DELAYS

Karthik MadhavanSCMHRD, Pune.

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.

EXCUSABLE DELAYS

• The consideration to excuse would be: –Non-foreseeable situation.

Non-critical in impact. Concurrent with party's delay.

• Labour disputes.• Fire.• Unusual delay in deliveries. • Unavoidable delays.

NON-EXCUSABLE DELAYS

• Ordinary and foreseeable weather conditions.

• A subcontractor's delays.• The contractor's failure to adequately

manage and coordinate the project site.

• The contractor's financing problems. • The contractor's failure to mobilize

quickly enough. • Delay by the contractor in obtaining

materials.• Poor workmanship.

COMPENSABLE DELAYS • Unforeseen delays in transportation. • Other causes beyond ‘the contractor's 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 and therefore what gives rise to claim for damages is Critical, Non Excusable, Non Concurrent delay.

GAIL INDIA LTD. V/S

HINDUSTAN CONSTRUCTION

COMPANY

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.

• Clause 27 of the GCC- GAIL was entitled to liquidated damages for the delay in HCC completing the work.

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.

• 14 months after the receipt of the final payment • But HCC had to raise any objection within 10

days

ISSUES

• 6th October 1999: HCC filed it claims to arbitrator• GAIL's objection as to maintainability of HCC's

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 without imposition of LD. Since extension of contractual completion period has been approved without imposition of LD, you are hereby advised to submit the No claim certificate afresh without any condition immediately.”

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 2003.

• The petition is allowed with costs of Rs. 5,000/- which should be paid by HCC to GAIL within a period of four weeks from today.

SUDHIR GENSETS LTD v/s

INDIAN OIL CORPORATION LTD

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 invoked and the appellant would recover the same for such delay.

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.

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 time- limit for supply of goods, ONGC informed

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.

• In certain contracts, it is impossible to assess the damages or prove the same. Such situation is taken care by 73 and 74

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 STCC

• LD a sum of Rs 10,77,714/-

MAYURDWAJ COOPERATIVE GROUP V/S

DELHI DEVELOPMENT AUTHORITY

•DELHI DEVELOPMENT AUTHORITY – Defendants and Housing Society Ltd – Plaintiff

FACTS•Suit for recovery of Rs 61,42,790/-•Plaintiff allotted 5 acres of land by defendant in 1982•As per plaintiff, land was sufficient for construction of only 300 flats, whereas the membership of the plaintiff-society, being 462, the defendant was required to allot land measuring 7.66 acres to it.

• 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 of the plaintiff.

• Cost of construction increased and construction could not be completed within time.

•The defendant directed the plaintiff to deposit Rs 39,88,824.38/- for granting extension of time for construction of flats.• The aforesaid amount was deposited by the plaintiff under protest•Despite legal notices for possession of additional land and refund of Rs 26 39,88,824.38/-, the defendant failed to refund the amount.

• 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.

• It is also alleged that the suit is barred by limitation since it ought to have been instituted within six months from the date on which the cause of action arose.

•Due to the arbitration clause contained in Perpetual Lease Deed, the suit is not maintainable and the matter is required to be referred for arbitration. •The plaintiff-society represented that it had 460 members and requested for allotment of land measuring 7.666 acres and also deposited Rs 8,53,800/- on 03rd March, 1982 but only 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 of additional land, but, the society failed to deposit the cost of additional land.• Since the society had paid Rs 25,28,300/- towards premium 5 acres was allotted to it.•The plaintiff paid Rs 3,00,000/- on 11th March, 1983, Rs 3,68,250/- on 30th April, 1983 and Rs 11,87,119/- on 21st June, 1983 and interest, amounting to Rs 6,82,689.68 on 11th February, 1991. •The additional land was later allotted to the society, possession was handed over to it on 06th October, 1999 and lease deed was executed on 01st September, 2000. •It is further alleged that allotment of additional land is an issue altogether different from non-construction on the allotted land.

ISSUES•Whether present suit is barred for want of proper legal notice under Section 53-B of the Delhi Development Act?•Whether notice under Section 53-B of the Delhi Development Act had been served on the defendant?•Whether the present suit is barred by time?•Whether there is an arbitration agreement between the parties, if so what would be its effect?•Whether plaintiff is entitled to claim the amount as alleged in the plaint?•Whether plaintiff is entitled to claim the interest, if so at what rate?•Relief?

JUDGEMENT•It would make no difference to the merits of the case as that there was no linkage between construction on the land measuring 5 acres allotted to the plaintiff-society at Patparganj and allotment of additional land to it.•This is not a suit for damages on account of delay in allotment of additional land to the plaintiff-society nor is this a suit for payment of interest on the amount paid as premium for additional rent on the ground that there was no delay on the part of the DDA in allotting additional land to the plaintiff-society, despite receipt of entire land premium from it alongwith requisite interest.•This is a suit for refund of the composition fee which DDA has recovered from the plaintiff- society while extending the time for completion of construction on 5 acres of land allotted to it at Patparganj.

• 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 plaintiff-society.

• The issue is decided against the plaintiff and in favour of defendant.

RAUNAQ INTERNATIONAL LIMITED V/S

I.V.R. CONSTRUCTION LTD.

FACTS

•The Maharashtra State Electricity Board floated a tender for design, engineering, manufacture, supply, erection and commissioning of large diameter pipes and steel tanks with all accessories and auxiliaries of Khaperkheda Thermal Power Station, Maharashtra, each unit being of 210 MW. •The qualifying requirements was that the bidder should have designed fabricated/manufactured, supplied, erected and successfully commissioned large diameter piping system comprising the supply of M.S. pipes not less than 2000 mm diameter and laid/buried for a minimum total length of 3 kms. in a thermal power station.• It should be in successful operation for the past 2 years as reckoned on the date set for opening of the bid. •Further, the bidder should have minimum turnover of Rs. 7.5 crores per annum for the last 3 consecutive years.

• 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.• The High Court stayed the operation of the Letter

of Intent issued to M/s. Raunaq International Ltd. Hence the appeal.

JUDGEMENT OF SUPREME COURT• Relaxation was permissible under the 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 of M/s. Raunaq International Ltd. is lower and hence accepted.

• 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 Ltd. shall pay to the appellants herein the costs of the appeals.

THANK YOU!