NATIONAL INSTITUTE OF CONSTRUCTION MANAGEMENT

AND RESEARCH, PUNE

Subject:
CONTRACTS & CLAIMS MANAGEMENT

Guide By:
Prof. Ashish Goel

PEM-16 Batch
Section 2

Submitted By: Group 12

PP20134 Jay Patel
PP20136 Amjad Malik
PP20137 Shweta Devekar
PP20138 Rajat Kewate
PP20139 Sruthi Harikumar

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 Gas Authority of India Limited vs Hindustan Construction Corporation
Petitioner: Gas Authority of India Limited - GAIL
Respondent: Hindustan Construction Corporation - HCC
Dated on: 9 January, 2012
Author: S. Muralidhar
High Court of Delhi, New Delhi

1. Case summery
The case on GAIL by HCC is a dispute on claim dispute. HCC was been awarded a contract for the
upgradation of the Auraiya Gas Compressor Station for HBJ Pipeline on 6th July, 1994 by GAIL with
a completion date, 27th February 1995. But project was actually completed on 31st October 1996 with
delay of twenty months. HCC was not serious about the execution of the job and various notices/letters
were issued by GAIL and Engineers India Ltd. who was Engineer-in-charge of the project. Under
Clause.27 of the GCC, GAIL was entitled to “liquidated damages” for the delay in HCC completing
the work. Work was done and HCC submitted final bill and a ‘No Claim Certificate -NCC’ also
requesting an extension period of conclusion of contract on 7th March 1997. GAIL replied to submit
a fresh NCC on 14 Jan, 1998 and received it on 16th Jan, 1998. Later HCC issued letter asking no
further payments left dated 16th April, 1999 (fourteen months later).

According to the GAIL, under Clause 9 (i) Volume I of GCC, HCC had to raise any objection as
regards payments due to it by giving a written notice within ten days of the final payment. On 6th
October 1999 HCC filed a claim before the Arbitrator. GAIL in its reply argued about maintainability
of the claim on HCC which was rejected by the Arbitrator and allowed the claims of the HCC and
rejected the counter claim of GAIL.

Mr. Rajiv Bansal, (counsel – GAIL), submitted that the Arbitrator erred in rejecting the plea of GAIL
and was in favor of the HCC’s claims. The plea of HCC that NCC was given under coercion was an
afterthought but HCC had already given no further claims certificate against GAIL. Mr. Anurag Kumar
(counsel – HCC) submitted that the NCC given under coercion else HCC couldn’t receive any payment
from GAIL and the letter on 16th April 1999 issued by HCC was not in contract. The issue was on
Arbitrator's rejection of GAIL's claim and also the submission of NCC by a contractor would prevent
a contractor from subsequently raising a claim.

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After completion of the work on 31st October 1996, HCC submitted its final bill along with the first
NCC issued on 7th March 1997, which includes a condition for issuance of NCC and sanction of final
extension of time without levy of Liquidated Damages and payment of final bill.
The reply from GAIL includes,
• No evidence submitted on PUF insulation which is against the clause no. 60.2-1(d) and actual
payments made to M/s. LLOYD INSULATIONS.
• Since extension of contractual completion period has been approved without imposition of LD
as per request, HCC should submit the NCC afresh without any condition immediately.
• HCC should submit the application to Regional Labour Commissioner, completion certificate,
Order passed by the R.L.C. for release of Security Deposit.
• Release of fund on final bill after getting the above cited clarifications.

The NCC was issued on 14 Jan, 1995 and since the copy of the petition does not mention the date,
Arbitrator refers to it as dated 16th January 1998 whereas in the present petition GAIL states that it is
dated 16th July 1998. As far as the letter dated 16th April, 1999 is concerned HCC said this belongs
to a different contract because the letter was not document by GAIL in the arbitral proceedings. The
two parties were in negotiation on the settlement of the final bill and there was no compulsion, neither
coercion to issue on NCC. The Arbitrator has failed to notice that HCC had not issued the NCC under
coercion and also the said conclusion was contrary to the evidence which shows that the NCC was
issued after HCC's condition to GAIL. The Arbitrator failed in terms of law and Court ordered petition
is allowed with costs of Rs. 5,000/- which should be paid by HCC to GAIL.

2. Did the dispute happen due to ambiguity or mistakes in any of the contact clauses? How the
dispute could have been prevented (in terms of better drafting of contract clauses).

• The dispute did not happen due to the ambiguity or mistakes in any of the contract clause. But
yes, the dispute could have been avoided at the very beginning when the claimants-HCC filled
a complaint on 6th October 1999 against GAIL before arbitrator.
• The learned arbitrator failed to identify that there was no compulsion on HCC, much less any
coercion, to issue an NCC to GAIL for the final payment. The learned Arbitrator has failed to
consider this important aspect while concluding that: "In the present case the NCC was
demanded before the bill was finalized and before the amount of final payment intimated to
claimants- HCC

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 • The NCC issued by HCC to GAIL constituted 'accord and satisfaction' of HCC's claims and
there was therefore no arbitrable dispute.
• The dispute could have been avoided if the contract clauses would have been drafted better and
would have gone into the depth a bit more to avoid any ambiguity.
• HCC should have submitted the separate documents of subcontracting of PUF insulation of
control building roofing to M/S LLYOD INSULATION and plus should have submitted the
necessary bills, and documentary evidence time to time to GAIL which is mentioned very
clearly in the clause no. 60.2. I(d). As per this clause you are required to submit every evidence
you must support the claims and payments made you to the subcontractor and further you can
only claim for the said amount.
• But while verifying the records, it is observed that no such documentary evidence has been
submitted and therefore GAIL requested HCC to submit the documentary evidence of actual
payments made to M/s. LLOYD INSULATIONS by HCC and acknowledgement of the same
by them for carrying out the above mentioned PUF insulation job.
• Also, HCC would have submitted only required bills instead of NCC if they had issues
regarding payments. If they provide NCC, they would have checked final payment details and
informed within 10 days of payment.

3. Comment with reasons whether the dispute could have been avoided if FIDIC provisions
(Red/Yellow/Silver book, as applicable based on type contract used in the selected case) were
adopted instead of relevant Indian standard form contract used in that case.

• Here, the dispute was not due to error in the contract clauses.
• So, there is no chance that dispute could be avoided by FIDIC provisions.
• The dispute was due to “No claim certificate” submitted by HCC twice without checking their
received payments were satisfactory or not.
• HCC could apply for claim as contract (Clause 91 (i) of Volume I of GCC) in duration of 10
days from final payment. FIDIC clause 14 also has similar clause regarding payment.
• FIDIC Red book clause 14.13:
Within 28 days after receiving the Final Statement and written discharge, the Engineer shall
issue to the Employer, the Final Payment Certificate which shall state
o the amount which is finally due, and
o after giving credit to the Employer for all amounts previously paid the Employer and
for all sums to which the Employer is entitled. the balance (if any) due from the

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 Employer to the Contractor or from the Contractor to the Employer, as the case may
be.
If the Contractor has not applied for a Final Payment Certificate, the Engineer shall request the
Contractor to do so. If the Contractor fails to submit an application within a period of 28 days,
the Engineer shall issue the Final Payment Certificate.
• As HCC had raised claim after almost 1.5 years, FIDIC clause of 28 days can’t help in dispute.

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References:

• https://indiankanoon.org/doc/136008516/
• FIDIC – 1999 – Red Book: Conditions of Contract for Construction

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