IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA Arb. Case No.39 of 2010 Date of decision : October 6, 2010 M/s Continental Construction Projects Ltd. …Petitioner. Versus Beas Valley Power Corporation Ltd. …Respondent. Coram The Hon’ble Mr. Justice Surjit Singh, Judge. Whether approved for reporting?1 Yes. For the Petitioner : Mr. Bhupinder Gupta, Senior Advocate with M/s Bimal Gupta and Neeraj Gupta, Advocates. For the Respondent : Mr. J.S. Bhogal, Senior Advocate, with M/s Suneet Goel & Tarunjeet Singh Bhogal, Advocates. Surjit Singh, J (Oral) Petitioner, who is party to an agreement (Annexure P-10), has filed the present petition, under Section 9 of the Arbitration and Conciliation Act, 1996, seeking following interim reliefs: “(i) The respondent may kindly be restrained from taking further coercive action against the petitioner after passing of order dated 27.7.2010 by issuing letter dated 31.7.2010. (ii) A direction to the respondent may kindly be issued to the respondent to refund the bank guarantee revoked by it. (iii) The respondent may further be restrained from attaching/forfeiting/selling the plant and machinery of the petitioner lying on the site. Whether reporters of the local papers may be allowed to see the judgment? …2… (iv) The respondent may kindly be restrained to invite any tender pertaining to work under contract awarded to the petitioner as the petitioner is still ready and willing to do the work, with further direction to the respondent to allow the petitioner to keep on executing the work. (v) The respondent may further be directed to refund 70% of claimed amount against the work done as agreed in the meeting dated 12.3.2010. (vi) Any other order or direction, which this Hon’ble Court deems just and proper may also be passed in favour of the petitioner and against the respondent.” Petition is opposed by respondent, the other party to the agreement. 2. Facts, as per material on record and the pleadings of the parties, are that there was an agreement between the parties, per which the petitioner was to execute a work for the respondent. The work was for completing the construction of a tunnel, which had been partly excavated by a previous contractor. Agreement was executed on 22nd October, 2008. It was agreed that the work will be completed within 24 months. Soon after the signing of the contract, petitioner addressed a communication, Annexure P-11, to the respondent that delay was bound to occur in the completion of the work, owing to extreme difficulty in reaching the face of the tunnel, because of slush, muck and accumulation of debris and also on account of several other operational difficulties, as pointed out in the communication. It appears that there had been some joint inspection also and the situation on the spot was brought to the notice of the functionaries of the respondent. …3… 3. Thereafter, parties had been exchanging correspondence. Respondent started accusing the petitioner for making lame excuses for delay caused by it. In one letter dated 23rd March, 2009, copy Annexure P-17, respondent wrote to the petitioner that cause of delay was inaction on its part and that one Jumbo Drill, which was required to be deployed for doing the drilling job, had yet not reached the site. Petitioner’s response was that old Jumbo Drill made available by the respondent had been in operation after some repairs and new one had already reached Mumbai Port and was likely to be available at the site by first week of April, 2009. This was conveyed through letter dated 30th March, 2009, Annexure P-24. Spot was again inspected on 15th April, 2009 and as per inspection report of that date, Jumbo Drill was not likely to yield the expected results, because of the seepage of water. 4. A meeting took place between the functionaries of the parties, on 12th March, 2010. Issues were raised by both the sides. Petitioner raised issues regarding revision of rates, extension of time, payment of work already done, payment for extra item of work, especially HRT package, payment of price variation bill and electricity charges, while the respondent raised the issue regarding dismal progress made in execution of the work. According to the respondent, only 15 per cent of the total work assigned to the petitioner had been completed over a period of 17 months, though the total period of the work was 24 months. Thereafter, vide communication dated …4… 14th June, 2010, Annexure P-33, Show Cause Notice was issued to the petitioner for determination of the contract, in accordance with Clause-3 of the agreement, relevant portion of which reads as follows: “Clause 3 DETERMINATION OF CONTRACT Chief Engineer may without prejudice to Corporation right in respect of any delay or inferior workmanship or other wise or to any claim for damage in respect of any breach of the contract and without prejudice to any rights or remedies under any provision of this contract or otherwise and irrespective of the fact whether the dates for completion has or has not elapsed, by notice in writing, absolutely determine the contract, in any of the following cases: (i) It the contractor, having been given by the Engineer-in-Charge a notice in writing to rectify, reconstruct or replace any defective work or that the work/or part of work is being performed in an in—efficient manner or otherwise improper or unworkman like manner, fails to comply with the requirements of such notice for a period of seven days thereafter or if the contractor shall delay or suspend the execution of the work or part of the work so that either in the judgement of the Chief Engineer (which shall be final and binding) the contractor will be unable to secure completion of the work by the date for completion or the contractor has already failed to complete the work by that date.” Petitioner submitted reply to the Show Cause Notice, which was not found satisfactory by the respondent and the contract was rescinded vide communication dated 27th July, 2010, copy Annexure P-35. 5. After serving the Show Cause Notice and before passing the final order, the respondent encashed the bank guarantee, which was to the tune of `1.20 crore. …5… 6. Petitioner’s contention is that rescission of the contract is illegal and that blame for delay in execution of work cannot be put on it, because of the situations and conditions prevailing on the spot, as pointed out in various communications addressed to the respondent. 7. Reply has been filed by the respondent, in which it says that the petitioner did not deploy sufficient manpower and machinery to execute and complete the work and that was the cause of delay. 8. I have heard learned counsel for the parties and gone through the record. 9. Bank guarantee has already been encashed by the respondent and, therefore, it may not be appropriate to grant any interim relief to the petitioner, with respect to this aspect of the matter. Otherwise also, it has been pointed out that that was an unconditional bank guarantee in favour of the respondent. 10. Main concern of the petitioner, which he has pointed out in the course of submissions, made by its learned counsel, is that no hindrance should be put in the removal of its machinery from the site. Learned counsel representing the respondent submits that when the respondent has rescinded the contract, in exercise of its power under Clause-3, it has the right to make use of the machinery of the petitioner, of course on payment of hire charges, as per right reserved to it under Clause-4 of the agreement, which reads as follows: …6… “CLAUSE 4 CONTRACTOR TO REMAIN LIABLE TO PAY COMEPNSATION IF ACTION NOT TAKEN UNDER CLAUSE-3 POWERS TO TAKE POSSESSION OF OR REQUIRE REMOVAL OF OR SELL CONTRACTOR’S PLANT. In any case in which any of the powers conferred upon the Engineer-in-Charge by clause-3 thereof, shall have become exercisable and the same has not been exercised, the non exercise thereof shall not constitute a waiver of any of the conditions hereof and such powers shall notwithstanding be exercisable in the even of any future cases of default by the contractor and liability of the contractor for compensation shall remain unaffected. In the event of the Chief Engineer/Engineer-in- Charge putting in force all or any of the powers vested in him under the preceding clause he may, if he so desires, after giving a notice in writing to the contractor, take possession of or use on hire (the amount of the hire charges as determined by the Engineer-in-Charge being final) all or any tools, plant, materials and stores, in or upon the works, or the site thereof, belonging to the contractor, or procured by the contractor and intended to be used for the execution of the work or any part thereof, paying or allowing for the same in account at the contract rates, or, in case of these not being applicable, at current market rates to be certified by the Engineer-in-Charge, whose certificate thereof shall be final. Otherwise the Engineer-in-Charge, by notice in writing may order the contractor, or his authorised agent to remove such tools, plant, materials, or stores from the premises (within a time to be specified in such notice), and in the event of the contractor failing to comply with any of such requisition, the Engineer-in-Charge may remove them at the contractor’s expense or sell them by auction or private sale on account of the contractor and at his risk in all respects and the certificate of the Engineer-in-Charge as to the expense or any such removal, the amount of the proceeds and any such sale shall be final and conclusive against the contractor.” …7… 11. Learned counsel representing the petitioner submits that machinery of the petitioner cannot be put to use unless a notice, in writing, is served, in accordance with the provision of Clause-4 and that no such notice having been issued, respondent cannot put the machinery to use. Learned counsel for the respondent says that the notice has been issued on 4th October, 2010 and as per that notice only ten items of machinery, belonging to the petitioner, have been opted to be retained for use in execution of the remaining work by the new contractor and the rest of it has been directed to be removed. He says that he received a copy of the notice by FAX, and the same having now become illegible, placing it on record will serve no purpose. On 5th October, 2010, one list scribbled in hand, giving detail of ten items, sought to be used by respondent, had been passed over to petitioner’s counsel. 12. Respondent having reserved right vide Clause-4 of the agreement, as reproduced hereinabove, to make use of the machinery of the petitioner, no interim relief can be granted, with respect to the apprehension of the petitioner that its machinery may not be allowed to be removed from the site, except, of course, a direction to the respondent not to use any item of machinery of the petitioner, except in accordance with Clause-4 of the agreement, after serving notice. 13. Another submission made on behalf of the petitioner is with respect to payment of certain amounts, as had been agreed to be paid by the respondent in the meeting held on 12th March, 2010. As per Minutes of the meeting, …8… payment on account of rock bolts was agreed to be released, immediately, after carrying out requisite pull-out tests by the petitioner. It is directed that in case requisite pull-out tests have been carried out, money on this count be credited to the account of the petitioner maintained by the respondent. Another payment of `9.58 lac had been agreed to be paid, on account of HRT package. That amount has not been paid, as per the petitioner. Learned counsel for the respondent says that as per his instructions this amount of money stands paid. It is directed that in case the amount of Rs.9.58 lac, on account of HRT package has not been paid to the petitioner, the same will be credited to its account maintained by the respondent. 14. Petition stands disposed of accordingly. On account of disposal of the main petition, pending applications stand disposed of, having become infructuous and interim orders already passed stand vacated. Copy dasti. October 6, 2010(sd) ( Surjit Singh ), J