2019 (5) TMI 1915 - HC - Insolvency and Bankruptcy

Validity of award - execution of works contract - failure of HCC to furnish hinderance free site - resistance of extension of the validity period of the PBG - Section 34 of the Arbitration and Conciliation Act, 1996 - HELD THAT - The learned arbitrator has scrupulously gone through each and every claim and only after giving due consideration to the material on record, he has reached his conclusion vis- -vis the claims lodged by Ipex. It is this wholesome approach of the learned arbitrator that despite the absence of HCC s written submissions, the claim lodged by Ipex for loss of profit was declined and some of the claims were scaled down. Therefore, the submission made on this score on behalf of HCC by Mr. Dayan Krishnan cannot be accepted. It must be indicated that apart from anything else, the learned arbitrator was to a very large extent persuaded to hold in favour of Ipex as the evidence on record demonstrated that the obligations undertaken by HCC at the meeting held 16.03.2016 were not discharged. The evidence on record also shows that bills had remained unpaid, monies had been retained from the running bills by HCC and that huge amounts had been incurred by Ipex by way of idling cost due to a misrepresentation made by HCC with regard to the availability of hindrance free site. The fact that HCC coerced Ipex to extend the PBG from time to time is an aspect which also emerges from the record. Petition dismissed.

Summary

Issues Involved:
1. Validity of the arbitration award dated 08.01.2019.
2. Alleged false representations by HCC leading to delays in sub-contract works.
3. Non-payment of dues and retention of money by HCC.
4. Extension and validity of the Performance Bank Guarantee (PBG).
5. Claims for compensation, idling costs, and loss of profit by Ipex.
6. Procedural fairness in arbitration proceedings.
7. Consideration of the agreement between HCC and DMRC.

Issue-Wise Detailed Analysis:

1. Validity of the Arbitration Award:
The petition under Section 34 of the Arbitration and Conciliation Act, 1996, was filed to challenge the arbitration award dated 08.01.2019. The court examined whether the arbitrator followed due process and considered all relevant evidence before making the award.

2. Alleged False Representations by HCC:
Ipex argued that HCC made false representations to induce Ipex to mobilize resources quickly. These included claims that HCC had a hindrance-free site, obtained necessary clearances, possessed the land, and would make timely payments as per the LOI. The arbitrator found that HCC failed to provide a hindrance-free site and necessary clearances, which contributed to delays and additional costs for Ipex.

3. Non-Payment of Dues and Retention of Money by HCC:
Ipex claimed unpaid amounts towards running bills and retention of money by HCC. The arbitrator awarded Ipex ?67,30,994 for unpaid running bills and ?22,69,162 for retained money. Additionally, HCC was directed to release the PBG and pay extension charges of ?57,481.

4. Extension and Validity of the Performance Bank Guarantee (PBG):
HCC repeatedly requested Ipex to extend the validity of the PBG, failing which HCC threatened to encash it. Ipex extended the PBG under protest due to mounting losses and non-payment issues. The arbitrator noted HCC's coercion in extending the PBG and its failure to meet its obligations.

5. Claims for Compensation, Idling Costs, and Loss of Profit by Ipex:
Ipex sought compensation for idling costs, loss of profit, and other overheads. The arbitrator awarded ?6,03,94,423 for idling costs but declined the claim for loss of profit. Pre-litigation interest of ?11,31,407 and pendente lite interest at 12% per annum on ?7,19,52,060 were also awarded. Post-award interest at 12% per annum on ?8,60,33,837 and costs of ?8 lakhs were granted.

6. Procedural Fairness in Arbitration Proceedings:
HCC contended that the arbitrator did not consider its written submissions filed on 14.12.2018. The court noted that HCC failed to serve these submissions to Ipex, as required. The arbitrator proceeded based on available records and found HCC's conduct in not filing its statement of defense despite opportunities given. The court held that the arbitrator's decision to proceed without HCC's written submissions was justified.

7. Consideration of the Agreement Between HCC and DMRC:
HCC argued that the arbitrator did not consider the agreement between HCC and DMRC. The court rejected this argument, noting that Ipex was not a party to the HCC-DMRC agreement. The arbitrator's focus was on the obligations and representations made by HCC to Ipex.

Conclusion:
The court dismissed the petition, finding no merit in HCC's arguments. The arbitrator's award was upheld, and costs were imposed on HCC. The court emphasized that the arbitrator had thoroughly examined the claims and evidence, and procedural fairness was maintained throughout the arbitration process.