Delhi High Court - Orders
National Highways Authority Of India vs Madhucon Projects Limited on 19 March, 2024
Author: Prathiba M. Singh
Bench: Prathiba M. Singh
$~36
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P. (COMM) 130/2024 & I.As. 6458/2024, 6459/2024,
6460/2024
NATIONAL HIGHWAYS AUTHORITY OF INDIA ..... Petitioner
Through: Mr. Manish K Bishnoi with Mr.
Anish Chawla, Mr. Abhishek K
Mishra & Mr. Neeraj Kumar, Advs.
(M-99535 41910)
versus
MADHUCON PROJECTS LIMITED ..... Respondent
Through: None.
CORAM:
JUSTICE PRATHIBA M. SINGH
ORDER
% 19.03.2024
1. This hearing has been done through hybrid mode. I.A. 6458/2024 (for exemption)
2. This is an application seeking exemption from filing originals/certified copies of as also true typed copies of the dim documents, etc. Original documents shall be produced/filed at the time of Admission/Denial, if sought, strictly as per the provisions of the Commercial Courts Act and the DHC (Original Side) Rules, 2018.
3. Exemption is allowed, subject to all just exceptions.
4. Accordingly, the present application is disposed of. O.M.P. (COMM) 130/2024 & I.A. 6459/2024, I.A. 6460/2024
5. I.A. 6459/2024 is an application filed by the Petitioner-National Highways Authority of India (hereinafter, 'NHAI') seeking a direction to requisition complete records from the ld. Arbitral Tribunal. The ld. Arbitral O.M.P. (COMM) 130/2024 Page 1 of 10 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 23/03/2024 at 00:20:17 Tribunal entered reference on 13th March, 2021 in the case titled "M/s Madhucon Projects Ltd v. National Highways Authority of India."
6. I.A. 6460/2024 is an application filed by the Petitioner under Section 36(2) of the Arbitration and Conciliation Act, 1996 (hereinafter, 'Act'). The Petitioner vide this application is seeking a stay on the operation of the award dated 14th November, 2023 passed by the ld. Arbitral Tribunal in the case "M/s Madhucon Projects Ltd v. National Highways Authority of India."
7. The Registry has calculated a delay of one day in filing the application I.A. 6460/2024. The Petitioner has filed this application beyond the three months limitation period prescribed under Section 34(3) of the Act. The ld. Counsel for the Petitioner submits that there is no delay. The award is dated 14th November, 2023 and the petition was filed on 15th February, 2024. In any event, the delay if any, is only of one day beyond the prescribed statutory limitation period of three months under Section 34(3) of the Act. Accordingly, the delay is condoned.
8. The present petition is filed by the Petitioner under Section 34 of the Act. The Petitioner vide this petition is challenging the impugned arbitral award dated 14th November, 2023 passed by a three-member tribunal in the case titled "M/s Madhucon Projects Ltd v. National Highways Authority of India." The ld. Arbitral Tribunal therein has awarded the Respondent/Claimant herein, Madhucon Projects Ltd. a sum of over Rs. 106 crores along with interest.
9. It is the case of the Petitioner that the Respondent was awarded the project of four laning of Patna to Koilwar Section of NH-30 in the state of Bihar (hereinafter, 'project') on Engineering Procurement and Construction O.M.P. (COMM) 130/2024 Page 2 of 10 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 23/03/2024 at 00:20:17 (EPC) basis. The EPC contract was entered into by the Petitioner and the Respondent on 9th September, 2015 (hereinafter, 'EPC Contract'). The total value of the contract was Rs. 597.96 crores.
10. The Petitioner submits that the project could not commence as there were protests by locals and villagers including landowners, which resulted in the site itself not being handed over to the Respondent. The protests continued till 2016-2018 and finally, vide a letter by the Petitioner dated 26th December, 2018 the contract was terminated. As per the said letter of termination, NHAI thereafter decided to change the alignment of the road itself. The relevant portion of the termination letter dated 26 th December, 2018 is to extracted in paragraph 2.15 of the arbitral award dated 14th November, 2023. The relevant portion of the termination letter is extracted hereinbelow:
Letter from NHAI to the Respondent dated 26th December 2018 terminating the contract "2.15 As the Respondent was still able to procure all required land in the Project Highway and while the Claimant was seeking to commence work under the Agreement at the earliest, the Respondent informed the Claimant through its letter dated 26.12.2018 that it has now decided to construct the highway on a changed alignment, and has therefore decided to terminate the Claimant's contract. The relevant extract of the Respondent's letter dated 26.12.2018 terminating the Claimant's Contract Agreement is reproduced for reference:
".......
2. This is hereby brought to your notice that the Road is now proposed on the changed alignment.
3. The Competent Authority NHAI has therefore decided that Contract entered into between NHAI and O.M.P. (COMM) 130/2024 Page 3 of 10 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 23/03/2024 at 00:20:18 you on the subject project may be terminated in terms of the provision contained therein, in this regard.
4. This is for your information, please. "
11. The Respondent vide letter dated 18th March, 2019 and several other letters in 2019, repeatedly raised claims of Rs. 169 crores from the Petitioner. However, NHAI did not accede to the same. Subsequently, the Respondent vide letters dated 7th January, 2020 and 27th July, 2020 referred the matter to arbitration, in terms of Article 26 of the EPC Contract, wherein the ld. Arbitral Tribunal awarded a sum of more than Rs. 106 crores to the Respondent.
12. Ld. Counsel for the Petitioner submits that not a single brick has been laid by the Respondent. The land acquired by NHAI for the project could not even be handed over to the Respondent due to a situation of force majeure. Accordingly, the Respondent herein was only able to carry out some pre-construction activities, since the appointed date was never fixed. Ld. Counsel submits that the Respondent cannot be compensated in this manner and that the present situation was beyond the control of the Petitioner. The compensation claimed by the Respondent has been in the nature of a loss of profits claim which could not have been granted without a specific clause in the EPC Contract which outlays the same.
13. The Court has perused the award. In the award, it is clear that the awarded project work itself did not commence. This fact has been acknowledged in the award. The relevant portion of the award is extracted hereinbelow:
"2.5 It is thus apparent from the above that upon receiving the performance security, the Respondent O.M.P. (COMM) 130/2024 Page 4 of 10 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 23/03/2024 at 00:20:18 had the mandatory obligation to acquire and provide hindrance-free and unencumbered land/ROW to the Claimant-Contractor on no less than 90% of the total length of the Project Highway within a period of 15 days from the date of the Agreement dated 09.09.2015. 'Appointed Date' could have been notified only after handing over of ROW on no less than 90% of the Site. In the absence of declaration of the Appointed Date, the Claimant could not have commenced any Work at the Site. Thus, providing ROW on 90% of the land and declaring the Appointed Date was a condition precedent for commencement of work by the Claimant. xxxx 2.9 In the above circumstances, the Claimant vide its letter dated 30.11.2015 had requested the Respondent to allow the Claimant to commence work in the small stretches where land was available, but this request of the Claimant was not acceded to by the Respondent. Meanwhile, the local miscreants continued to obstruct the work and the Claimant kept making repeated complaints to the local police and administration vide letters dated 08.12.2015, 14.12.2015 and 30.12.2015, which did not make much difference. Fact remains, that the Respondent was not able to handover the required land to the Claimant in terms of Article 4.1.3 of the Agreement and as such, no Appointed Date was notified by the Respondent and no work could be executed as planned. Despite the above prevailing conditions at the Site where no work was possible till such time Respondent could handover requisite land/ROW to the Claimant and fix the Appointed Date, the Respondent was still complaining to the Claimant regarding less mobilization of men and machinery."
14. In addition, a perusal of the EPC Contract would show that civil commotion and similar events are covered as force majeure under Clause
21. The relevant Clause reads as under:
O.M.P. (COMM) 130/2024 Page 5 of 10This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 23/03/2024 at 00:20:19 "21.1 Force Majeure As used in this Agreement. the expression "Force Majeure" or "Force Majeure Event" shall mean occurrence in India of any or all of Non-Political Event, Indirect Political Event and Political Event. as defined in Clauses 21.2. 21.3 and 21.4 respectively, if it affects the performance by the Party claiming the benefit of Force Majeure (the "Affected Party") of its obligations under this Agreement and which act or event (i) is beyond the reasonable control of the Affected Party, and (ii) the Affected Party could not have prevented or overcome by exercise of due diligence and following Good Industry Practice, and
(iii) has Material Adverse Effect on the Affected Party.
21.2 Non-Political Event A Non-Political Event shall mean one or more of the following acts or events:
(a) act of God, epidemic. extremely adverse weather conditions, lightning, earthquake, landslide, cyclone, flood, volcanic eruption, chemical or radioactive contamination or ionising radiation, fire or explosion (to the extent of contamination or radiation or fire or explosion originating tom a source external to the Site);
(b) strikes or boycotts (other than those involving the Contractor, Sub contractors or their respective employees/representative, or attributable to any act or omission of any of them) interrupting supplies and services to the Project Highway for a continuous period of 24 (twenty-four) hours and an aggregate period exceeding 10 (ten) days in an Accounting Year, and not being an Indirect Political Event set forth in Clause 21.3;O.M.P. (COMM) 130/2024 Page 6 of 10
This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 23/03/2024 at 00:20:19
(c)any failure or delay of a Sub-contractor but only to the extent caused by another Non-Political Event;
(d) any judgement or order of any court of competent jurisdiction or statutory authority made against the Contractor in any proceedings for reasons other than
(i) failure of the Contractor to comply with any Applicable Law or Applicable Permit, or (ii) on account of breach of any Applicable Law or Applicable Permit or of any contract, or (iii) enforcement of this Agreement, or (iv) exercise of any of its rights under this Agreement by the Authority;
(e) the discovery of geological conditions, toxic contamination or archaeological remains on the Site that could not reasonably have been expected to be discovered through a site inspection; or
(f)any event or circumstances of a nature analogous to any of the foregoing.
21.3 Indirect Political Event An Indirect Political Event shall mean one or more of the events:
(a) an act of war (whether declared or undeclared), invasion, armed conflict or act of foreign enemy, blockade, embargo, riot, insurrection, terrorist or military action, civil commotion or politically motivated sabotage;
(b) Industry-wide or State-wide strikes or industrial action for a continuous period of 24 (twenty-four) hours and exceeding an aggregate period of 10 (ten) days in an Accounting Year;
(c) any civil commotion, boycott or political agitation which prevents construction of the Project Highway by the Contractor for an aggregate period exceeding 10 (ten) days in an Accounting Year, O.M.P. (COMM) 130/2024 Page 7 of 10 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 23/03/2024 at 00:20:21
(d) any failure or delay of a Sub-contractor to the extent caused by any Indirect Political Event;
(e) any Indirect Political Event that causes a Non- Political Event; or
(f) any event or circumstances of a nature analogous to any of the foregoing.
21.4 Political Event A Political Event shall mean one or more of the following acts or events by or on account of any Government Instrumentality:
(a) Change in Law, only if consequences thereof cannot be dealt with under and in accordance with the provisions of Clause 19.17:
(b) compulsory acquisition in national interest or expropriation of any Project Assets or rights of the Contractor or of the Sub-Contractors;
(c) unlawful or unauthorised or without jurisdiction revocation of, or refusal to renew or grant without valid cause, any clearance, licence, permit, authorisation, no objection certificate, consent, approval or exemption required by the Contractor or any of the Sub-contractors to perform their respective obligations under this Agreement; provided that such delay, modification, denial, refusal or revocation did not result from the Contractor's or any Sub-
contractor's inability or failure to comply with any condition relating to grant, maintenance or renewal of such clearance, licence, authorisation, no objection certificate, exemption, consent, approval or permit;
O.M.P. (COMM) 130/2024 Page 8 of 10This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 23/03/2024 at 00:20:21
(d) any failure or delay of a Sub-contractor but only to the extent caused by another Political Event, or
(e) any event or circumstances of a nature analogous to any of the foregoing."
15. Surprisingly, NHAI's termination letter dated 26th December, 2018 does not mention the force majeure clause. However, previous correspondences between the parties reveal the fact that due to the commotion and protests, the project could not commence at all. This appears to have led to the NHAI taking a decision on 26th December, 2018 to realign the road itself. Under such circumstances, this Court is of the opinion that grant of such huge amounts to the Respondent when the construction itself has not commenced may not be tenable. The issue deserves to be examined by this Court under Section 34 of the Act.
16. Accordingly, following the recent order of the Supreme Court in NHAI v. M/s T K Toll Road Pvt. Ltd. (Civil Appeal Nos 6262-6264/2023) the Petitioner is directed to deposit 25% of the awarded amount with the Registrar General within six weeks. The same shall be kept in a fixed deposit on auto-renewal mode. The entire arbitral record be requisitioned from the Presiding Arbitrator. The impugned award shall remain stayed subject to the Petitioner depositing the aforesaid amount. It is submitted on behalf of the Petitioner that there is an execution petition being OMP Enforcement No. 56/2024 which may also be transferred and listed along with this case in terms of general practice directions. Upon receipt of the arbitral record, the same be scanned and attached with the present court record.
17. List before the Joint Registrar on 29th April, 2024.
O.M.P. (COMM) 130/2024 Page 9 of 10This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 23/03/2024 at 00:20:22
18. List before Court on 11th July, 2024.
PRATHIBA M. SINGH, J MARCH 19, 2024 dj/rks O.M.P. (COMM) 130/2024 Page 10 of 10 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 23/03/2024 at 00:20:22