Construction Arbitration

Construction Arbitration — Issue 101

The Employer awarded to the Contractor a construction contract. During execution, the Contractor encountered several hindrances and delays, including delays arising from procurement of imported materials and local supply constraints. The Contractor challenged the levy of price discount by the Employer for delay. The arbitral tribunal allowed the claim of the Contractor and directed refund of the price discount together with interest.

The Court set aside the award concluding that mere reproduction of the Contractor's submissions, and narration of pleadings does not amount to adjudicatory reasoning. There was no logical bridge between evidence and conclusion. The Court held that failure to provide intelligible reasons violates the statutory mandate of section 31(3) of the Arbitration and Conciliation Act, 1996.

The dispute also concerned withholding of money for non-achievement of contractual milestones. The project completion period had been repeatedly extended, the delays were not attributed to the Contractor and the Contractor had in fact sought rescheduling of milestones. Once time was extended, the milestones ought to have been correspondingly rescheduled.

The arbitral tribunal’s finding that the withholding of money for non-achievement of milestones was unjustified was held to be a plausible interpretation of the contract and warranted no interference.

The Employer awarded to the Contractor the contract for construction of 100 Family Quarters (Type-II, III & IV) along with internal water supply, sanitary installation and electrical works for the ITBP 22^nd Battalion Campus at Chhawla, New Delhi.

During execution, disputes arose regarding withholding of money for non-achievement of contractual milestones, reimbursement of GST/service tax, payment of the final bill, refund of penalty for delay in completion of the sample flat and damages for prolongation of the contract. The disputes between the parties were referred to arbitration.

The Contractor claimed reimbursement towards an alleged additional 3% tax. The Contractor failed to prove payment of the alleged additional 3% tax and the award of the claim towards the alleged 3% GST difference was held to be contrary to law.

The Contractor also claimed damages under section 73 of the Contract Act. The Court held that proof of actual loss is required and, unless such proof is impossible, a Chartered Accountant's certificate of expenditure alone does not establish compensable loss.