UTTAR HARYANA BIJLI VITRAN NIGAM Vs. TERACOM LIMITED

JUDGEMENT

(1.) THE Uttar Haryana Bijli Vitran Nigam (for short "the Nigam") has approached this Court in appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (for short "the Act") challenging the order passed by the learned Additional District Judge, Panchkula dated 8 September 2012 dismissing the Objections of the Nigam under Section 34 of the Act with respect to the arbitral award dated 30 July 2011 made by Justice Ms. Kiran Anand Lall (Retd.).

(2.) THE dispute arose out of a contract agreement dated 15 June 2007 entered into by the Nigam with the respondent -firm for supply and distribution of transformers, VCBs and allied material for commissioning 11 K.V. New Lines, L.T. Lines and other material for segregation of Rural Domestic Load and Agricultural Load etc for distribution of power, against a notice inviting tender (NIT) for work to be carried out in Operation Circles, Karnal, Jind, Rohtak and Sonepat in order to draw 11 K.V. Lines to feed 627 villages on Turn -Key Basis. The respondent -firm was issued two work orders for the said supply to segregate rural, domestic and agricultural load. Subsequently, an additional work order dated 29 December 2008 was issued due to some technical hitches in proper supply of electricity. The scheduled time for completion of the work allotted under the two work orders was nine months and for the completion of the work allotted under the additional work order, was three months. The contract, however, could not be completed within the stipulated time. The Nigam issued a show cause notice dated 26 November 2008 proposing to terminate the contract. The respondent -Company filed reply on 3 December 2008 against the show cause notice. On 10 December 2008, the Nigam cancelled the contract. The Nigam terminated the contract by invoking the risk and responsibility clause of the contract. A dispute arose between the parties which was referred to arbitration. Statement of claims and counter claims were filed before the learned Arbitrator by the parties. It is not disputed that the period of contract had been extended by the Nigam upto 31 December 2008 i.e. almost 9 months beyond the time specified i.e. 9 months after the two work orders and and 3 months from additional work order, respectively. The argument of the Nigam before the learned Arbitrator, that time was of the essence of the contract since it was not executed within the time frame set by the contracting parties in the terms and conditions, has been rejected and rightly so by the learned Arbitrator for the reason that there was a clause for imposition of penalty for delay in performance of work. Clause 27 in the contract agreement could have been applied by imposing penalty but not in cancelling the contarct itself. Besides, the learned Arbitrator relied on Clause 26 of the contract agreement which provided for extension of time. It is a well entrenched principle of law that if there is a provision for extension of time or a condition of imposition of penalty for the delay caused in the completion of contract, the condition regarding time being of the essence of the contract becomes redundant unless the employer, by a communication addressed to the contractor after the expiry of the stipulated date, specifically again makes the time as the essence of the contract by fixing a fresh time limit. See State of Maharashtra and another vs. Digambar Balwant Kulkarni, 1979 AIR(SC) 1339 where such principle has been laid down by the Supreme Court. In the present case, the learned Arbitrator did not find any such communication on record. For these reasons, the learned Arbitrator in my considered view has rightly held that the termination of contract was an illegal act.

(3.) AFTER all the extended contract was in currency and due to expire on 31 December 2008. However, a review meeting was held on 4 December 2008 behind the back of the respondent, chaired by the Chief Minister, Haryana to review the progress of segregation of feeders in the State. It was at this meeting that a fiat was issued to cancel the contract of the claimant -firm and to award the balance or pending work to some other party by calling fresh tenders. This adverse decision was taken on the 8th day of the issue of show cause notice dated 26 November 2008, without even waiting to receive the reply of the claimant and affording an opportunity of hearing or calling upon the contractor to finish the work by the end of the year which extension had already been granted without demur. Soon thereafter, the pending balance work was handed over by the Nigam to the other firms in the picture, namely, Vijay Electricals and M/s A2Z who were engaged alongwith the respondent to do the same type of work but in different sections of the project independently. The learned Arbitrator had also noticed that a precious period of six months was lost on account of faulty work orders issued by the Nigam and the consequent amendment made therein later on, for reasons exclusively attributable to the Nigam.