The Delhi High Court has clarified that in case of infrastructure projects, the balance of convenience lies with the timely completion of the project for national benefit, not with the contractor. The Court explained that under Section 41(ha) and Section 20A of the Specific Relief Act, 1963, courts are barred from granting an injunction if it would impede or delay the progress of an infrastructure project.
Further, the Court said that termination of a commercial contract should not normally be stayed by an interim order under Section 9 of the Arbitration and Conciliation Act, 1996, as the aggrieved party can be compensated with damages by an arbitrator if the termination is found to be wrongful.
Moreover, the Court held that the provision for “preservation” of the subject matter of a dispute under Section 9(1)(ii)(c) of the Arbitration Act cannot be interpreted to keep a contract alive against the interest of the parties and the public; its purpose is for evidence gathering. Accordingly, the Court restrained the NHAI from encashing the insurance surety bonds and bank guarantees furnished by the contractor until the disposal of the application under Section 9 of the Act of 1996.
However, the Court said that the NHAI is free to pass an order pursuant to its notice of intent to terminate the contract and may issue a fresh NIT to engage another entity to complete the work for package no. VIII. At the same time, the Court cautioned that the NHAI is restrained from passing any final order for the recovery of costs from the contractor until the disposal of the Section 9 application.
The Division Bench comprising Justice Dinesh Mehta and Justice Vinod Kumar observed that the contractor’s excuse regarding the non-availability of land was lame and unsustainable, as NHAI had written to the contractor to mobilize labour and machinery to take possession of the land.
The Bench noted that the argument of NHAI’s notice being a “counterblast” could be applied both ways, suggesting the contractor’s own notice might have been an attempt to delay termination. It was found that there was sufficient material to show NHAI had valid and legit reasons to issue the termination notice, and it was not arbitrary.
Thus, the Bench pointed out that the existence of three settlement agreements demonstrated that NHAI had already provided “sufficient leeway and indulgence” to the contractor. The Bench was not convinced by the contractor’s claim that it could show progress if given more time, highlighting that the terms of commercial contracts must be strictly adhered to.
Lastly, the Bench observed that the balance of convenience entirely favoured the nation and NHAI, as citizens were being deprived of a completed highway.
Briefly, the appeal was filed by the National Highways Authority of India (NHAI) under Section 37(1)(b) of the Arbitration and Conciliation Act, 1996, against an order passed by a Single Judge, who had restrained NHAI from acting upon its notice of intention to terminate a contract, concerning package No. VIII of the Delhi-Mumbai National Expressway.
The respondent-contractor, Roadway Solutions India Infra Limited, had previously issued its own notice of intention to terminate the contract, alleging NHAI’s failure to provide contiguous land. NHAI argued that the project was of national importance and that restraining termination was against the public interest. The contractor contended that NHAI’s notice was a “counterblast” and that NHAI had ignored the third settlement agreement, which revised project milestones.
The contractor claimed to have met the revised milestone of 10% expenditure/progress by achieving 19.34% and argued that termination would cause it significant financial loss and lead to blacklisting.
Appearances:
Solicitor General Tushar Mehta, along with Advocates Ankur Mittal, Abhay Gupta and Sucharu Garg, for the Appellant
Senior Advocates Rajiv Nayyar and Gopal Jain, along with Advocates Samir Mahk, Varun Kalra and Krishan Kumar, for the Respondent
