Cases in Delays - Indian Contract Act, 1872


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Cases in Delays - Indian Contract Act, 1872

  1. 1. DELAYS Karthik Madhavan SCMHRD, Pune.
  2. 2. CAUSES FOR DELAY• Defects in documents/design/decision.• Incompetence of parties to cope up with changes.• Differing site conditions.• Attitude of any one or both the parties.
  3. 3. EXCUSABLE DELAYS• The consideration to excuse would be: – Non-foreseeable situation. Non-critical in impact. Concurrent with partys delay.• Labour disputes.• Fire.• Unusual delay in deliveries.• Unavoidable delays.
  4. 4. NON-EXCUSABLE DELAYS• Ordinary and foreseeable weather conditions.• A subcontractors delays.• The contractors failure to adequately manage and coordinate the project site.• The contractors financing problems.• The contractors failure to mobilize quickly enough.• Delay by the contractor in obtaining
  5. 5. COMPENSABLE DELAYS• Unforeseen delays in transportation.• Other causes beyond „the contractors control‟.CRITICAL AND NON-CRITICAL DELAYS• Time is of the essence.CONCURRENT DELAYS• While one party undergoes a phase of delay of its own making, the other party too is delayed due to its own deficiencies.Thus a non-critical, concurrent delay is Excusable andtherefore what gives rise to claim for damages is Critical,
  7. 7. FACTS• Contract Awarded On 6th July 1994• For upgradation of the Auraiya Gas Compressor Station for HBJ Pipeline.• To be completed by 27th February 1995.• Actually completed on 31st October 1996• Delay of about 20 months.• GAIL claims that HCC was not serious about the execution of the job awarded to it• Various notices/letters were issued to HCC by GAIL, and also by Engineers India Ltd. (`EIL) who were the Engineer-in-charge of the project.
  8. 8. ISSUES• HCC had already submitted its NCC while requesting EoT by a letter dated 7th March 1997.• GAIL by its letter dated 14th January 1998 requested HCC to submit a fresh NCC. This was done by the HCC on 16th January 1998.• HCC also issued another letter dated 16th April 1999, that no further amount is due to it under the contract in question.
  9. 9. ISSUES• 6th October 1999: HCC filed it claims to arbitrator• GAILs objection as to maintainability of HCCs claim was rejected by the learned Arbitrator in the impugned Award dated 11th August 2003.• HCC had imposed a condition for issuance of such NCC. – “We shall have no claim whatsoever of any kind towards the Contract and the works executed at GAIL Dibiyapur subject to sanction of final extension of time without levy of Liquidated Damages and payment of our final bill”• GAIL‟s reply: – “You had submitted conditional No Claim Certificate subject to extension of contractual completion period
  10. 10. JUDGEMENT• HCC insisted on GAIL extending the period of completion of the contract without imposition of LD as a pre-condition to issuing the NCC.• GAIL acceded to the said condition and thereafter HCC issued the NCC.• The two parties were in negotiation as regards the settlement of the final bill and there was no compulsion on HCC, much less any coercion, to issue an NCC.• For the aforementioned reasons, the Court sets aside the impugned Award dated 11th August
  12. 12. FACTS• Delayed the supply and installation of the Gen-sets beyond the time limit.• Work was not completed on time.• EoT is not to be granted according to the contract.• Section 73 and 74 was violated to which Indian Oil claimed LD.• Time was extended by letter dated 4-12- 1996 with a specific demand that the clause for liquidated damages would be
  13. 13. FACTS• Sudhir Gen-sets had supplied the goods• Indicates that they were agreeable to pay liquidated damages.• Sudhir gen-sets raised issue with arbitrator claiming there was no loss to IOC.• Arbitrator dismissed the claims.• No justifiable reason for the Arbitral Tribunal to arrive at a conclusion that still the purchaser should prove loss suffered by it because of delay in supply of goods.• It was LD and not Penalty.
  14. 14. ISSUES• There is specific stipulation in the agreement that the time and date of delivery of the goods was of the essence of the contract;• In case of failure to deliver the goods within the period fixed for such delivery in the schedule, ONGC was entitled to recover from the contractor liquidated damages as agreed;• It was also explicitly understood that the agreed liquidated damages were genuine pre-estimate of damages;• On the request of the respondent to extend the
  15. 15. ISSUES• Specifically that time was extended but stipulated liquidated damages as agreed would be recovered;• Liquidated damages for delay in supply of goods were to be recovered by paying authorities from the bills for payment of cost of material supplied by the contractor;• There is nothing on record to suggest that stipulation for recovering liquidated damages was by way of penalty or that the said sum was in any way unreasonable.
  16. 16. JUDGEMENT• Damages were pre-fixed by the parties with regard to loss suffered by IOC on account of delay in supplying the equipment.• It is not necessary for the respondent to prove actual damages.• Thus, the arbitrator was justified in dismissing the claim of Sudhir Gen- sets by virtue of Clause 13 of the
  18. 18. •DELHI DEVELOPMENT AUTHORITY –Defendants and Housing Society Ltd –Plaintiff FACTS•Suit for recovery of Rs 61,42,790/-•Plaintiff allotted 5 acres of land bydefendant in 1982•As per plaintiff, land was sufficient forconstruction of only 300 flats, whereasthe membership of the plaintiff-society,
  19. 19. • Defendant later offered additional land to the plaintiff for the remaining 160 members and asked it to deposit Rs 11,87,119.80/- towards cost of the additional land.• The plaintiff made payment of Rs 6,82,689.65/- and asked the defendant to allot the additional land to it.• The defendant did not allot additional land for the remaining 160 members
  20. 20. •The defendant directed the plaintiffto deposit Rs 39,88,824.38/- forgranting extension of time forconstruction of flats.• The aforesaid amount wasdeposited by the plaintiff underprotest•Despite legal notices for possessionof additional land and refund of Rs26 39,88,824.38/-, the defendant
  21. 21. • The plaintiff thus claimed the aforesaid amount of Rs 39,88,824.38/- along with interest @18% p.a. amounting to Rs 21,53,964.62/-, thus making a total claim of Rs 61,42,790/-• Defendant objected that the suit is not maintainable for want of notice under Section 53-B Delhi Development Act.
  22. 22. •Due to the arbitration clause contained in Perpetual LeaseDeed, the suit is not maintainable and the matter isrequired to be referred for arbitration.•The plaintiff-society represented that it had 460 membersand requested for allotment of land measuring 7.666 acresand also deposited Rs 8,53,800/- on 03rd March, 1982 butonly 5 acres of land was available in Patparganj.•It was decided to allot land measuring 7.666 acres,subject to payment of Rs 11,87,119.80/- towards cost ofadditional land, but, the society failed to deposit the costof additional land.• Since the society had paid Rs 25,28,300/- towardspremium 5 acres was allotted to it.•The plaintiff paid Rs 3,00,000/- on 11th March, 1983, Rs3,68,250/- on 30th April, 1983 and Rs 11,87,119/- on 21stJune, 1983 and interest, amounting to Rs 6,82,689.68 on
  23. 23. ISSUES•Whether present suit is barred for want ofproper legal notice under Section 53-B of theDelhi Development Act?•Whether notice under Section 53-B of theDelhi Development Act had been served onthe defendant?•Whether the present suit is barred by time?•Whether there is an arbitration agreementbetween the parties, if so what would be itseffect?•Whether plaintiff is entitled to claim the
  24. 24. JUDGEMENT•It would make no difference to the merits of thecase as that there was no linkage betweenconstruction on the land measuring 5 acres allottedto the plaintiff-society at Patparganj and allotment ofadditional land to it.•This is not a suit for damages on account of delayin allotment of additional land to the plaintiff-societynor is this a suit for payment of interest on theamount paid as premium for additional rent on theground that there was no delay on the part of theDDA in allotting additional land to the plaintiff-society, despite receipt of entire land premium fromit alongwith requisite interest.
  25. 25. • Since construction was not dependent on allotment of additional land and there was no hindrance such as encroachment on the land at Patparganj, non-completion of construction within the time stipulated was not justified.• The lessor, therefore, was very much entitled to recover composition fee while acceding to the request of the
  27. 27. FACTS•The Maharashtra State Electricity Board floated a tenderfor design, engineering, manufacture, supply, erectionand commissioning of large diameter pipes and steeltanks with all accessories and auxiliaries of KhaperkhedaThermal Power Station, Maharashtra, each unit being of210 MW.•The qualifying requirements was that the bidder shouldhave designedfabricated/manufactured, supplied, erected andsuccessfully commissioned large diameter piping systemcomprising the supply of M.S. pipes not less than 2000mm diameter and laid/buried for a minimum total lengthof 3 kms. in a thermal power station.
  28. 28. • 4 tenderers qualified as per the qualifying criteria. M/s. IVR Construction was one of them.• Raunaq International Ltd. had done work for less than 3 kms but had done CW piping for 210 MW units.• M/s. IVR Construction Ltd. fell short of the requisite experience by one year.• Raunaq International Ltd.‟s offer was the most competitive and hence tender awarded to it.• IVR Const. challenged this decision in High Court.
  29. 29. JUDGEMENT OF SUPREME• COURT under the Relaxation was permissible terms of the tender. The relaxation granted to M/s. Raunaq International Ltd. is on valid principles looking to the expertise of the tenderer and his past experience although it does not exactly tally with the prescribed criteria.• IVR Construction Ltd. themselves do not fulfil the requisite criteria. Thus, any judicial is not valid in this case.• Even if criteria can be relaxed both, offer
  30. 30. • Also stopping the performance of the contract so awarded, there is a major detriment to the public because the construction of two thermal power units is held up.• There is no allegation of collateral reasons for granting the contract to Raunaq International Ltd.• High Court has erred in granting the interim order. M/s. IVR Construction
  31. 31. THANK YOU!