Skip to main content

Whether time is of the essence in a contract is not dependent only a clause in the contract

In WELSPUN SPECIALTY SOLUTIONS LIMITED (FORMERLY KNOWN AS REMI METALS GUJARAT LTD.) vs OIL AND NATURAL GAS CORPORATION LTD., appeal was filed against the  judgment of High Court of Uttarakhand at Nainital setting aside an arbitration award.

The entire dispute and claim before the Arbitrator revolved around the question whether time is of the essence in a contract.

The Tribunal noted that the supply of material in the instant case was not for any specific purpose or urgent requirement. The tender was a global tender for general requirement. Besides, the contract provides for imposition of LD and/or termination of the contract. It may also be noticed that ONGC could extend the time for delivery and in fact ONGC did extend the delivery period without levying any LD. These and other stipulations in the contract are a clear indication that the time was not the essence of contract.

The Arbitral Tribunal, at the outset, had held that merely having a clause in the contract making time the essence of it would not be determinative; rather, an overall view having regard to all the terms of contract are to be taken into consideration. Further, they noted that contracts containing provision for extension of time or payment of penalty on default would dilute the obligation of timely performance and render the clauses imbuing time as essence of the contract ineffective. Additionally, the Arbitral Tribunal also noted that generally, under construction contracts, time is not the essence.

The Supreme Court agreeing with the Tribunal held that it is now settled that ‘whether time is of the essence in a contract’, has to be culled out from the reading of the entire contract as well as the surrounding circumstances. Merely having an explicit clause may not be sufficient to make time the essence of the contract. As the contract was spread over a long tenure, the intention of the parties to provide for extensions surely reinforces the fact that timely performance was necessary. The fact that such extensions were granted indicates ONGC’s effort to uphold the integrity of the contract instead of repudiating the same.

Comments

Post a Comment

Most viewed this month

The recovery of vehicles by the financier not an offence - SC

Special Leave Petition (Crl.) No. 8907  of 2009 Anup Sarmah (Petitioner) Vs Bhola Nath Sharma & Ors.(Respondents) The petitioner submitted that  respondents-financer had forcibly taken away the vehicle financed by them and  illegally deprived the petitioner from its lawful possession  and  thus,  committed  a crime. The complaint filed by the petitioner had been  entertained  by  the Judicial Magistrate (Ist Class), Gauhati (Assam) in Complaint Case  No.  608 of 2009, even directing the interim custody of the vehicle (Maruti  Zen)  be given to the petitioner vide order dated  17.3.2009.  The respondent on approaching the Guwahati High  Court against this order, the hon'ble court squashed the criminal  proceedings  pending   before  the  learned Magistrate. After hearing both sides, the Hon'ble Supreme Court decided on 30th...
7 comments
Read more

Winding-Up Petition Can’t Be Used If Bona Fide Payment Disputes Pending

The Karnataka High Court, in the case of M/s Uttam Industrial Engineering Ltd vs  M/s Shree Basaveshwar Sugars Ltd, has held that a winding-up petition has serious  ramifications on the financial standing of a company and cannot be used in cases  where there is a bona fide dispute regarding the amount owed by one party to the  other and in such cases the company court should relegate the matter either to the  civil court or arbitral tribunal. In this case, Uttam Industrial Ltd entered into a contract with Basaveshwar Sugars Ltd  to provide machinery and equipment for a sugar plant. Article referred:  http://www.livelaw.in/remedy-winding-petition-cant-relied-upon-bona-fide-payment-disputes-karnataka-hc/
Post a Comment
Read more

A liquidator must pay GST on sale of assets of a defunct company

The West Bengal Authority of Advance Ruling has ruled that a National Company Law Tribunal appointed liquidator must have the GST registration till all liabilities cease to exist and that the liquidator must pay goods and services tax (GST) on sale of assets of a defunct company under liquidation, as the sale is effectively supply of goods. 
Post a Comment
Read more