Arbitration: Courts Should Not Grant Injunction In Public Work Projects; Delhi High Court Reiterates Law

The Delhi High Court has ruled that in view of Sections 20A and 41(ha) of the Specific Relief Act, 1963 (SRA), the courts should grant no injunction relating to infrastructure projects where delay may be caused by such an injunction.

The bench of Justice Chandra Dhari Singh was dealing with a petition filed under Section 9 of the Arbitration and Conciliation Act, 1996 (A&C Act) seeking to staying the operation of a ‘Notice of Intention To Terminate’ issued by the National Highway Authority of India (NHAI) to a contractor, on the ground that the latter had failed to carry out its obligations under the Contract in relation to the strengthening/overlaying work on National Highway-48. The petitioner sought to restrain NHAI from flouting a fresh tender with respect to the said project.

Dismissing the Section 9 petition, the court remarked that the role of courts is to interfere to the minimum extent so that public work projects are not impeded or stalled. Noting that the scheduled targets of progress had not been achieved by the petitioner under the contract, the court ruled that Sections 20A and 41(ha) of the SRA were squarely applicable to the case. Thus, if any injunction is granted and the petitioner is allowed to continue, the same would further delay the progress/completion of the infrastructure project.

The bench further ruled that under Section 9 of the A&C Act, the court cannot give a direction to a party for not terminating the contract or to continue with the contract. While reckoning that the contract was determinable in nature, the bench held that no interreference was warranted by the court.

A Letter of Award was issued in favour of the petitioner, Roadway Solutions India Infra Ltd, by the respondent, NHAI, for execution of strengthening/overlaying work on a certain section of NH-48. The parties thereafter entered into a Contract. After certain disputes arose between the parties, NHAI issued a ‘Notice of Intention To Terminate’ (NITT) seeking to terminate the contract executed between the parties, claiming that the petitioner had failed to perform its obligations under the contract.

Against this, the petitioner filed a petition under Section 9 of the A&C Act before the Delhi High Court, seeking to stay the operation and effect of the NITT issued by NHAI.

The petitioner, Roadway Solutions India, submitted before the Delhi High Court that the contract was not per se determinable. It further claimed that it was not responsible for the delays in the execution of the project, and that the delay was attributable to NHAI. It averred that issuance of a new tender to another contractor would be a heavy burden on the public exchequer.

Per contra, NHAI argued that the contract was determinable in nature and thus, no injunction could be granted by way of specific performance. NHAI further submitted that considering the importance of the National Highway and the urgency in this regard, it would re-tender the works in an expedited manner.

The court at the outset remarked that under Section 9 of the A&C Act, it cannot give direction to a party for not terminating the contract or to continue with the contract.

“If the Contract is terminated, the applicant/petitioner shall have rights as available to it under law. It is the right of a party not to continue with a Contract and the Court cannot force a Contract on somebody under Section 9 of the Act irrespective of it being terminated in accordance with the terms of the Contract or not which is for the Arbitral Tribunal to determine,” the bench said. It added that the petitioner can always invoke the arbitration clause to claim damages, if any, suffered by it due to the issuance of the NITT.

Perusing the facts of the case, the court reckoned that only the NITT had been issued and termination of contract had not yet taken place. Dismissing the contention of the petitioner that the contract was not determinable, the court said, “The language of Clause 63.1 leaves no manner of doubt that the agreement can be terminated by the respondent and this Court is inclined to go with the argument put forth by the respondent in this regard.”

The court concluded that under the contract, NHAI could terminate the contract for default of the petitioner-contractor. Therefore, the contract was certainly determinable and no interference was warranted. The court added that whether the contract has been terminated or not, bears little or no relevance once it is determined that the contract by its very nature is determinable.

The bench observed that the Division Bench of the Delhi High Court in NHAI vs. Panipat Jalandhar NH-Tollway Pvt Ltd, 2021:DHC:1320-DB had negated a similar contention as raised by the petitioner that since the agreement provides for termination of contract on account of a default, it is not per se a determinable contract.

The court further remarked that Sections 20A and 41(ha) of the SRA express the legislative intent not to grant injunctions relating to infrastructure projects where delay may be caused by such an injunction. “The whole purpose and objective introduced this provision by way of amendment was to promote foreign investment and build investor confidence in the infrastructure sector of India. Public Private Partnerships have long suffered due to the prolonged delays and cost-overruns in timely execution of infrastructure projects,” said the court. It added that an obstruction in the development of infrastructure would yield negative consequences for the whole nation, leading to stagnancy in the economy and the downfall of the nation’s position in the global market.

While holding that any public work must progress without interruption, the bench said, “Thereby, the role of courts in this exercise is to interfere to the minimum extent so that public work projects are not impeded or stalled. In my considered view, Sections 20A and 41(ha) of the SRA squarely apply to the present case and an injunction would tantamount to further delaying the infrastructure project.”

The court reckoned that the Delhi High Court in Hari Ram Nagar vs DDA, 2019 SCC OnLine Del 9747 further highlighted that whenever suit or proceedings where an injunction is sought may lead to delay in the Infrastructure Projects, the operation of the SRA gets attracted and the courts should, in normal course, grant no injunction.

Referring to the facts of the case, the court noted that the scheduled targets of progress had not been achieved by the petitioner under the contract. Thus, it concluded that if any injunction was granted and the petitioner was allowed to continue, such continuance would cause impediment and delay in the progress or completion of the said infrastructure project. “Even otherwise, the time to be consumed in the process of inviting fresh bids cannot be a reason to continue with petitioner especially with a meagre physical progress of 3.08% in the last 8 months,” the bench added.

The court, therefore, ruled, “In view of the foregoing discussion on the facts and law, this Court cannot grant the reliefs as sought for. The petitioner by way of present petition has sought for stay of NITT and any such stay would result into petitioner continuing the project and would tantamount to granting of final relief which cannot be granted by this Court in the instant proceedings under Section 9 of the Act. On the other hand, if the action of respondent is held to be bad eventually, the petitioner can always be suitably compensated in terms of damages.”

The bench thus dismissed the petition.

Case Title: Roadway Solutions India Infra Limited vs National Highway Authority of India

Citation: 2023 LiveLaw (Del) 442

Dated: 24.05.2023

Counsel for the Petitioner: Mr. Rajiv Nayar, Senior Advocate with Mr. Nirav Shah, Mr. Sourabh Seth, Ms. Prachi Garg, Mr. Varun Kalra and Mr. Krishan Kumar and Mr. Saurabh Seth, Advocates

Counsel for the Respondent: Mr. Parag P. Tripathi, Senior Advocate with Mr. Ankur Mittal, Mr. Abhay Gupta, Ms. Vasundhara and Mr. Raushal Kumar, Advocates

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