9911796707
TMI Blog2025 (4) TMI 1575X X X X Extracts X X X X X X X X Extracts X X X X ..... s had awarded a contract to M/s Consolidated Construction Consortium Ltd. i.e. the appellant for construction of office building, incubation centre etc. of the respondent. As per the Letter of Intent dated 09.03.2006 issued by the respondent, the total cost of the project was Rs. 16,48,69,970.00. The scheduled date for completion of construction was 15.01.2007. Appellant could complete the construction only by 30.11.2007. There was thus a delay of about 10 months. 4.1. Appellant after handing over the project site to the respondent claimed a sum of Rs. 1,40,12,786.00 including retention money and interest thereon. However, because of the delay in completion, respondent levied and deducted liquidated damages to the tune of Rs. 82,43,499.00 by invoking clause 26 of the contract agreement entered into between the parties. Respondent also made other deductions. After such deductions, balance amount of Rs. 3,70,992.00 was paid to the appellant by the respondent. 4.2. Aggrieved appellant invoked the arbitration clause of the contract agreement and initiated arbitral proceedings challenging deduction of liquidated damages by the respondent and also lodged other claims. Respondent also l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Single Judge had rightly exercised power within the broad parameters of Section 34 of the 1996 Act while setting aside the award in question. It is the Division Bench which acted like an appellate court beyond the scope of Section 37 of the 1996 Act while setting aside the order passed under Section 34 of the 1996 Act and restoring the award. 8.2. Learned counsel submits that the respondent had extended the time for completion of the contractual work. Appellant had completed the construction within the extended period. Therefore, there was no delay in the contractual performance. Extension of time and levy of liquidated damages cannot go hand-in-hand. In the circumstances, respondent was not justified in deducting liquidated damages from the contractual dues of the appellant. 8.3. He submits that the instant contract between the appellant and the respondent was a contract relating to construction. In such a contract, time is never of the essence. Such a contract is governed by the principles laid down in Sections 55, 73 and 74 of the Indian Contract Act, 1872. In any view of the matter, the employer would be entitled to liquidated damages to compensate for the delay provided the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed damages were rightly levied by the respondent. Such liquidated damages are in conformity with Section 55 of the Indian Contract Act, 1872 (briefly 'the Contract Act' hereinafter). Respondent was presented with such a situation by the appellant that it had no other option but to grant extension of time on account of appellant's admitted inability to complete the work within the stipulated time. In the review meeting held on 18.12.2006, just twenty eight days before the stipulated date for completion of the work i.e. 15.01.2007, appellant expressed its inability to complete the work within the stipulated date. Respondent was left with no option other than to fix a revised date for completion of the work and grant extension of time. 9.1. Pursuant to the review meeting dated 18.12.2006, respondent vide letter dated 12.01.2007 had granted the first extension of time for completion of the contract work upto 28.02.2007. However, appellant failed to complete the work within this extended period of time. As a result, respondent was compelled to grant further extensions of time to the appellant upto 30.06.2007 in order to have the contract work completed. This was because of appellant's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have received the due consideration of the Court. 11. Let us first deal with the award. In this case, the arbitral tribunal comprised of a sole arbitrator Shri K. Srinivasan. He was appointed as the arbitrator on 05.01.2009. In the arbitral proceedings, as many as five claims were made on behalf of the appellant. On the other hand, the respondent made three counter claims. In so far the appellant is concerned, the major claim was relating to refund of Rs. 82,43,499.00 deducted by the respondent as liquidated damages. This claim was framed as issue No. 3 by the arbitral tribunal. In so far respondent is concerned, it raised counter claims relating to reimbursement of rent paid by it for the period of delay in completion of the contract work as well as for loss of rent in the new complex due to delayed construction. As alluded to hereinabove, issue No. 3 pertains to claim of the appellant for refund of Rs. 82,43,499.00 deducted by the respondent as liquidated damages i.e. as compensation for the delay in execution of the contract. Both appellant and the respondent had submitted their relied upon documents and advanced their respective contentions. Arbitral tribunal had framed two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended time under clause 28 hereof the contractor shall pay or allow the employer to deduct the sum named in the Appendix as "Liquidated Damages" for the period during which the said works shall remain incomplete and the employer may deduct such damages from any money due or that may become due to the contractor. 12.1. Thus, what clause 26 says is that if the contractor fails to complete the work within the stipulated period or within the extended time as provided under clause 28 then the employer shall be entitled to deduct the sum named in the Appendix as liquidated damages for the period during which the contract work remained incomplete. The employer may deduct such liquidated damages from any money due or that may become due to the contractor. 12.2. In the Appendix, the time for completion was provided as 10 months from the 10th day of the written order to commence work or after the date on which the site was handed over to the contractor whichever was later. In so far determination of liquidated damages is concerned, it was mentioned in the Appendix that the same would be calculated at the rate of Rs. 0.5 percent of the contract value per week subject to a maximum of 5 perc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supply of materials stipulated to be supplied by the employer; or (vii) if the contractor wanted extension of time, he was required to apply to the employer/architect for such extension within the period specified and if the employer/architect was of the opinion that reasonable grounds were shown, it would make a fair and reasonable extension of time for completion of the contract work. 14. Since, there is a reference to clause 28 in clause 26, we may as well consider clause 28. It deals with consequence of failure of the contractor to comply with the instructions of the architect or the employer. Clause 28 reads thus: 28. Failure of contractor to comply with Architect's/Employer's Instructions If the contractor after receipt of written notice from the architect/employer requiring compliance within ten days fails to comply with such further drawings and/or architect/employer's instructions the employer may employ and pay other persons to execute any such work whatsoever that may be necessary to give effect thereto, and all costs incurred in connection therewith shall be recoverable from the contractor by the employer on the certificate of the architect as a debt or may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eserved the right to levy liquidated damages. 18. Section 55 of the Indian Contract Act says that when a party to a contract promises to do a certain thing within a specified time but fails to do so, the contract or so much of it as has not been performed, becomes voidable at the option of the promisee if the intention of the parties was that time should be of the essence of the contract. If time is not the essence of the contract, the contract does not become voidable by the failure to do such thing on or before the specified time but the promisee is entitled to compensation from the promisor for any loss occasioned to him by such failure. Further, if in case of a contract voidable on account of the promisor's failure to perform his promise within the time agreed and the promisee accepts performance of such promise at any time other than that agreed, the promisee cannot claim compensation for any loss occasioned by the non-performance of the promise at the time agreed, unless, at the time of such acceptance he gives notice to the promisor of his intention to do so. 19. Sections 73 and 74 deal with consequences of breach of contract. Heading of Section 73 is compensation for loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by an application for setting aside such award in accordance with sub-section (2) and sub-section (3). (2) An arbitral award may be set aside by the court only if- (a) the party making the application [establishes on the basis of the record of the arbitral tribunal that]- (i) a party was under some incapacity; or (ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or (iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or (v) the composition of the arbitral tribunal or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tral tribunal will eliminate the grounds for setting aside the arbitral award. [(5) An application under this section shall be filed by a party only after issuing a prior notice to the other party and such application shall be accompanied by an affidavit by the applicant endorsing compliance with the said requirement. (6) An application under this section shall be disposed of expeditiously, and in any event, within a period of one year from the date on which the notice referred to in subsection (5) is served upon the other party.] 22. Sub-section (1) of Section 34 provides that an application may be made to the competent court for setting aside an arbitral award. This is the only remedy available for setting aside an arbitral award. The conditions for setting aside an arbitral award are mentioned in sub-sections (2) and (2A). Sub-section (2) provides for situations such as the agreed party was under some incapacity or the arbitration agreement is not valid under the law or the aggrieved party did not receive proper notice regarding appointment of arbitrator or of the arbitral proceedings which prevented it from presenting its case or the arbitral award deals with a dispute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvoked in a conservative manner. The reason is that arbitral autonomy must be respected and judicial interference should remain minimal otherwise it will defeat the very object of the 1996 Act. 25. Keeping the above in view, let us now deal with the order of the learned Single Judge dated 02.01.2019 passed under Section 34 of the 1996 Act. 26. In the aforesaid order, learned Single Judge noted that the contract work was required to be executed within a period of 10 months. Appellant could not complete the work within the contract period due to land slides and rains. Ultimately, appellant could complete the work on 30.11.2007 by seeking extension of time which was granted by the respondent. There is no complaint about the construction. Learned Single Judge also noted that there were rains and land slides during the contract period which is not in dispute. Thereafter, learned Single Judge observed as under: If the building had been erected and there were landslides, it would affect the building constructed and there would not only have been loss of money, but also loss of lives and that the 1st respondent should thank the stars that no untoward event took place. 27. Learned Single ..... X X X X Extracts X X X X X X X X Extracts X X X X
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