Delhi High Court Upholds Arbitral Award In Favour Of NCC In AIIMS Bhopal Project Dispute With Health Ministry

The Delhi High Court has upheld an arbitral award in favour of NCC Limited in a dispute arising from the construction of the medical college and hostel complex at AIIMS Bhopal, finding no ground for interference under Section 34 of the Arbitration and Conciliation Act, 1996.

Justice Jasmeet Singh dismissed a petition filed by the Ministry of Health and Family Welfare challenging the arbitral award dated 8 May 2017 passed by a sole arbitrator.

The court reiterated that proceedings under Section 34 are not appellate in nature and do not permit reappreciation of evidence or substitution of the arbitrator's view.

It observed that an arbitral award can be interfered with only on limited grounds specified in Section 34 and not merely because another view is possible.

On the issue of delay, the court upheld the arbitrator's finding that the delays in execution of the works were not attributable to the contractor.

"Since, the delays leading to the prolongation of Contract were clearly held attributable to the petitioner, these co-related counter claims flowing from the same cause were rejected by the Arbitrator. This Court finds no reason to interfere with the findings of the Arbitrator regarding attribution of delays in execution of works under the Contract and consequently, the findings of the Arbitrator qua the aforesaid counterclaims also deserves to be upheld"

The dispute arose from a 2010 contract awarded by the Ministry of Health and Family Welfare to Nagarjuna Construction Ltd., now NCC Limited, for construction of a medical college and hostel complex at AIIMS Bhopal.

The Rs 147.89 crore project, scheduled for completion in 15 months, was delayed, leading to disputes over payments and responsibility for delays.

An arbitral tribunal, by awards dated December 30, 2016 and May 8, 2017, granted reliefs to NCC and rejected the Ministry's counterclaims.

The Ministry challenged the award before the High Court under Section 34 of the Arbitration and Conciliation Act, 1996.

The court noted that the arbitrator had relied on the hindrance register maintained at the site, which recorded causes of delay and was signed by officials of the Ministry and its consultants.

It recorded that the Ministry had not disputed the contents of the hindrance register during the arbitral proceedings.

The court further noted that objections to the hindrance register were raised only at a later stage and were treated as an afterthought.

It held that reliance on the hindrance register as contemporaneous evidence was justified and supported the arbitrator's conclusion on delay attribution.

The court also observed that the arbitrator had considered the Ministry's contentions, including reliance on reports and site inspections, but did not find them sufficient to displace the contemporaneous record.

In view of the finding on delay, the court upheld the arbitrator's rejection of the Ministry's counterclaims.

The arbitral tribunal had, by an interim award dated 30 December 2016, directed release of ₹2,95,79,465 towards withheld amounts from running account bills.

The court did not find any ground to interfere with this direction. The final award granting Rs 38,10,057 towards reimbursement of increase in statutory taxes and duties was also upheld.

On the issue of notice under the contract, the court accepted the arbitrator's view that non-compliance with a notice requirement would not, by itself, defeat a claim otherwise found to be due.

The court also upheld the award of approximately Rs 3.22 crore towards claims relating to prolongation of the contract, including expenses on resources.

It rejected the Ministry's contention that such claims were barred by contractual clauses, noting that the arbitrator had considered those clauses.

The court accepted the arbitrator's reasoning that compensation could be awarded where delays were attributable to the employer, applying principles of the Contract Act.

It distinguished the decision relied upon by the Ministry on the ground that the contractual clause in that case was materially different.

The court found no patent illegality or perversity in the arbitral award.

Accordingly, the petition under Section 34 was dismissed.

For Petitioner (Ministry of Health & Family Welfare): Advocates Pratima N Lakra, Kanchan Shakya, Shailendra Kumar Mishra, Chanakya Kene, Mansi.

For Respondent (Nagarjuna Construction Ltd.): Advocates Amit George, Rupam Jha, Adhishwar Suri, Ibansara Syiemlieh, Dushyant Kishan Kaul, Vaibhav Gandhi, Medhavi Bhatia, Kartikay Puneesh, Bhrighu Pamidighantam.