UNION OF INDIA V INDIAN RADIOLOGICAL AND IMAGING  ASSOCIATION AND ORS. ETC.

SPECIAL LEAVE PETITION (C) Nos. 16657-16659 OF 2016

DECIDED ON 14/03/2018

A single-judge bench of the Delhi High Court, headed by Justice YOGESH KHANNA, set aside the award of the arbitrator qua the claim of the petitioner vis-a-vis the final bill of the substitute contractor.

The case was that the objector/petitioner Indian Oil Corporation Ltd. (“IOCL”), a Government of India Undertaking, incorporated under the Indian Companies Act, 1956, having its registered office at Mumbai and its refineries headquarter at New Delhi. IOCL awarded to the respondent, SPS Engineering Ltd. (“SPSEL”), the contract for infrastructure works of supply and installation of construction water system and drinking water system for Paradip refinery project at Paradip (Orissa) by issuing its fax of acceptance (“FOA”) followed by a detailed letter of acceptance (“LOA”) and a formal contract between IOCL and SPSEL was executed. The resident construction manager, Engineers India Ltd. (RCM, EIL) was appointed as the engineer-in-charge for the works under the contract. EIL was the consultant appointed by IOCL for the project. The total nominal value of the contract was Rs.15,89,17,473/ – based on the quantities and unit rates specified in the schedule of rates. SPSEL was to complete the work within 13 (thirteen) months to be reckoned from the date of issue of Fax of Acceptance. SPSEL showed a lack of interest in the timely completion of the works and even after taking many initiatives no progress was seen and as a result the engineer-in-charge was left with no option but to recommend to IOCL the termination of the contract to which they were given some reasons not to terminate the contract.

Disputes arose between the parties which were referred to Shri P.K. Bahri (Retd. Judge of the Delhi High Court) for decision as Sole Arbitrator. The Ld. Arbitrator made the award in the arbitration proceedings by allowing the claims of IOCL to the extent of Rs.11,10,662/ – and those of SPSEL of Rs.91,33,844/-, leaving a balance of Rs.80,23,182/payable by IOCL to SPSEL under the said award after adjustment. With regard to IOCL’s claim of Rs.2,10,41,626/- for the estimated cost of completing the balance work at the risk and cost of SPSEL.

Petitioner challenged this in the Delhi High Court where the award was set aside qua the claim of the petitioner vis-a-vis the final bill of the substitute contractor relying upon the law laid down in Era Construction (supra) to hold the learned arbitrator who went wrong to say the claim was beyond limitation as was beyond three years from the date of termination of the contract. The matter was again referred to Sh.Rakesh Kapoor who was appointed as an arbitrator to find if the claim of the petitioner qua the final bill submitted by the substitute contractor is within time and in case it is found to be within limitation then to compute the compensation payable to the petitioner, per terms of the contract. No order was passed as to costs.