Case title:
Roadways solutions India Infra Ltd. Vs National highway authority of India
Date of Order:
24th May 2023
Bench:
Hon'ble Mr. Justice Chandra Dhari Singh
SUBJECT
- The petitioner and respondent were in a dispute due to the petitioner's non-performance, leading to the respondent issuing a Notice of Intention To Terminate (NITT). The Delhi High Court dismissed the petition and any pending applications as they lacked valid grounds based on Arbitration laws and facts of the case.
IMPORTANT PROVISIONS
- Section 9 of the Arbitration and Conciliation Act empowers a party to seek interim relief from a court before or during arbitral proceedings.
- Section 17 of the Arbitration and Conciliation Act grants interim measures to ensure the arbitral tribunal has the authority to address urgent matters and provide effective relief to the parties.
OVERVIEW
- Roadways solution India Infra Ltd. (petitioner) was the lowest bidder for strengthening/overlaying project on Six Lane Gurgaon-Kotputli-Jaipur section of NH-48, and the National Highway Authority of India issued a Letter of Award in its favour.
- The petitioner was required to commence the works as soon as possible after receiving a notice from the engineer, according to CoPA. It submitted Performance Security and Additional Performance Security to the respondent in the form of bank guarantees and a mixed design of Reclaimed/Recycled Asphalt Pavement (RAP) for review and approval.
- The team leader/engineer issued a letter to the petitioner stating that Dense Bituminous Macadam (DBM) work has been suspended and asked for submission of a work programme. The respondent rejected the use of RAP material for DBM works, stating that it is not part of the Bill of Quantities (BOQ) under the Contract. The petitioner was not satisfied with the decision.
- They then raised objections to the use of RAP material for DBM works, and the respondent only released 50% of the amount on 9th November 2022, which was accepted under protest.
- The respondent sent a Notice alleging defaults of the petitioner, which the petitioner denied. The respondent issued a notice of termination dated 31st January, 2023, which the petitioner replied to on 4th February, 2023.
- The parties had disputes due to non-performance on the part of the petitioner, leading to the respondent issuing Notice of Intention To Terminate (NITT). The petitioner has now approached this Court, aggrieved by this action.
ARGUMENTS ADVANCED BY THE APPELLANT
- Mr. Rajiv Nayar submitted that the petitioner asked for review and approval of the Work Program, Quality Assurance Program and Construction Methodology in terms of Clause 14.1 of the Contract. It is also submitted that the respondent unilaterally decided to fix the date of commencement of the project on 27th July, 2022, despite no clarity on the items, the stretch where work was to be executed and quantities of the materials to be deployed. The petitioner then commenced the maintenance work as required.
- The Ministry of Road Transport and Highways (MoRTH) issued a circular on August 30th, 2022 to implement global engineering practices. The petitioner submitted a mixed design of Reclaimed/Recycled Asphalt Pavement (RAP) and its Construction Methodology to the respondent on December 24th, 2022, but the respondent rejected the proposal after a delay of almost two months, contradicting the MoRTH Circular.
- The petitioner had previously requested an Interim Payment Certificate (IPC-01) on October 6th, 2022, seeking payment for the work completed, and the engineer/team leader recommended processing the IPC-01 on October 12th, 2022. However, the respondent raised objections to the IPC-01 in an email on October 19th, 2022, which were clarified by the engineer/team leader on October 19th, 2022. Nonetheless, the respondent once again objected to the release of the IPC-01 on October 21st, 2022.
- The respondent unilaterally and arbitrarily issued the notice of intent to terminate dated 31st January, 2023, giving a notice of 14 days, upon which it was entitled to terminate the Contract.
- The respondent made false accusations against the petitioner in a notice of intent to terminate. The petitioner's senior counsel argued that the claim of a shortage of Bitumen and non-availability was false, as the petitioner always had the necessary material. However, due to the limited capacity of the HMPs, they were unable to procure the required Bitumen for the remaining work.
- The respondent acted in an authoritative manner beyond the provisions of the Contract and applicable law, and that the petitioner was not in breach of any contractual obligations. An interim relief under Section 9 of the Arbitration and Conciliation act, 1996 was requested.
- Mr. Nayar argued for a stay on the implementation of the Notice of Intention to Terminate until arbitration was resolved, citing Fedders Electric and Engineering Limited v. Srishti Constructions.
ARGUMENTS ADVANCED BY THE RESPONDENT
- Mr. Parag Tripathi, the respondent's senior counsel, argued that the termination of the agreement is not mandatory after giving a 14-day notice, as the employer has the discretion to terminate or not. Therefore, the respondent cannot be prevented from acting in accordance with the terms of the Contract.
- The engineer revoked the approval of the revised work program on February 15, 2023. The team leader's letter to revise the program is invalid since they lacked the authority outlined in Clauses 14.1/14.2 of the CoPA. Consequently, any approval given by the team leader for the revised work program is outside the contractual scope and holds no legal validity.
- The petitioner only requested approval for DBM on November 1, 2022, which was granted by SC/AE on November 23, 2022. As of February 16, 2023, the progress made on the designated stretch was merely 10.474 kilometers, so the petitioner's claim that there was no delay in completing the project holds no merit.
- It is pointed out that the petitioner raised a dispute regarding the non-approval of RAP, while the NHAI was compelled to issue the notice due to the petitioner's non-performance. The counsel also cites Section 14(1)(c) of the Specific Relief Act, 1963, which states that a contract that is inherently terminable cannot be specifically enforced.
- The Contract Agreement's Clause 63.1 allows termination with a 14-day notice by the respondent due to the concessionaire's default. The counsel asserts that NHAI and the engineer consistently highlighted the petitioner's failure to fulfill its contractual obligations, despite multiple notices and reminders.
- The respondent's senior counsel emphasized that Sections 20A and 41(ha) of the SRA aim to prevent injunctions in Infrastructure Projects to avoid delays. They referenced the case of Hari Ram Nagar v. DDA, where the court held that injunctions should be avoided if they can cause project delays.
- It is stated that NHAI will expedite the re-tendering process within 7 days, and that granting a stay to the petitioner would grant them final relief. However, if the respondent's actions are found to be wrongful, the petitioner can be compensated through damages. Therefore, the petition lacks merit and should be dismissed.
JUDGEMENT ANALYSIS
- The Court believes that only an Arbitral Tribunal, upon careful review of the pleadings and evidence, has the authority to make a decision on the matter. The Court refrains from expressing any opinion on Section 9 of the Act or making any remarks concerning it.
- The court's previous ruling in Hari Ram Nagar emphasizes that when an injunction is requested in a case that could cause delays in infrastructure projects, the provisions of the SRA (Specific Relief Act) come into effect, and courts should generally refrain from granting injunctions. In the current case, it is evident that the projected milestones have not been met.
- Section 20A applies when an injunction causes delays in infrastructure projects, and the petitioner's argument that it only applies when an injunction hampers progress is not persuasive.
- The petitioner's argument that a stay on the NITT would result in a stay on the termination itself is flawed, as the respondent is obligated to issue a NITT at least 14 days prior to termination.
- The petitioner has sought a stay of NITT, which would lead to the continuation of the project, which cannot be granted by the Court.
- The Fedders Electric and Engineering Limited case suggests that the current petition should be referred to the Arbitral Tribunal for consideration and decision on the relief sought under Section 9 of the Application under Section 17 of the Act. However, this cannot be done without the consent of both parties, which has not been sought from the respondent.
- The court believes that the petitioner has failed to present a compelling argument to justify an interim injunction, as neither the circumstances nor the petitioner's potential harm support it.
- Therefore, the current petition, lacking any valid grounds was rejected, along with any pending applications.
