Lakshmi Infrastructure And Developers ... vs National Highways Authority Of India on 21 August, 2024

[Cites 4, Cited by 0]

Delhi High Court - Orders

Lakshmi Infrastructure And Developers ... vs National Highways Authority Of India on 21 August, 2024

Bench: C.Hari Shankar

                             $~59
                             *         IN THE HIGH COURT OF DELHI AT NEW DELHI
                             +         O.M.P.(I) (COMM.) 270/2024
                                       LAKSHMI INFRASTRUCTURE AND
                                       DEVELOPERS INDIA PRIVATE LIMITED          .....Petitioner
                                                    Through: Mr. Jayant Mehta, Sr. Adv.
                                                    with Mr. Rishabh Dheer, Ms. Tina Aneja,
                                                    Ms. Lakshmi Nair, Advs. with Mr. B.A.N.S.
                                                    Keerit, AR

                                                                            versus

                                       NATIONAL HIGHWAYS
                                       AUTHORITY OF INDIA                      .....Respondent
                                                    Through: Mr. Santosh Kumar, SC with
                                                    Mr. Devansh Malhotra, Adv.
                                       CORAM:
                                       HON'BLE MR. JUSTICE C.HARI SHANKAR
                                                                            ORDER

% 21.08.2024 I.A. 36969/2024 (Exemption)

1. Allowed, subject to all just exceptions.

2. The application stands disposed of.

O.M.P.(I) (COMM.) 270/2024

3. This is a petition under Section 9 of the Arbitration and Conciliation Act, 1996 ("the 1996 Act"), seeking pre-arbitral interim relief.

4. For the purpose of the order being passed today, no detailed O.M.P.(I) (COMM.) 270/2024 Page 1 of 8 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 23/08/2024 at 00:25:47 allusion of facts is necessary. Suffice it to state that the petitioner was contracted by the respondent for six laning of a stretch to NH 44 in the State of Telangana.

5. According to the petitioner, there were various defaults on the part of the respondent in handing over the land in a manner in which the petitioner could carry out the projected work and in compliance with its obligations under the contract.

6. Article 26 of the contract between the parties deals with resolution of disputes. Clauses 26.1 to 26.3 with their relevant sub clauses read thus:

"26.1 Dispute Resolution

(i) In the event of any dispute, difference or controversy of whatever nature howsoever arising under or out of or in relation to this Agreement (including its interpretation) between the Parties, and so notified in writing by either Party to the other Party (the "Dispute"), either Party may call upon the Authority's Engineer, to mediate and assist the Parties in arriving at an amicable settlement thereof.

(ii) The Parties agree to use their best efforts for resolving all Disputes arising under or in respect of this Agreement promptly, equitably and in good faith, and further agree to provide each other with reasonable access during normal business hours to all non-

privileged records, information and data pertaining to any Dispute.

(iii) Dispute Resolution Board (DRB) Failing mediation by the Authority's Engineer or without the intervention of the Authority's Engineer, either Party may require such Dispute to be referred to the Dispute Resolution Board ("DRB") in accordance with the procedure setforth in Schedule -S to the Contract Agreement. The decision (s) of the Dispute Resolution Board shall be binding on both parties who shall promptly give effect to unless and until the same is revised / modified, as hereinafter provided, in a Conciliation/Arbitral O.M.P.(I) (COMM.) 270/2024 Page 2 of 8 This is a digitally signed order.

26.2 Conciliation If either the employer (i.e. Authority) or the Contractor is dissatisfied with any decision of the DRB, and/or if the DRB is unable to resolve the dispute, either Party may refer the Dispute to arbitration in accordance with the provisions of Clause 26.3 but before resorting to such arbitration, the parties agree to explore conciliation by the Conciliation Committees of Independent Experts set up by the Authority in accordance with the procedure decided by the panel of such experts and notified by the Authority on its website including its subsequent amendments. In the event of the conciliation proceedings being successful, the parties to the dispute would sign the written settlement agreement and the conciliators would authenticate the same. Such settlement agreement would then be binding on the parties in terms of Section 73 of the Arbitration Act. In case of failure of the conciliation process even at the level of the Conciliation Committee, either party may refer the Dispute to arbitration in accordance with the provisions of Clause 26.3.

26.3 Arbitration 26.3.1 Any Dispute which is not resolved amicably by conciliation as provided in Clause 26.2 shall be finally settled by arbitration as set forth below:

i) The Dispute shall be finally referred to Society for Affordable Resolution of Disputes (hereinafter called as SAROD), a Society registered under Society's Act 1860 vide Registration no. S/RS/SW1049/2013 duly represented by Authority and National Highways Builders Federation (NHBF). The dispute shall be dealt with in terms of Rules of SAROD. The detailed procedure for conducting Arbitration shall be governed by the Rules of SAROD and provisions of Arbitration & Conciliation Act, 1996, as amended from time to time.

The Dispute shall be governed by Substantive Law of India.

ii) The appointment of Tribunal, Code of conduct for Arbitrators and fees and expenses of SAROD and Arbitral Tribunal shall also be governed by the Rules of SAROD as amended from time to time.

iii) Subject to the provisions of THE LIMITATION ACT, 1963, as amended from time to time, Arbitration O.M.P.(I) (COMM.) 270/2024 Page 3 of 8 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 23/08/2024 at 00:25:47 may be commenced during or after the Contract Period, provided that the obligations of Authority and the Contractor shall not be altered by reason of the Arbitration being conducted during the Contract Period + defect liability period.

iv) The venue of Arbitration shall be New Delhi or a place selected by governing body of SAROD and the language for all documents and communications between the parties shall be English.

v) The expenses incurred by each party in connection with the preparation, presentation, etc., of arbitral proceedings shall be shared by each party itself.

26.3.2 The arbitrators shall make a reasoned award (the "Award"). Any Award made in any arbitration held pursuant to this Article 26 shall be final and binding on the Parties as from the date it is made, and the Contractor and the Authority agree and undertake to carry out such Award without delay.

26.3.3 The Contractor and the Authority agree that an Award may be enforced against the Contractor and/or the Authority, as the case may be, and their respective assets wherever situated.

26.3.4 This Agreement and the rights and obligations of the Parties shall remain in full force and effect, pending the Award in any arbitration proceedings hereunder. Further, the parties unconditionally acknowledge and agree that notwithstanding any dispute between them, each party shall proceed with the performance of its respective obligations, pending resolution of Dispute in accordance with this Article."

7. Clearly, in the agreement between the parties, they have ad idem consented to resolution of disputes by a Dispute Resolution Board (DRB), conciliation and arbitration.

8. On 31 October 2023, the petitioner issued a notice of dispute to the respondent under Clause 26 of the contract. The respondent, vide response dated 25 January 2024, granted the petitioner a cure period for curing of the alleged defaults on the petitioner's part, to which the O.M.P.(I) (COMM.) 270/2024 Page 4 of 8 This is a digitally signed order.

9. On 22 April 2024, the petitioner filed a Statement of Claim before the DRB, to which the respondent filed a Statement of Defence on 27 May 2024 and the petitioner filed a rejoinder on 15 June 2024.

10. Both parties were heard by the DRB on 5 and 6 July 2024, on which date, DRB reserved the matter for orders. Following this on 15 July 2024, both parties filed written synopses of submissions before the DRB. There is no dispute that orders remain reserved by the DRB.

11. The petitioner is aggrieved by the fact that, while the matter stands thus, the respondent, on 8 August 2024 has issued a notice to the petitioner proposing to issue a notice terminating the contract. This, according to the petitioner, amounts to a precipitate step, which the respondent could not have taken when the dispute is pending before the DRB, which has reserved orders thereon.

12. Mr. Santosh Kumar, learned Counsel for the NHAI has vehemently opposed the petitioner's right to any interim relief. He submits that the grounds on which the notice proposing termination of the contract has been raised, are foreign to the dispute which is before the DRB. He has handed over, across the bar, a compilation of documents. He submits that the pendency of the matter before the DRB is, even otherwise, no bar, in law, to the respondent terminating the contract, if sufficient ground for termination exists.

O.M.P.(I) (COMM.) 270/2024 Page 5 of 8

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 23/08/2024 at 00:25:47

13. Mr. Santosh Kumar has also drawn my attention to a communication between the respondent and the petitioner, in which the petitioner has been alleged not to have taken adequate safety measures. He submits that, in the petition before this Court, the petitioner has not contested the grounds on which the termination of contract is proposed. As such, the outcome of the proceedings before the DRB would have no effect on the termination of the contract.

14. Mr. Mehta, learned Senior Counsel for the petitioner refutes the contention of Mr. Santosh Kumar. He has drawn my attention to a tabular statement provided in para 26 of the petition, which compares the contention raised by the respondent before the DRB in its Statement of Defence vis-à-vis with the grounds taken in the "Notice of intention to issue the Termination Notice". Referring to the said table, Mr. Mehta submits that each of the grounds, on which the respondent intends to terminate the contract, is subject matter of consideration before the DRB. He, therefore, submits that Mr. Santosh Kumar is not correct in his arguments that the petitioner has not raised any challenge to the grounds on which the respondent is proposing to terminate the contract.

15. In my considered opinion, the submission of Mr. Santosh Kumar that, even while the dispute between the parties is pending before the DRB, the respondent could issue a termination notice cannot prima facie be accepted. The provision for resolution of disputes by the DRB and the Clause permitting termination of contract are both part of the same contract. One cannot be regarded as less important or subservient to the other. The parties have subscribed to O.M.P.(I) (COMM.) 270/2024 Page 6 of 8 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 23/08/2024 at 00:25:47 a contractual arrangement in which, if there is a dispute, it is referable to the DRB. The DRB is itself a body constituted by the respondent to resolve disputes between the parties. Mr. Santosh Kumar does not join issue on the fact that the disputes between the parties are actually pending before the DRB and that both sides have placed their respective stands in writing.

16. In view of the tabular statement contained in para 26 of the present petition, it cannot, prima facie, be said that the grounds on which the termination of the contract is proposed by the respondent, are foreign to the dispute pending before the DRB.

17. Even otherwise, the respondent cannot be heard to say that, while the issue of whether the respondent is in default of its obligations under the contract is being considered by the DRB, the respondent can go ahead and terminate the contract on the ground that the petitioner is in default of the obligations cast on it. A commercial contract is a two way street. There are reciprocal obligations. It is not permissible for one party to call upon the Court to shut its eyes to the allegations of its default of the obligations cast on it and, myopically, only examine the allegations of default committed by the other party.

18. In any event, for the present, as the DRB is seized of the disputes between the parties, I am of the considered opinion that the respondent was prima facie not justified in taking precipitate action against the petitioner by way of the impugned termination notice.

19. In that view of the matter, issue notice, returnable on 5 O.M.P.(I) (COMM.) 270/2024 Page 7 of 8 This is a digitally signed order.

20. Reply, if any, be filed within four weeks with advance copy to learned Counsel for the petitioner, who may file rejoinder thereto, if any, within four weeks thereof.

21. Till the next date of hearing, there shall be a stay of operation of the "Notice of intention to issue the Termination Notice" dated 8 August 2024, issued by the respondent to the petitioner.

C.HARI SHANKAR, J AUGUST 21, 2024 rb Click here to check corrigendum, if any O.M.P.(I) (COMM.) 270/2024 Page 8 of 8 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 23/08/2024 at 00:25:47

Unlock Advanced Research with PRISMAI

Delhi High Court - Orders