Court U/s. 9 Of Arbitration Act Cannot Give Direction To A Party For Not Terminating Contract Or Continue With It: Delhi HC

Finding that the question as to whether material breach/delay has been committed or not or if there is any breach/delay at all is not to be gone into because it is not the question for determination in the petition under Section 9 of the Arbitration and Conciliation Act, 1996, the Delhi High Court held that it is only an Arbitral Tribunal which can adjudicate upon the same after a thorough examination of the pleadings and the materials placed on record and it is not for the Court to comment on Section 9 of the Act and/or make any observations regarding the same.

The Court observed, "...this Court under Section 9 of the Act cannot give direction to a party for not terminating the contract or to continue with the Contract."

While stating that this Court under Section 9 of the 1996 Act cannot give direction to a party for not terminating the contract or to continue with the contract, the Single Judge Bench of Justice Chandra Dhari Singh observed that “It is the right of a party not to continue with a Contract and the Court cannot force a Contract on somebody under Section 9 of the Act irrespective of it being terminated in accordance with the terms of the Contract or not which is for the Arbitral Tribunal to determine”.

Senior Advocate Rajiv Nayar appeared for the Petitioner, whereas Senior Advocate Parag P. Tripathi appeared for the Respondent.

Going by the background of the case, the Petitioner (Roadway Solutions India Infra) is a construction company, whereas the Respondent (NHAI) is an autonomous agency of the Government of India. The Respondent invited bids for strengthening/overlaying on the Six Lane Gurgaon – Kotputli – Jaipur section at the risk and cost of Concessionaire on an item rate basis. In August 2021, the Petitioner also took part in said bid and being the lowest bidder, was awarded the contract.

The Petitioner submitted the Performance Security amounting to Rs.12,29,10,754/- and Rs.3,51, 37, 643/- respectively to the Respondent in the form of bank guarantees. When the Petitioner submitted the mixed design of Reclaimed/Recycled Asphalt Pavement (RAP) along with the Construction Methodology of RAP for review, the Respondent rejected the proposal for the use of RAP. The Respondent also rejected the use of RAP material for DBM works stating that the same is not part of the Bill of Quantities (BOQ) under the Contract. The Petitioner raised an objection and submitted the Interim Payment Certificate (IPC-01) seeking release of 75% of the net payment for the works done by the Petitioner. The Respondent, however, released only 50% of the amount and sent a notice alleging defaults of the Petitioner under the Contract. This culminated in the termination of the contract. Since the dispute arose alleging non-performance on the part of the Petitioner which showed no progress in executing works even after a lapse of six months, hence the present petition.

After considering the submission, the High Court observed that the Petitioner's contention that the Respondent has a duty to act in a fair, just, and prudent manner being a State machinery, is not tenable in the present case to go into, as the petition is based only on breach of contract and remedies flowing therefrom.

Thus, “the matter must be decided strictly in the realm of private law rights governed by the general law relating to contracts with reference to the provisions of the SRA providing for non-enforceability of certain types of contracts”, added the Court.

The Bench highlighted that the contention of Petitioner that the present contract is not determinable is misconceived since the agreement clearly specifies that same can be terminated by the Respondent.

Referring to the decision of the Division Bench of this Court in NHAI v. Panipat Jalandhar NH-Tollway Pvt. Ltd [FAO(OS) No. 55/2021], the High Court clarified that NHAI could terminate the Contract for default of Petitioner.

Highlighting that Sections 20A and 41(ha) of the SRA express the legislative intent not to grant injunctions relating to infrastructure projects where delay may be caused by such an injunction, the Bench stated that the role of courts is limited to minimum interference so that public work projects are not impeded or stalled.

Therefore, finding that the Petitioner by way of the petition has sought a stay of NITT, the Bench refused to grant an interim injunction and concluded that any such stay would result in Petitioner continuing the project and would tantamount to granting of final relief which cannot be granted by the Court.

Cause Title: Roadway Solutions India Infra Limited v. NHAI [NEUTRAL CITATION No.2023: DHC: 3610]

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