007) 13 SCC 43 and Assam State Electricity Board & Ors. v. Buildworth Private Limited reported as (2017) 8 SCC 146.

10. The scope of Section 34 of the A&C Act has come to be defined in a plethora of decisions. Supreme Court in UHL Power Co. Ltd. v. State of H.P. reported as (2022) 4 SCC 116, has expounded its scope as under:-

17. A similar view, as stated above, has been taken by this Court in K. Sugumar v. Hindustan Petroleum Corpn. Ltd., where it has been observed as follows:

11. The meaning and scope of patent illegality has been explained by the Supreme Court in Associate Builders (Supra), in the following manner:-

This last contravention must be understood with a caveat. An arbitral tribunal must decide in accordance with the terms of the contract, but if an arbitrator construes a term of the contract in a reasonable manner, it will not mean that the award can be set aside on this ground. Construction of the terms of a contract is primarily for an arbitrator to decide unless the arbitrator construes the contract in such a way that it could be said to be something that no fair minded or reasonable person could do.”

12. Recently, in Delhi Airport Metro Express Pvt. Ltd. v. Delhi Metro Rail Corporation, reported as (2022) 1 SCC 131, Supreme Court explained the expression ‘patent illegality’ in the following manner:-

13. The Arbitral Tribunal observed that delay in execution of Project was attributable to the petitioner. The relevant extract of the impugned award reads as under:- “7.5.5.6. Finding & Decision of the Tribunal 7.5.5.6.1. This is quite unusual as the site of the work is invariably mentioned in the tender document. In any case, the undisputed fact is that in the agreement, it is mentioned that the site for the work is available. This statement is absolute and firm and without any rider. Admittedly, the hindrance free site was to be handed over to claimant on date of commencement. 7.5.5.6.2. There is no gainsaying that the site was first pre-requisites for commencement of the work and thus it was fundamental reciprocal obligation/promise of the respondent to provide site. 7.5.5.6.3. Section 46 of the Indian Contract Act, 1872 provides as under: "Where, by the contract, a promisor is to perform his promise without application by the promisee, and no time for performance is specified, the engagement must be performed within a reasonable time." 7.5.5.6.4. Explanation: The question "What is a reasonable time" is, in each particular case, a question of fact. 7.5.5.6.5. Given the fact that the stipulated time for completion of work with a estimated cost of tender of Rs. 16,33,06,6311- was 18 months, I am of the view that the respondent was under obligation to provide hindrance free site & drawing immediately after the stipulated date of start on 13.09.2014 particularly as stipulated time of contract was 18 months. 7.5.5.6.6. Admittedly, the claimant completed the work. The overall position, based on the facts and figures as brought out by the claimant and admitted by respondent as per EOT proforma filed by the Respondent vide letter dated 23.08.2022 which is on record, is mainly given as under: i. Hindrance due to pile design. ii Due to change of methodology of boring of piles. iii Hindrance due to change of level of deck slap iv Hindrance due to NGT order for closure of Hot mix plant in winter season v. Hindrance due to funds vi. Monsoon 7.5.5.6.7. Due to these admitted hindrances the work was delayed for 1041 days whereas the Claimant has claimed the delay for 1042 days and the Respondent admitted the delay for 1047 days as justified delay against the required EOT for only 1041 days. 7.5.5.6.8. The Respondent has submitted that they have granted EOT without levy. 7.5.5.6.9. It has been observed by me that all the hindrances are not attributable to the contractor. Delay is mostly due to inter departmental correspondence and factual site condition and availability of materials etc. in the market. Though, no individual can be held responsible for hindrances/delays but the systems as a whole is responsible for which the Respondent is only responsible. 7.5.5.6.10. Having regard to relevant facts as discussed above, I am of view that respondent has committed a serious breach which is of the most fundamental in nature and which goes to very root of contract. Thus, the Respondent is entirely responsible for the prolongation of contract.”

14. Pertinently, the aforesaid findings of the AT have not been assailed by the petitioner. Further, during the course of arguments, apart from challenging the impugned Award on the ground of perversity, no other submission has been addressed. In fact, the AT observed in the para 7.5.5.6.7, extracted hereinabove, that the petitioner admitted delay of 1047 days as justified delay, whereas the Contractor’s request for extension of time was only for 1041 days.

15. The petitioner contended that Contractor’s undertaking, in the form of endorsement, was without any duress. Examining the said contention in light of terms of the Contract, it is seen that Clause 5 of the Contract provided that contractor is entitled for seeking extension of time. The relevant clause reads as under:- “The time allowed for execution of the Works as specified in the Schedule 'F' or the extended time in accordance with these conditions shall be the essence of the Contract. The execution of the works shall commence from such time period as mentioned in schedule 'F' or from the date of handing over of the site whichever is later. If the Contractor commits default in commencing the execution of the work as aforesaid, Government shall without prejudice to any other right or remedy available in law, be at liberty to forfeit the earnest money & performance guarantee absolutely”. 5.[1] As soon as possible after the Contract is concluded, the Contractor shall submit a Time and Progress Chart for each mile stone and get it approved by the Department. The Chart shall be prepared in direct relation to the time stated in the Contract documents for completion of items of the works. It shall indicate the forecast of the dates of commencement and completion of various trades of sections of the work and may be amended as necessary by agreement between the Engineer-in-Charge and the Contractor within the limitations of time imposed in the Contract documents, and further to ensure good progress during the execution of the work, the contractor shall in all cases in which the time allowed for any work, exceeds one month (save for special jobs for which a separate programme has been agreed upon) Complete the work as per mile stones given in Schedule 'F'. 5.[2] If the work(s) be delayed by:

(i) force majeure, or

(ii) abnormally bad weather, or

(iii) serious loss or damage by fire, or

(iv) civil commotion, local commotion of workmen, strike or lockout, affecting any of the trades employed on the work, or

(v) delay on the part of other contractors or tradesmen engaged by Engineer-in-Charge in executing work not forming part of the Contract, or

(vi) non-availability of stores, which are the responsibility of Government to supply or

(vii) non-availability or break down of tools and Plant to be supplied or supplied by Government or

(viii) any other cause which, in the absolute discretion of the Engineer-in-Charge is beyond the Contractor's control. then upon the happening of any such event causing delay, the Contractor shall immediately give notice thereof in writing to the authority as indicated in Schedule 'F' but shall nevertheless use constantly his best endeavours to prevent or make good the delay and shall do all that may be reasonably required to the satisfaction of the Engineer-in-Charge to proceed with the works. 5.[3] Request for rescheduling of Mile stones and extension of time, to be eligible for consideration, shall be made by the Contractor in writing within fourteen days of the happening of the event causing delay on the prescribed form to the authority as indicated in Schedule 'F'. The Contractor may also, if practicable, indicate in such a request the period for which extension is desired. 5.[4] In any such case the authority as indicated in Schedule 'F' may give a fair and reasonable extension of time and reschedule the mile stones for completion of work. Such extension shall be communicated to the Contractor by the authority as indicated in Schedule 'F' in writing, within 3 months of the date of receipt of such request. Non application by the contractor for extension of time shall not be a bar for giving a fair and reasonable extension by the authority as indicated in Schedule 'F' and this shall be binding on the contractor.”

16. The petitioner’s contention that Contractor never claimed that the endorsement was given under duress, is fallacious as the Contractor in its rejoinder before the AT, clearly outlined the circumstances under which the said endorsement was given. This Court also finds strength in the submission of the learned counsel for Contractor that, only when the petitioner tried to take the benefit of the endorsement in its statement of defence, did the Contractor give explanation in its rejoinder. Whether such an endorsement can be enforced against the claimant to deny its legitimate claims, especially when the impugned Award holds the petitioner guilty of delay, would not require much deliberation, in light of what has been held by Supreme Court in the case of R.L. Kalathia & Co. vs. State of Gujarat reported as (2011) 2 SCC 400. The Supreme Court observed as under:- “(i) Merely because the contractor has issued "No Due Certificate", if there is acceptable claim, the court cannot reject the same on the ground of issuance of "No Due Certificate".

(ii) Inasmuch as it is common that unless a discharge certificate is given in advance by the contractor, payment of bills are generally delayed, hence such a clause in the contract would not be an absolute bar to a contractor raising claims which are genuine, at a later date even after submission of such "no-claim certificate".

(iii) Even after execution of full and final discharge voucher/receipt by one of the parties, if the said party is able to establish that he is entitled to further amount for which he is having adequate materials, he is not barred from claiming such amount merely because of acceptance of the final bill by mentioning "without prejudice" or by issuing 'no-dues certificate'.”

17. Issuance of NOC[4] 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 or that the same was issued under compelling circumstances that were coercive in nature. The compelling circumstances would vary from case to case. Factors like nature of relationship between the contracting parties, the inequality in the bargaining power/position of the parties, the dominant position that a party may enjoy, nature of the transaction, remedies available under the contract, would need to be considered to determine if the issuance of ‘no claim’ certificate was voluntary in nature or not. While the mere presence of one or more of these factors may not be sufficient to conclude that the issuance of ‘no claim’ certificate was involuntary, however, how these factors played out in a given case/factual matrix and affected the decision-making ability of the issuer,

18. In the present case, the AT has opined that the NOC issued by the Contractor was involuntary and hence, cannot be enforced against the Contractor to deny a claim, to which it was otherwise entitled. AT has given a finding of fact in this regard, after examining the circumstances under which NOC was issued by the Contractor. There is nothing patently illegal about such finding. Thus, there is no reason for this court to interfere with this finding.

19. Petitioner’s second contention that the AT erred in awarding claim on account of prolongation of Contract, as there was no clause in the Contract providing for the same, is also meritless. It is pertinent to note that the Contractor had claimed damages towards the escalation cost, on account of breach of Contract by the petitioner. Admittedly, the Project was completed to the satisfaction of the petitioner, and the delay in execution was attributable to the petitioner. Clause 10C of the Contract provided for increase in cost of materials and labour during the period of extension. The claim was sub-divided into two sub heads i.e., claim on account of increase in wages for labour on prevailing wages as per Clause 10C and claim on account of increase in prices of material. The AT observed that the petitioner had granted extension of time considering the hindrances, and without levy of any compensation, which showed that the delay was attributed to the petitioner. A party cannot draw any benefit out of its own folly, to the detriment of the other. In the case of P.M. Paul (Supra), Supreme Court while dealing with the same issue has held as under:- “12. In the instant case, it is asserted that the extension of time was granted and the arbitrator has granted 20% of the escalation cost. Escalation is a normal incident arising out of gap of time in this inflationary age in performing any contract. The arbitrator has held that there was delay, and he has further referred to this aspect in his award. The arbitrator has noted that claim No. I related to the losses caused due to increase in prices of materials and cost of labour and transport during the extended period of contract from 9/5/1980 for the work under phase I, and from 9/11/1980 for the work under phase II. The total amount shown was Rs.5,47,618.50. After discussing the evidence and the sub- missions the arbitrator found that it was evident that there was escalation and, therefore, he came to the conclusion that it was reasonable to allow 20 per cent of the compensation under claim No. I, he has accordingly allowed the same. This was a matter which was within the jurisdiction of the arbitrator and, hence, the arbitrator had not mis-conducted himself in awarding the amount as he has done.

13. It was submitted that if the contract work was not completed within the stipulated time which it appears, was not done then the contractor has got a right to ask for extension of time, and he could claim difference in price. This is precisely what he has done and has obtained a portion of the claim in the award. It was submitted on behalf of the Union of India that failure to complete the contract was not the case. Hence, there was no substance in the objections raised. Furthermore, in the objections raised, it must be within the time provided for the application under Section 30 i.e., 30 days during which the objection was not specifically taken, we are of the opinion that there is no substance in this objection sought to be raised in opposition to the award. Once it was found that the arbitrator had jurisdiction to find that there was delay in execution of the contract due to the conduct of the respondent, the respondent was liable for the consequences of the delay, namely, increase in prices. Therefore, the arbitrator had jurisdiction to go into this question. He has gone into that question and has awarded as he did.

14. Claim No. I is not outside the purview of the contract. It arises as an incident of the contract and the arbitrator had jurisdiction. In that view of the matter the objections raised against the award, cannot be sustained. No other objection was urged before us. The award, therefore, must be made the rule of the Court and there will be a decree in terms of the award, and the respondent is directed to pay Rs. 17,500 as the arbitrator's remuneration and Rs. 10,000 as advocates' fees and costs.”

20. In K.N. Sathyapalan (Supra), Supreme Court observed as under:-

21. In Assam State Electricity Board & Ors. (Supra), the Supreme Court has held as under:-

22. Recently in Parsa Kente Collieries Ltd. v. Rajasthan Rajya Vidyut Utpadan Nigam Ltd. reported as (2019) 7 SCC 236, the Supreme Court, while considering a contract which provided for price escalation, refused to interfere with the award.

23. The AT, after considering the above, found the same violative of Section 73 of the Contract Act, which entitles a party to claim compensation for breach of the contract committed by the other contracting party. Even if contract does not provide for price escalation, it would not preclude a party to claim escalation in price, as a measure of damages suffered by it, if the other contracting party is guilty of causing delays in completion of contractual works.

24. The AT, while considering the contentions raised by the petitioner, came to the conclusion that the 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 petitioner. In the considered opinion of this Court, the view taken by the AT was both possible and plausible, and needs no interference in light of the narrow scope of Section 34 of the A&C Act.

25. Consequently, the objections fail and the petition alongwith pending application is dismissed with no order to costs.

JUDGE AUGUST 16, 2023