CONTENENTAL CONSTRUCTION LIMITED Vs. BALFOUR BEATY LIMITED

JUDGEMENT

(1.) This petition under section 20 of the Indian Arbitration Act, 1940 has been filed by the petitioner M/s Continental Construction Limited for referring disputes to the arbitration. The parties entered into two agreements referred to as "the Joint Venture Agreements" dated 8/1/87 for the purpose of jointly preparing and submitting a tender for the construction of Ahmedabad-Vadodara Expressway project in Gujarat State and for the widening to 4-lanes (including strengthening of existing pavement) of National Highway - I in Haryana State. The said Joint venture signed contract agreements Nos.II, III and IV dated 23.3.87 for the works in the State, of Haryana. Besides, Joint venture also signed contract agreement Nos. V,VI and VII dated 25.3.87 and Nos. VIII,IX,X dated 24.3.87 for the works in the state of Gujarat. Under the Joint venture agreements the defendant had to provide experts in express ways and also had to provide on a temporary basis specialised road construction equipments whereas the bulk of the remaining heavy earth moving and construction machinery was to be provided by the plaintiff.

(2.) It is alleged that the defendant company failed to maintain the requisite standard of expertise in terms of the staff deputed for the work as also the machinery required for the purpose. Plaintiff wrote a letter dated 16.9.98 in this regard to the defendant. Even the client namely State of Haryana expressed their concern at the lack of progress on the projects. Ultimately a meeting was held on 15.12.88 but the defendant instead of providing inputs informed all concerned that they had decided to withdraw from the joint venture as well as from the works. This was done in December 1988/89. Plaintiff then made it clear to the defendant that defendant could not escape full liability for the breach of the agreement and they could not simply walk away. Plaintiff also wrote a letter dated 31.8.89 to the client states undertaking full responsibility for the execution of the contract but the concerned governments took about 30 months time to accept the plaintiff company alone as the contractors. In the meantime a settlement was arrived at between the parties vide MOU dated 1.2.89 under which the plaintiff undertook to takeover all the contractual obligations towards the client states on behalf of the Joint venture for a sum of Stg.pounds 9 million which defendant had agreed to pay to the plaintiff. Another MOU was signed between the parties on 25.2.89 under which the defendant agreed to make a lump sum payment of Stg. pounds 6.8 million to the plaintiff on receipt of approval from the client states of the defendant's withdrawal from the joint venture. It is admitted by the plaintiff that this amount of Stg. pounds 6.8 million has been received by the plaintiff.

(3.) The plaintiff's case is that at the time of the signing of the MOU dated 1.2.89 it was expected that the Governments of States of Haryana and Gujarat as also the Central Government will sort out the matter regarding the withdrawal of defendant from the joint venture by end of March 1989 but this did not happen. The Governments could resolve the matter only during the year 1991. In the meantime work remained virtually suspended in Gujarat and Haryana while cost escalation continued mounting up. Plaintiff wrote various letters to the defendant informing that the amount of losses estimated in the MOU dated 1.2.89 would not hold good because of the lapse of time. The plaintiff also submitted details of extra expenses incurred by it on behalf of the joint venture up to January 1991. According to the plaintiff the total loss to be shared between the parties would amount to Stg. pounds 32.34 million and therefore defendant was liable to pay Stg. pounds 16, million to the plaintiff. Out of the total amount of Stg. pounds 9 million which was agreed to be paid by the defendant to the plaintiff vide MOU dated 1.2.89 only Stg. pounds 6.8 million have been paid to the plaintiff. Thus, according to the plaintiff a sum of Stg. pounds 2.2 million remains payable by the defendant to the plaintiff.