Navayuga Engineering Co.

P Ltd vs Public Works Department And Anr on 15 March, 2016

Delhi High Court

Navayuga Engineering Co. P Ltd vs Public Works Department And Anr on 15 March, 2016
Author: Mukta Gupta
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment Reserved on: March 02, 2016
% Judgment Delivered on: March 15, 2016
+ FAO(OS) 264/2014
NAVAYUGA ENGINEERING CO. P LTD ..... Appellant
Represented by: Mr.Sandeep Sethi, Sr.Advocate
instructed by Mr.Abhijeet
Sinha, Mr.Arijit Mazumdar and
Mr.Shanto Nandy, Advocates.
versus

PUBLIC WORKS DEPARTMENT AND ANR ..... Respondents

Represented by: Mr.Santosh Kr.Tripathi, ASC
for GNCTD.
CORAM:
HON'BLE MR. JUSTICE PRADEEP NANDRAJOG
HON'BLE MS. JUSTICE MUKTA GUPTA
MUKTA GUPTA, J.

1. Navayuga Engineering Co. (P) Ltd. (in short Navayuga), the appellant herein was awarded a
contract to construct a bridge across river Yamuna, near Geeta Colony, Delhi vide Agreement
No.10EE/PBEF/PWD/2004-2005. Due to delay in construction of the bridge disputes arose, which
were referred to an Arbitrator. Navayuga raised seven claims of which claim Nos.2, 5 and 7 were
rejected. Public Works Department (in short PWD) raised a counter claim which was also rejected.
For claim No.1 `8,92,00,294/-, claim Nos.3(a) to 3(f) `2,90,39,805/- and for claim No.4
`2,12,83,367/- was awarded by the Arbitrator. Vide claim No.6 interest was awarded. PWD raised
objections to the award in OMP No.420/2012 under Section 34 of the Arbitration and Conciliation
Act, 1996 (in short the Act) before the learned Single Judge.

The challenge in the OMP was against allowing claim Nos.1 and 4. PWD raised no challenge to
either claim No.3 being allowed in favour of Navayuga or rejection of the counter claim of PWD,
however, by the impugned judgment the learned Single Judge set aside the award in its totality
including claim Nos.3(a) to 3(f).

2. Thus we hold at the outset that since no objections to claim Nos.3(a) to 3(f) for an amount of
`2,90,39,805/- awarded were raised in the OMP, the learned Single Judge could not have set aside
the award. Thus the award qua said claims is restored.

3. Claim No.1 before the Arbitrator was for work done. `23,86,75,025/- was claimed as under:

(i) Total amount of work done upto stipulated `64,66,29,722/-

date of completion i.e.29.01.2008 as per agreement rate

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(ii) Total amount of work done from stipulated `46,16,72,151/-

date of completion to actual date of completion i.e. 22.12.2008 as per market rate.

(iii) Total amount of work done (i) + (ii) `1,06,33,51,234/-

(iv) Already paid vide 46th R/A Bill `82,46,76,209/-

(v) Balance amount payable `23,86,75,024/-

4. Claim No.1 was revised by Navayuga and reduced to `14,23,77,790/- for the reason, the final bill
of the claimant had been cleared. Navayuga further re-revised claim No.1 and reduced the same to
`10,46,36,748/-.

5. As regards the question of delay the Arbitrator noted:

"Ample portion of the site was available for doing the work except for some portion
on which there were hindrances which were sorted out by the Respondents on
priority.

I have gone through the pleadings and arguments of both parties carefully. It is to be
noted that the EOT was granted twice, first up to 30.11.2008 and then up to
22.12.2008 by the competent authority i.e. Project Manager without levy of
compensation. While granting EOT up to 30.11.2008, the competent authority i.e.
Project Manager had noted as under:

I agree with the analysis of hindrance done by the Executive Engineer. The
weightages adopted by the Executive Engineer fairly correspond to the quantum of
work hindered at a given point of time of hindrance which could have otherwise
progressed taking in to account the effect of overlapping hindrances. Considering the
cumulative effect to all the hindrance which were beyond the control of the
contractor total justified period of delay works out to 366 days which is 60 days more
than what was asked by the contractor. Considering the sincerity and efforts put in by
agency and their intention to complete the work as early as possible the extension of
time is granted upto 30.11.2008 (proposed date of completion by the contractor)
without levy of compensation"

The work was actually completed on 22.12.2008. Subsequently to the above, project
manager, in his capacity as the competent authority, granted EOT up to 22.12.2008
without levy of compensation. Here again, against a justified delay of 26 days, actual
delay was only 22 days.

In the light of the foregoing, there appears to be no need for me to discuss the merit
or otherwise of the individual hindrances cited by the Claimants as the Respondents.

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(Namely Project Manager) themselves have recorded that the hindrances responsible
for delay in execution of the work were beyond the control of the contractor. It is also
seen from the foregoing that against a total justified delay of 392 days (i.e.366 + 26)
for the completion of the project, actual delay that occurred is 328 days i.e. 64 days
ahead of time. In the light of this fact, it is obvious that delay in completion of the
project work was beyond the control of the contractor and that is why the competent
authority i.e. Project Manager granted EOT up to the actual date of completion i.e.
30.11.2008 without levy of compensation.

This answers issue No.(i) referred to by me in the beginning of this discussion i.e. to
say that claimants, were not responsible for delay in execution of the work."

6. Since there was no dispute either on the final measurement or the actual market rates, the
Arbitrator held that Navayuga was entitled to demand market rate beyond the stipulated date of
completion for the reasons:

i) It is well accepted principle that the quoted rates are valid and binding during the
stipulated period of completion and not thereafter.

ii) It has already been established by me in the earlier discussion that there was a
fundamental breach of contract on the part of the Respondents. That being the case,
Claimants were not bound to perform beyond the stipulated date of completion at
their quoted rates. Claimants informed the Respondents about their intention to
repudiate the contract before the stipulated date, of completion i.e. on 28.01.08 as
they were not in a position to continue with the work at their quoted rates on account
of increase in the prices of construction materials. They also mentioned therein that
they were ready to continue with the work if their demand for market rates was
acceded to.

Respondents did write to the Claimants vide exhibit R-12 dated 29.01.08 but their
contention regarding refusal to accept new rates on ground of agreement being alive
did not address the basic demand for new rates beyond the stipulated date of
completion.

iii) Respondents again wrote to the Claimant vide exhibit R-14 dated 30.04.08
subsequent to the meeting with the Chief Engineer on 25.04.08 that market rates are
not acceptable for the work done after the stipulated date of completion.

iv) Claimants argument during hearing that they continued to work beyond the
stipulated date of completion only after they received verbal assurance from the Chief
Engineer (that their request for payment of market rates for the work done after the
stipulated period of completion will be viewed favourably) seems to carry weight
because Respondents did examine the Claimants request and worked out the
reasonable market rates for various items beyond the stipulated date of completion.

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Analysis of rates based on market rates has been supplied by the Respondents at the
behest of the sole arbitrator.

v) Finding that the Respondents were not committing (themselves for payment of
market rates for work beyond the stipulated period of completion, claimants
requested the Chief Engineer for arbitration vide their letter dated 04.06.08.

From the aforesaid points, it follows that the intent and conduct of the parties is very
important. If the Respondents had no intention of considering the request of the
Claimants for payment of market rates for the work beyond the stipulated period of
completion, as is now being suggested by them then how do they explain their action
of having done the detailed exercise of analysing the rates of various items based on
market rates prevailing beyond the stipulated date of completion. As already
mentioned, the Respondents have supplied the detailed analysis of rates done by
them based on market rates and these are on record of this case. It is apparent that
the Respondents were initially to accede to the demand of the Claimants for payment
of market rates beyond the stipulated date of completion but later on changed their
mind. In view of the above, I find that the request of the claimants for payment of
market rates for the work done after the stipulated period of completion particularly
when Respondents have granted extension of time without levy of compensation on
the ground that the delay was beyond the control of the Claimants is in order. The
amount payable has been determined by me based on modified annexure Y filed by
the Claimants vide exhibit C-87 at Pages 1291-1295 of their additional submission of
claims and on the basis of the analysis of market rates filed by the Respondents on
28.09.10 to be Fair, while working out the amount payable, consideration has been
given to the fact that rates allowed are not more than those asked for by the claimants
and also those worked out by the Respondents. This is so because in certain items,
market rates worked out by the Respondents are more than those asked for the
Claimants. The quantities executed after stipulated date of completion and adopted
for calculation are the ones considered by the Claimants in their calculations at
Annexure "Y", exhibit C-87 pages 1291-1295 of their additional submissions. These
quantities have not been contested by the Respondents at any stage and therefore I
take them to be correct. An amount of `22,00,000/- withheld by the Respondents in
34th, 46th & 47th R/A bills claimed by the Claimants has been allowed by me as
Respondents have neither contested the same nor furnished any justification for
withholding the same. The amount due to the claimants works out to `8,92,00,294/-
As such I award `8,92,00,294/- in favour of the Claimants against this claim."

7. The finding of the learned Arbitral Tribunal that the delay was on account of PWD and not
Navayuga has rightly not been disturbed by the learned Single Judge. However, the learned Single
Judge noted that the Arbitral Tribunal proceeded on the basis that the Chief Engineer, PWD had
given an assurance to Navayuga that the rates and terms shall be revised for the work done after the
stipulated date of completion which finding was in the teeth of the evidence available on record and
contrary to the same and PWD had expressly rejected the claim for revision of rates in respect of

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 Navayuga Engineering Co. P Ltd vs Public Works Department And Anr on 15 March, 2016

work done after the stipulated date of completion on several occasions.

8. The learned Single Judge noted that while accepting the final payment Navayuga accepted the
final measurement but disputed the rates to be applied in respect of the works carried out by
Navayuga after the stipulated date of completion. Noting that the stipulated date of completion was
January 29, 2008 and the work could not be completed due to various hindrances as noted in
Ex.C-40/1, the letter dated January 28, 2008 of Navayuga the learned Single Judge held that firstly
the contract did not grant any right to the respondent to claim enhanced rate for work done after the
stipulated date of completion. The demand for revised rates made by Navayuga was at best an offer
which was specifically and repeatedly rejected by PWD and Navayuga had an option to discontinue
the work as indicated vide Ex.C-40/1 dated January 28, 2008. However, Navayuga chose to carry on
the work on its own thus it was precluded from subsequently demanding or raising a claim for
revised rates. The second reason assigned by the learned Single Judge to decline claim No.1 was that
even though Navayuga had sought extension with market rates in respect of the balance work, the
extension of time granted by PWD was conditional, that is, without levy of compensation.

9. Learned Single Judge noting that Ex.C-40/1 was sent by Navayuga to Executive Engineer, PWD
on January 28, 2008, that is, one day prior to the stipulated date of completion, that is, January 29,
2008, held that there was protest by Navayuga for the delay caused by PWD only a day prior to the
stipulated date of completion of contract. However, as noted by the Arbitrator and reproduced by us
above, there were earlier discussions between the parties and the Project Manager admitted that the
delay was on part of PWD.

10. The learned Single Judge in para-35 of the impugned judgment noted that the contract in the
present case did not contain a clause similar to clause-11 considered in the decision reported as
2007 (2) SCC 453 Ramnath International Construction (P) Ltd. vs.Union of India and various other
decisions however, still came to the conclusion that the general conditions of the contract did not
grant any right to Navayuga to claim enhanced rates for the work done after the stipulated date of
completion. Referring to the decision reported as 2002 (4) SCC 45 General Manager, Northern
Railway & Anr. vs.Sarvesh Chopra the learned Single Judge noted that the contractor was entitled to
avoid the contract at its option on account of delay in performance of the contract by the employer
and claim damages, if the employer commits fundamental breach of the contract. However, if the
contractor does not avoid the contract and accepts the belated performance of reciprocal obligation
on the part of the employer, the contractor cannot claim any compensation for any loss occasioned
by the non-performance of the reciprocal promise by the employer at the agreed time, unless at the
time of such acceptance, he gives notice to the employer of his intention to do so.

11. The plea of PWD before the learned Single Judge was that though major portion of the land was
provided, only a minuscule portion thereof which was owned by the State of U.P. was handed over to
Navayuga later on. The finding of the Arbitrator is that hindrance free complete site could be made
available by PWD to Navayuga only by September, 2007, that is, 31 months from the stipulated date
of start and five months before the stipulated date of completion. The Arbitrator held that in order
of performance of reciprocal promise, this was the very first performance which the PWD was
obliged to perform and it failed to do so. Not only this PWD continued to supply the drawing

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 Navayuga Engineering Co. P Ltd vs Public Works Department And Anr on 15 March, 2016

required for execution of work as late as January/February, 2008, that is, around or even after the
stipulated date of completion of work. These findings of facts could not be altered by the learned
Single Judge.

12. To consider claim No.1 four communications between Navayuga and PWD as also the minutes of
the meeting dated April 25, 2008 conveyed vide letter dated April 30, 2008 are material and we
note the same as under: -

(a) Ex.C-40/1 is the letter dated January 28, 2008 from Navayuga to the Executive Engineer giving
the reasons for the delay in execution of work and stating that the cost of construction had increased
tremendously due to increase in prices of bitumen, reinforcement steel cement and other
construction material and consumables, and the prevailing BOO rates were very much on the lower
side even if price escalation is added to them. Navayuga however, stated that notwithstanding the
above it may complete the balance work if new rates at the present market rate along with new
terms and conditions were provided. The reasons given for delay were: -

"- Permission for felling down the trees in the right of way of the bridge and
approaches was given after 18 months from the date of start of the Project.

- Change in scope of work by adding bigger and more number of spans at Mughal
Bund intersection asking for mobilization and time for completion.

- Minor bridge at Mughal Bund intersection could be started after 24 months from
date of start as the approval was delayed from your end.

- One more span was added in Mughal bund intersection nearly 30 months after the
start of work.

- Decision of raising level of approach embankment was taken after 18 months from
date of start.

- Approach work from 0 CII to 440 CII could be started after 24 months from date of
start as the approval was delayed from your end and the PAC camp was shifter then

- UP irrigation land was handed over to us after 20 months from the date of start.

- Part of Eastern approach is still not handed over to us as other agency is working in
that area."

(b) Vide Ex.R-12 (1) PWD wrote a letter to Navayuga dated January 29, 2008 clarifying that Clause
Nos.2.3.1 (VIII), 2.3.1(XVIII) and condition No.13 of the agreement clearly informed about the
hindrances and shifting of service etc. and that provisional extension was granted upto April 30,
2008 under Clause-5 of the agreement vide the office letter dated January 08, 2008 without
prejudice to the right of the Government to recover liquidated damages in accordance with the

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provisions of Clause -2 of the agreement. The deployment of additional resources was the internal
management of Navayuga and since there were no hindrances in the alignment in the main bridge
across Yamuna, the works were still not completed upto January 29, 2008. As regards Mughal Bund
intersection proposal, it was pointed out that Navayuga agreed to execute the same as he was being
paid as per the terms and conditions of the agreement on market rates. However, the structural
work of the main bridge was not completed till that date. The letter noted that since the agreement
was alive, Navayugas request for allowing new rates along with the new terms and conditions was
not acceptable and it was requested to complete the work within three months failing which action
in terms of the relevant clauses of the agreement would be initiated.

(c) Navayuga responded vide Ex.C-41/1, a letter dated February 08, 2008 reiterating the hindrances
caused and that they were not in a position to accept unilateral extension of time without revision of
rates as the market rates had increased considerably. Navayuga reiterated that as regards future
payment for the items to be executed after the stipulated date of completion, the rates as enclosed
should be granted.

(d) Vide Ex.R-13/1, a letter dated February 11, 2008, PWD reiterated its stand taken in the letter
dated January 29, 2008 and turned down the request and that nothing beyond the agreement could
be given.

(e) On the request of Navayuga a meeting was held on April 25, 2008 by the Chief Engineer, PWD,
minutes whereof were noted in the letter dated April 30, 2008. The minutes of the meeting dated
April 25, 2008 are:-

"The slow progress of R.E. Wall due to non-availability of Geogrid and other
connected items for construction of R.E. Wall for Chainage 0 to 550 m. The Chief
Engineer, CW-1 asked the Garware represented Mr.Patial, reasons for not supplying
adequate quantity for accelerating the progress of work. He has raised some disputes
regarding payments to be released by NEC. The Chief Engineer directed NEC to sort
out the issue with Garware and whole supply should be received within a week and
the payments shall be settled by both the firms. As regards change in design and for
cost adjustment on account of the same. The Chief Engineer has requested the NEC
to submit his claims and it will be addressed and solved fairly under the provisions of
the agreement and has also requested that the work should not be suffered due to this
reason.

Representative of the NEC has raised the issue of the payment at market rates for
___of work done after the stipulated date of completion i.e. 29.1.2008 as the
___delayed on account of hindrances beyond the control of the contractor as
___department.

Chief Engineer, CW-1 expressed that the payments can only be made as per the
provisions of the agreement and no settlement can be done for paying market rates
for the work done after the stipulated date of completion. NEC has sought

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conciliation under clause 25. Chief Engineer heard the pleas and concluded that
agreement is only enforceable and no market rates can be accepted.

Completion of Projects: -

The progress of work was discussed. The Chief Engineer emphasised for completion
of work by 10th June, 2008. The representative of the firm assures that they will try
to complete the work by 15.6.2008. The Chief Engineer emphasised that the road
work in bridge alignment with BM & DBC shall be completed by 15.6.2008. The Chief
Engineer has also taken a note that the covering of drain on ring road side may take
sometime."

13. Learned counsel for the PWD contends that in view of the negative covenants in Chapter 2
Condition (xviii) and Chapter 7 Condition 7.16 and also Clause 5.2 of the General Clauses of
Contract, Navayuga is not entitled to claim compensation for the extended period of contract.

14. Condition (xviii) of Chapter 2, Condition 7.16 of Chapter 7 and Clause 5.2 of the General Clauses
of Contract read as:-

"Condition (xviii) of Chapter 2 Services like water supply lines, sewer lines, storm
water drains, electricity lines, telephone lines, over head and underground
cables/structure, if any falling in the alignment of the work, (which are required to be
removed or shifted in the opinion of the Engineer-in-charge) shall be
removed/shifted by the Department if found necessary by the Engineer-in-charge.
Time taken for its shifting, removal, diversion shall be accounted for towards
according extension of times if it actually causes hindrances in execution as per the
discretion of the Engineer-in-charge. No claim for delay or otherwise due to above
reasons shall be entertained on this account.

Condition 7.16 of Chapter 7 The contractor will not have any claim in case of any
delay by the Engineer-in-Charge in removal of trees or shifting, raising, removing of
telegraph, telephone or electric lines (overhead or underground), water and sewer
lines and other structures etc., if any, which may come in the way of the work.
However, suitable extension of time may be granted to cover such delays. The
department shall get the services shifted and the contractor shall provided all
assistance to the department during shifting of services at ground. The payment for
shifting of services shall be made by the department to the concerned utility
department.

Clause 5.2 of General Clauses of Contract If the work(s) be delayed by:-

i) force majeure, or

ii) abnormally bad weather, or

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iii) serious loss or damage by fire, or

iv) civil commotion, local commotion of workmen, strike or lockout, affecting any of
the trades employed on the work, or

v) delay on the part of other contractors or tradesmen engaged by

Engineer-In-Charge in executing work not forming part of the Contract, or

vi) non-availability of store, which are the responsibility of Government to supply or

vii) non-availability or break down of tools and Plant to be supplied or supplied by

Government or

viii) any other cause which, in the absolute discretion of the authority mentioned in
Schedule F is beyond the Contractors control then upon the happening of any such
event causing delay, the Contractor shall immediately give notice thereof in writing to
the Engineer-In-Charge but shall nevertheless use constantly his best endeavours to
prevent or make good the delay and shall do all that may be reasonably required to
the satisfaction of the Engineer-In-Charge to proceed with the works."

15. The delay in completion of project being on account of PWD, the only issue before the learned
Single Judge and this Court is that in the absence of a covenant prohibiting compensation, whether
the Arbitrator misconducted in granting market rate beyond the stipulated period of contract. As
noted above the negative covenants are in condition (xviii) Chapter-2 prohibiting claim for delay on
account of services like water supply lines, sewer lines etc. falling in the alignment of the work and
required to be shifted and condition-7.16 of Chapter-7, that is, claim for delay in removal of trees or
shifting, raising, removing of telegraph, telephone or electric lines etc. In clause-5.2 of the General
Clauses of Contract, there is no negative covenant as noted by the Supreme Court in the case of
Ramnath International (supra) wherein the contract specifically provided that no claim shall be
admitted in respect of compensation or otherwise, howsoever, arising as a result of extension of time
granted qua conditions (a) and (b) noted therein. Conditions (a) and (b) noted in Ramnath
International (supra) are the same as noted by us in the present case in Clause-5.2 of the General
Clauses of the Contract. Thus, the reliance of the learned Single Judge on the various decisions
including Ramnath International (supra) is misconceived.

16. Section 55 of the Contract Act provides as under:

55. Effect of failure to perform at a fixed time, in contract in which time is

essential.--When a party to a contract promises to do a certain thing at or before a
specified time, or certain things at or before specified times, and fails to do any such
thing at or before the specified time, the contract, or so much of it as has not been
performed, becomes voidable at the option of the promisee, if the intention of the
parties was that time should be of the essence of the contract.

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Effect of such failure when time is not essential.--If it was not the intention of the
parties that time should be of the essence of the contract, the contract does not
become voidable by the failure to do such thing at or before the specified time; but
the promisee is entitled to compensation from the promisor for any loss occasioned
to him by such failure.

Effect of acceptance of performance at time other than that agreed upon.--If, in case
of a contract voidable on account of the promisors failure to perform his promise at
the time agreed, the promisee accepts performance of such promise at any time other
than that agreed, the promisee cannot claim compensation for any loss occasioned by
the non- performance of the promise at the time agreed, unless, at the time of such
acceptance he gives notice to the promisor of his intention to do so.

17. Section 55 of the Contract Act clearly provides that on acceptance of performance at a time other
than agreed upon, the promisee cannot claim compensation for any loss occasioned by the
non-performance of the promisee at the time agreed, unless, at the time of such acceptance he gives
notice to the promisor of his intention to do so. In the present case notice was given by Navayuga of
its intention to PWD.

18. Supreme Court while dealing with Section 55 of the Contract Act in the decision reported as
General Manger, Northern Railway (Supra) held as under:

" In Hudson's Building and Engineering Contracts (11th Edn., pp. 1098-99) there is reference to
"no-damage" clauses, an American expression, used for describing a type of clause which classically
grants extensions of time for completion, for variously defined "delays" including some for which, as
breaches of contract on his part, the owner would prima facie be contractually responsible, but then
proceeds to provide that the extension of time so granted is to be the only right or remedy of the
contractor and, whether expressly or by implication, these damages or compensation are not to be
recoverable therefor. These "no-damage" clauses appear to have been primarily designed to protect
the owner from late start or coordination claims due to other contractor delays, which would
otherwise arise. Such clauses originated in the federal government contracts but are now adopted by
private owners and expanded to cover wider categories of breaches of contract by the owners in
situations which it would be difficult to regard as other than oppressive and unreasonable. American
jurisprudence developed so as to avoid the effect of such clauses and permitted the contractor to
claim in four situations, namely, (i) where the delay is of a different kind from that contemplated by
the clause, including extreme delay, (ii) where the delay amounts to abandonment, (iii) where the
delay is a result of positive acts of interference by the owner, and (iv) bad faith. The first of the said
four exceptions has received considerable support from judicial pronouncements in England and the
Commonwealth. Not dissimilar principles have enabled some Commonwealth courts to avoid the
effect of "no- damage" clauses. (See Hudson, ibid.).

15. In our country question of delay in performance of the contract is governed by Sections 55 and
56 of the Indian Contract Act, 1872. If there is an abnormal rise in prices of material and labour, it
may frustrate the contract and then the innocent party need not perform the contract. So also, if

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time is of the essence of the contract, failure of the employer to perform a mutual obligation would
enable the contractor to avoid the contract as the contract becomes voidable at his option. Where
time is "of the essence" of an obligation, Chitty on Contracts (28th Edn., 1999, at p.1106, para
22-015) states "a failure to perform by the stipulated time will entitle the innocent party to (a)
terminate performance of the contract and thereby put an end to all the primary obligations of both
parties remaining unperformed; and (b) claim damages from the contract-breaker on the basis that
he has committed a fundamental breach of the contract (a breach going to the root of the contract)
depriving the innocent party of the benefit of the contract (damages for loss of the whole
transaction)".

If, instead of avoiding the contract, the contractor accepts the belated performance of reciprocal
obligation on the part of the employer, the innocent party i.e. the contractor, cannot claim
compensation for any loss occasioned by the non-performance of the reciprocal promise by the
employer at the time agreed, "unless, at the time of such acceptance, he gives notice to the promisor
of his intention to do so". Thus, it appears that under the Indian law, in spite of there being a
contract between the parties whereunder the contractor has undertaken not to make any claim for
delay in performance of the contract occasioned by an act of the employer, still a claim would be
entertainable in one of the following situations: (i) if the contractor repudiates the contract
exercising his right to do so under Section 55 of the Contract Act, (ii) the employer gives an
extension of time either by entering into supplemental agreement or by making it clear that
escalation of rates or compensation for delay would be permissible, (iii) if the contractor makes it
clear that escalation of rates or compensation for delay shall have to be made by the employer and
the employer accepts performance by the contractor in spite of delay and such notice by the
contractor putting the employer on terms.

19. Thus, in view of Section 55 of the Contract Act as Navayuga had given notice of compensation
due to extension of time, the learned Arbitrator committed no error in allowing claim No.1 of
Navayuga.

20. Claim No.4 of Navayuga for payment of bonus of `4,98,82,872/- was as under:

"The Claimants submits that as per the provision of contract Clause 2A, if the
contractor completes the work ahead of scheduled completion date, a bonus of one
percent of the tendered value per month shall be payable to the contractor subject to
a maximum of 5 percent of the tendered value. The Claimant had quoted for this
work because there was a bonus clause and on award of the contract had planned to
complete the work much ahead of Scheduled date to with the good intentions of
claiming the full bonus. The Claimants submits that justifiable delay due to reasons
beyond the control of Claimant as stated in preceding paragraphs was for 965 days
(32.17 months). Actual time for construction as per contract provision was 36
months. Justifiable delay of 32.17 months when added to construction time of 36
months, gives a total extended and approved period of 68.17 months. The Claimant
submits that they completed the work on 20.12.08, which is 68.17- 46.70 =21.23
months ahead as the claimant diligently put in tremendous efforts & crashed the

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 Navayuga Engineering Co. P Ltd vs Public Works Department And Anr on 15 March, 2016

programme of work by deploying additional resources. The Claimant submits that as

per the agreement they are entitled to maximum limit of 5% of the tendered value as
bonus, which amounts to `498,82,872/-.

Hence the Ld.Arbitrator may thus be pleased to award a sum of `49882872.00/- as

bonus in favour of the Claimant."

21. The learned Arbitrator noted that PWD granted extension of time upto actual date of completion
without levy of compensation and while granting extension, the Project Manager of PWD, in his
capacity as the competent authority, recorded that the delay in completion of the work was on
account of hindrances beyond the control of the contractor and that against a total justified "delay of
392 days" (i.e. 366+26) for the completion of project, actual delay that occurred was 328 days, that
is, the work was completed 64 days ahead of time. Since the delay occurred in the completion of
work for the reasons not attributable to Navayuga thus Navayuga was entitled to payment of bonus
for this period of 64 days.

22. The learned Single Judge vide the impugned judgment declined to grant claim No.4 for the
reason that same was clearly in breach of contractual clauses of the agreement. Clause 2A of the
contract provided that if the contractor completes the work ahead of the "scheduled completion
time" an incentive for early completion of work stipulated to a maximum limit of 5% of the tendered
value shall be payable. The "scheduled completion time" is a defined term and the same was defined
in contract as January 29, 2008 and could not be altered by the parties. Merely because the contract
may have been performed after the stipulated time of completion on account of extension of time for
completion of work being granted by PWD, it does not result in the change of "scheduled completion
time" and the Arbitral Tribunal could not have by resorting to a process of calculation re-fixed the
"scheduled completion time" under the agreement.

23. We are in agreement with the view expressed by the learned Single Judge that the "Scheduled
completion time" could not have been extended by the Arbitrator by deducting the delay on the part
of PWD thereby granting bonus to Navayuga.

24. The appeal is thus disposed of setting aside the judgment of the learned Single quashing the
award in respect of claim No.1 and claim Nos.3(a) to 3(f). The award qua said claims is restored.

25. No cost.

(MUKTA GUPTA) JUDGE (PRADEEP NANDRAJOG) JUDGE MARCH 15, 2015 'vn'

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