CONTINENTAL 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 8.1.1987 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 23.3.1987 for the works in the State of Haryana. Besides, joint venture also signed contract agreement Nos. V, VI and VII dated 25.3.1987 and Nos. VIII, IX, X dated 24.3.1987 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. 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 16.9.1998 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 15.12.1988 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 31.8.1989 to the client States undertaking full responsibility for the execution of the contract but me 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 1.2.1989 under which the plaintiff undertook to take over 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 25.2.1989 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. The plaintiffs case is that at the time of the signing of the MOU dated 1.2.1989 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 1.2.1989 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 1.2.1989 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.

(2.) Several letters were exchanged between the parties in this regard and meetings were also held but ultimately vide letter dated 9.4.1992 defendant's Secretary conveyed that the defendant has no liability whether past, present, contingent or otherwise to make any further payments to the plaintiff. The plaintiff thereupon invoked arbitration clause contained in the joint venture agreement vide their letter dated 26.7.1994 but the defendant did not agree to refer the disputes to the arbitration. The stand taken by the defendant was that with the payment of Stg. Pounds 6.8. million under the supplementary contracts dated 18.4.1991,16.8.1991 the defendant stood absolved of its liability under the joint venture agreements and the joint venture agreements which contained arbitration clause came to an end and therefore there is no question of referring the dispute to the arbitration.

(3.) The plaintiff pleads that the defendant's Managing Director Mr. Malwyn Jones had visited India in mid April, 1991 and had made a commitment on behalf of the defendant to pay Stg. Pounds 1.50 million over and above what had been paid till then provided plaintiff completed the withdrawal of the defendant's name from the contracts and also secured return of the defendant's bank guarantees from the client States. Plaintiff therefore raised the claim for Stg. Pounds 1.50 million only after completing the proceedings regarding withdrawal of defendant's name from the contracts and securing return of defendant's bank guarantees from the clients. According to the plaintiff the balance amount payable to it comes to Stg. Pounds 2.2 million but they are pressing their claim for payment of Stg. Pounds 1.5 million only as per the promise made by Mr. Malwyn Jones yet the defendant did not honour the commitment of their erstwhile Managing Director even for this lessor amount. The joint venture agreement dated 8.1.1987 contains the following arbitration clause: