Full Text
HIGH COURT OF DELHI
Date of Decision: 5th December, 2022
MEINHARDT AUSTRALIA PTY LTD. ..... Petitioner
Through: Mr. Sandeep S. Tiwari, Advocate.
(M:9810833632)
Through: Mr. Digvijay Rai and Mr. Archit Mishra, Advocates for AAI.
(M:9412636726)
Mr. Ripu Daman Bhardwaj, CGSC with Mr. Vinod Tiwari, GP for UOI.
(M:9818030700)
JUDGMENT
1. This hearing has been done through hybrid mode.
2. The Petitioner-Meinhardt Australia Pvt. Ltd, which is a Australia based company and engaged in the services of providing integrated engineering, planning, drawing, designing, supervision for infrastructure projects, has filed the present petition seeking reduction of the performance bank guarantees, in terms of the circular dated 12th November, 2020 issued post the outbreak of COVID-9 pandemic.
3. A Notice inviting tender (hereinafter ‘NIT’) was issued by the Respondent No.1 - Airport Authority of India (‘AAI’) vide Bid invitation NO. 1000018859 for the ‘Appointment of Project Management Consultant for the construction of new Domestic Terminal Building and other allied structures (Phase I & II) at Patna Airport’. The Petitioner was appointed as a Project Management Consultant on 26th July, 2017 and a contract agreement between AAI and the Petitioner was executed on 5th December, 2017. As per the contract, the Petitioner had to submit the performance bank guarantees, which is stated to have been done. The Petitioner relies upon certain notifications and circulars issued by the Government of India including on 12th November, 2020 to argue that as per the said circular, reduction of performance security for the value of the existing contracts ought to be given except in cases where there are any arbitration or court proceedings have already been started or are contemplated.
4. Ld. Counsel for the Petitioner submits that in the present case neither the court proceedings nor any arbitration have commenced. According to the Petitioner, there is no arbitration clause in the contract. The Petitioner had filed a writ petition being W.P.(C) 16036/2022, challenging the refusal of the Petitioner’s representation for reduction of the Performance Bank Guarantee by AAI. However, vide order dated 21st November, 2022, the following order was passed:
5. The Dispute Resolution committee (DRC) vide order dated 28th November, 2022 has rejected the request of reduction of performance security. The relevant recommendation of the DRC with respect to the claim for reduction of the PBG is as follows: “It is observed from the records that the case for this work was already under consideration for poor performance as recommended by GM(ENGG-P) Patna for initiating action as per agreement provisions and show-cause notice had been issued for non-performance. Therefore, the case does not fall within the parameters mentioned in the said OM and the claimant is not entitled for the relief granted by the OM.”
6. The present petition has now been filed post the DRC’s decision. Ld. Counsel for the Petitioner submits that the DRC has failed to take into consideration the fact that as per the circular issued by the Government, since the arbitration or court proceedings were not pending, reduction in performance security was mandatory and the benefit ought to have been given to the Petitioner.
7. He further submits that as per the arbitration clause, the present dispute in respect of reduction of performance security would also be an arbitral dispute.
8. On the other hand, Mr. Rai, ld. Counsel appearing for the AAI refers the two show cause notices dated 17th September, 2020 and 18th August, 2021 to argue that the breaches/defaults of the Petitioner were prior to the issuance of the OM No. F.9/4/2020-PPD issued on 12th November, 2020. Hence, the benefit of the circular cannot be extended to the Petitioner. He further submits that in terms of the arbitration clause in the contract, the decision by the DRC is the first step and the matter would finally be arbitral under the Arbitrator in panel, which may be constituted under the contract. He, thus, submits that the present writ petition is not maintainable.
9. Heard. The arbitration clause in the contract entered into between the parties is extracted as under:
10. The OM dated 12th November 2020, qua which the benefit is sought and which was issued post the outbreak of the pandemic, is as under:
11. The Petitioner admittedly had written a letter dated 20th December, 2021 seeking appointment of the Dispute Resolution Committee in terms of the contract dated 5th December, 2017. The issues that were set out for resolution in the matter are as under:
ISSUES FOR REDRESSAL:- (a) Whether the office of Jt. GM (Engg- Civil), Airport Authority of India had issued letter vide reference No. AAVCHQ/Engg.(C)/ER/Patna/Poor Performance/ 2021/40, dated 26-11-2021 to Meinhardt Australia Pty. Ltd. by unlawfully restraining M/s Meinhardt Australia Pty. Ltd. from participating in future tender of AAI for a period of 2 years or till completion of Patna Airport Project, whichever is later? (b) Whether the office of Jt. GM (Engg- Civil), Airport Authority of India had issued Letter vide reference No.
AAVCHQ /Engg.(CyER/PMClPatna/2021/23, dated 23-lI- 2021 to Meinhardt Australia Pty. Ltd replying to the Request letters dated 24-tl-2020 & 23-08-2021, unlawfully denying to return the reduced Performance Security on grounds of poor performance & quoting para 3 of office Memorandum issued by Govt. of India vide no. F.91412020-PPD dated 12-11-2020?
(c) whether the office of GM (Engg-P),
Airport Authority of India had issued Show Cause Notice vide Reference No. AAI/Patna/Engg (C)/GM (E-M)l PMC1202O-21/735-742, Dated 17.09.2020 to Meinhardt Australia Pty. Ltd. on basis of wrong allegation for discrepancy in services?
(d) Whether the office of GM (Engg-P),
Airports Authority of India had issued Show Cause Notice-2 vide Reference No. AAI/Patna/Engg(C)/ GM (E-My PMC|202I-2211989-2000, dated 18.08.2021 to Meinhardt Australia Pty. Ltd. on the basis wrong allegation for discrepancy in services? (e) Whether the office of GM (Engg-P), Airport Authority of India had issued letter vide reference No. AAl/Patna/Engg (C)/ GM (E- M)/PMC/2021-22/2201-07, dated 04-10-2021 to Meinhardt Australia Pty. Ltd. on basis of wrong allegation for discrepancy in services (Liabilities for non-performance)?”
12. A perusal of the above issues for redressal in the request for reference to the DRC would show that the issue in respect of reduction of performance security was raised in terms of the OM dated 12th November, 2020.
13. The said issue, which was referred for redressal of the dispute of the Petitioner, to the DRC, has now been rejected by the DRC. Detailed reasons have been given in the same. As per the DRC’s report dated 28th November, 2022, the Petitioner is not entitled for reduction in the performance security due to the following reasons. “It is observed from the records that the case for this work was already under consideration for poor performance as recommended by GM(ENGG-P) Patna for initiating action as per agreement provisions and show-cause notice had been issued for non-performance. Therefore, the case does not fall within the parameters mentioned in the said OM and the claimant is not entitled for the relief granted by the OM.”
14. A perusal of the above would show that the DRC has comprehensively considered the matter including various facts and circumstances arising of the show cause notices dated 17th September, 2020 and 18th August, 2021. The complete list of issues has been flagged by the DRC and detailed reasoning has been given to argue that the benefit of the circular/OM cannot be extended to the Petitioner.
15. A perusal of the circular would show that the benefit was to be given only in case of contracts where there were no arbitration or court proceedings, which had started or were contemplated. The Petitioner’s letter, which has been sent to the DRC and has been rejected, would now be the subject matter of arbitration proceedings, as per the stand of the AAI in terms of the arbitration clause. The question as to whether there were defaults or breach, which arose prior to the issuance of the circular dated 12th November, 2020 would require analysis of facts, in the context of the contractual obligations. This Court would be hesitant to make observations qua breach/performance of the contract, that too in a writ petition. If the DRC found that the nonperformance or breach was prior to the issue of the OM/circular, the Petitioner may not be entitled to the benefit of the OM. These facts would have to be thrashed out in the arbitration proceedings between the parties. The order of the DRC cannot be challenged in a writ petition, in these facts.
16. As per the arbitration clause, the Petitioner is free to seek constitution of an Arbitral Tribunal. The question of reduction of performance security in the aforesaid decision has now been taken by the DRC and may also be raised before the duly constituted Arbitral Tribunal in accordance with law. This Court is not inclined to entertain the present writ petition.
17. In view of the above, the present writ petition is disposed of permitting the Petitioner to raise the plea of reduction of performance security before the duly constituted Arbitral Tribunal, in accordance with the contract between the parties. It is clarified that this Court has not considered the merits of this matter.
PRATHIBA M. SINGH JUDGE DECEMBER 5, 2022/dk/am