M/S Mk Gupta And Company vs. South Eastern Coal Fields Limited

Facts

M/s MK Gupta And Company, a partnership firm engaged in construction, was awarded a turnkey project for the construction of a Sewerage Treatment Plant (STP) and sewage network by South Eastern Coal Fields Limited (SECL) for Rs. 6,40,58,102.00 inclusive of GST. The contract, executed on 25.08.2020, involved construction, trial run, commissioning, and operation & maintenance. A dispute arose regarding additional quantities of work, particularly house connections, which the applicant claimed was done on oral instruction but was outside the original scope. The applicant completed the work by 28.02.2022 and commissioned the STP on 01.03.2022. Subsequently, the applicant submitted a bill including escalation charges amounting to Rs. 42,50,654/-. SECL raised disputes regarding defects, which the applicant claimed to have rectified. Despite repeated requests and invocation of the dispute settlement clause, SECL withheld payment, leading the applicant to file an application under Section 11 of the Arbitration and Conciliation Act, 1996, for the appointment of an arbitrator.

Held

The Court noted that the parties had reached a consensus on the appointment of an arbitrator to resolve the dispute. The primary dispute revolved around the payment for additional work, including house connections, and the respondent's withholding of the applicant's bill due to alleged defects. The Court acknowledged the applicant's claim that the additional work was performed on oral instructions and that they had sought escalation charges. The respondent, while opposing the arbitration request initially, ultimately agreed to the appointment of an arbitrator. Given the mutual consent of the parties, the Court found it appropriate to appoint a sole arbitrator to adjudicate the matter. The Court did not delve into the merits of the dispute concerning the scope of work, the justification for additional payments, or the validity of the alleged defects. The core decision was to facilitate the resolution of these disputes through arbitration as per the parties' agreement.

Key Issues

1. Whether the applicant is entitled to payment for the additional quantity of work, specifically house connections, executed beyond the contracted scope of 14000 meters for the sewage network, and consequently, the associated escalation charges? 2. Whether the respondent's withholding of the 9th Running Bill, including escalation, is justified based on the alleged defects in the work, or if it constitutes an illegal withholding of payment? Contentions of the Petitioner (M/s MK Gupta And Company): The petitioner argued that the house connections were executed based on oral instructions from the site engineer, even though it was not explicitly within the original scope of work, and was done within the 14000-meter limit for sewage network laying. They contended that the work was completed, certified, and the STP commissioned, making them eligible for escalation charges. The applicant asserted that the defects pointed out by the respondent were either rectified or related to repair and maintenance, and that the respondent was illegally withholding payment. They relied on Clause 42 of the agreement for dispute settlement and subsequently invoked arbitration. Contentions of the Respondent (South Eastern Coal Fields Limited): The respondent opposed the arbitration request, raising disputes regarding defects in the work. They reiterated the need for rectification of these defects before payment could be released. The respondent did not present detailed arguments on the merits of the dispute but agreed to the appointment of an arbitrator.