DEPARTMENT OF CIVIL ENGINEERING

CEL 767-Construction & Contract Management

Case Study on Arbitration & Conciliation Act, 1996

Under the Guidance of

Dr. K.C IYER

Professor,
Deptt. Of Civil Engg.

Submitted By:

Arneet Singh Sarna

2010CEC3837
 Kunj Bihari Construction Co. PVT. LTD. Vs Nidhi Builders PVT. LTD. & ORS., 2009 (2)
Arb L R 103 ( Delhi )

The petitioner M/s. Kunj Bihari Construction CO. PVT. LTD. filed a petition under Section 9
of the Act, on 26th Dec, 2008 with the court ordering an interim measure of maintaining
status quo with regard to material & work at the construction site of Married Accommodation
Project for ORS at Kabul Lines, New Delhi.

The initial contract for the construction works under the name “KABUL LINE PROJECT”
was awarded by Respondent No. 3: Director General, Marketing Accounts Project vide work
order dated 28th Aug, 2005 to Respondents No. 1&2. The scheduled date of completion under
the contract was 15th June, 2007. But due to the ill health of respondent no. 2 work was
delayed time and again & on the request of respondent no. 3, alternate arrangements were
made & the petitioner was awarded the contract for completing the balance work. A formal
agreement was entered on 25th Jan, 2008 between the parties wherein the Arbitration Clause 9
was as under: “In case of dispute between the first and second party in connection with the
interpretation and application of any term, condition or otherwise, first the matter shall be
resolved by mutual consultation and discussion and in case it is not possible then through
arbitrator to be appointed by the first party from the panel of CPWD arbitrators.” Also, as per
the sub contract it was petitioner’s obligation to seek time extension from respondent no. 3.

Dispute arose between the parties on account of slow work progress and finally the contract
being terminated at the discretion of Respondents 1&2. Hence, the petitioner under Sec 9 of
the Act filed a petition seeking payment against the work carried out by him. In support of his
contention, the petitioner had relied upon the letter dated 16th June, 2008 written by
respondents 1&2 to respondent 3, wherein an admission was made by respondent 1&2 that
the infrastructure lying at the work site was not less than 3 crores, and that the manpower at
the site was more than 250 workers and that the petitioner’s work was stated to be
satisfactory.

On the other hand, respondent’s 1&2 had denied that the petitioner had performed any work
at the site and if performed was negligible, as appeared from various complaints of no
work/slow work by respondent no.3 to respondent no. 1&2. As for the letter dated, 16th June,
2008, respondents 1&2 stated that it was written only on the request of the petitioner to
present a good picture of the petitioner who wanted to seek an extension from respondent
no.3. The respondent 1&2 also submitted a copy of a letter dated 14th Nov, 2008 written by
the petitioner to them, wherein the petitioner had, made it’s intentions clear of completing the

2
 Kunj Bihari Construction Co. PVT. LTD. Vs Nidhi Builders PVT. LTD. & ORS., 2009 (2)
Arb L R 103 ( Delhi )

work not late than 10th Dec, 2008 & that if it failed to do the same, the contract shall be
terminated without any reference to it & that it would be liable to pay damages as per the
terms & conditions of the contract.

Respondents 1&2 also challenged the merit of the petition and alleged the petitioner for
concealing various material facts & documents from the court while filing the present petition
and hence argued that the petition is liable for dismissal on this ground itself. Respondents
1&2 contended that the entire issue is as to whether the petitioner was entitled to any amount
for the work done had to be decided by the arbitrator and in case the petitioner succeeded he
would be compensated in terms of damages as per the settled law.

The judge after taking a note of all the documents and pleadings of all the concerned parties
stated that the sole dispute was as to whether the termination of the sub contract by the
respondents was justified or not and whether the said action of termination was taken by the
respondent as per the sub contact agreement amongst the parties validly or not. The judge
was of the opinion that such a dispute had to be adjudicated by the arbitrator in terms &
conditions of the said agreement. Hence, the judge restricted his judgement only on the
consideration whether the interim order given earlier should continue and secondly, as to
whether the petitioner is entitled to any relief or not at this stage, as the main dispute which
has arisen is to be adjudicated upon by the arbitrator, and it was not prudent to decide the
question at this stage as it may prejudice either of the parties in view of the allegations &
counter allegations raised by them.

Citing the judgements from 2 different cases,” Techno Construction & another v/s Kunj
Vihar Cooperative Group Housing Society LTD.”, 2005 (Suppl.), Arb L R 67 (Delhi) and
“BSM Contractor PVT. LTD. v/s Rajasthan State Bridge & Construction Corp. LTD. &
Another”, 1999(1) Arb L R 417 (Delhi), the judge came to a conclusion that wherein a
contract is not specifically enforceable as per the clauses stipulated under Section 14 of the
Specific Relief Act, 1963, any interim order, in the form of injunction qua contact cannot be
passed enforcing negativity. Hence, the interim order in the form of status quo ordered on
26th Dec, 2008 was vacated on the condition that the respondents 1&2 shall deposit a sum of
Rs, 25 lakhs as security to secure the interests of the petitioner, with the Registrar General of
the court. This condition was said to be imposed as an interim measure without any prejudice
to the rights & contentions of the parties. On the deposit of the above amount, the

3
 Kunj Bihari Construction Co. PVT. LTD. Vs Nidhi Builders PVT. LTD. & ORS., 2009 (2)
Arb L R 103 ( Delhi )

respondents were free to execute the remaining work by themselves or from another any
other contractor after taking measurements of the work already done. A separate account in
this regard was to be maintained and produced before the learned arbitrator to be appointed in
this matter.

Observations & Conclusions from the CASE STUDY:

Since, an arbitration clause was present in the sub contract agreement the court ruled against
granting any relief to the petitioner at this stage and ruled for the appointment of an arbitrator
as per the conditions of the contract for the matter to be adjudicated by him. Also,
maintaining a status quo would have further delayed the completion of the KABUL LINE
PROJECT the court ruled in such a manner which secured the interests of the petitioner as
well as gave flexibility of operation to the respondents so that the work could be completed as
soon as possible with no further delay.