INTRODUCTION

“Discourage litigation. Persuade your neighbours to compromise whenever you can. Point
out to them how the nominal winner is often a real loser — in fees, expenses, and waste of
time. As a peacemaker, the lawyer has a superior opportunity of being a good man. There
will still be business enough.” — Abraham Lincoln

Construction contract matters are distinctly unique from other types of disputes. They nearly
usually require an urgent solution, have a highly technical and sophisticated nature, and
involve numerous parties. Like in no other conflict form, joinder and consolidation issues
take center stage in these disputes. Construction contracts come with a number of risks,
which makes it more important to allocate those risks among the various parties in an
efficient manner. The type of the act or omission that led to the obligation being violated, as
well as the amount of damages, must all be carefully considered when determining the
liability of a party in a chain of parties. Experts are becoming more and more involved in
these debates. Consequently, it takes a unique skill set to assess expert testimony and
examine expert witnesses.

It is crucial to use efficient case management approaches in construction dispute resolution

due to the fact-sensitive nature of these disputes and the requirement for rapid resolution. An
important financial component is often included in many disagreements. Financing for
construction projects is frequently provided by lenders and credit providers. Another
significant industry is insurance. A variety of claims against financial institutions are made
possible by security in the form of guarantees or bonds. Construction conflicts only occur as a
result of construction contracts, but there is a chance to limit their frequency and lessen their
effects by carefully studying and designing construction contracts.

The law of contracts helps evaluate if a legal construction contract has been made at the
outset and also establishes the applicable standards for determining culpability when a
dispute develops. This issue is decided through pre-contract agreements like tenders, letters
of intent, etc. It is crucial to keep in mind that construction disputes may not result from
circumstances that are constant over time, but rather from modifications to the original
designs, price changes, weather variations, raw material availability, labor conditions like
strikes and lockouts, changes to laws and regulations, and other unanticipated or foreseeable
but unpredicted events.

The aforementioned particular confluence of elements necessitates a highly specialized

understanding of the problems facing the construction industry as well as the rights and
remedies available to parties engaged in construction disputes. In this essay, key elements of
construction contracts are succinctly explained with a focus on those that are crucial in
disputes.

RESEARCH QUESTIONS

1. What are construction contracts and how are they formed in general?
2. Whether the provisions of CPC are applicable while granting an interim injunction in
construction disputes under section 9 of Arbitration Act?

OBJECTIVES

1. To find out the scenario of construction contracts in India along with its formations
2. To delve in to the scope of interim injunction to be granted by arbitral tribunal under
section 9 of Arbitration Conciliation Act, 1996 in Construction Contracts.
3. To analyse the position of law prevailing in India regarding applicability of the
provisions of CPC to interim injunctions u/s 9 of Arbitration Act in case of
construction disputes.
 CONSTRUCTION CONTRACTS IN INDIA

The term "construction" can refer to any type of building or assembly, but it is typically only
used to describe the production of, or the completion of work on, immovable property.
Depending on the technical details of the contract, this can comprise both construction and
engineering work. Engineering works refer to any type of construction that isn't static, while
a building denotes a structure meant for habitation. Construction in connection to other types
of property, such as the construction of ships and aircraft, is governed by the same principle,
with certain adaptations.1

A construction contract is any contract entered into specifically for the construction of an
asset or a group of assets that are closely interconnected or interdependent in terms of their
design, technology, and function, as well as their ultimate use or purpose, according to the
Accounting Standard (AS) 7.2

Numerous parties are involved in a construction contract, including the employer, contractor,
subcontractor, project management consultant, and supplier. The owner or principal is often
the employer, and the contractor is responsible for designing and/or constructing. Under a
subcontract, the subcontractor is employed by either the employer or the contractor.
Construction work is managed by a project management consultant. Materials or equipment
are provided by a supplier. Additionally, the design team may work independently. 'Design'
has ill-defined boundaries. Generally speaking, it refers to certain physical attributes of the
work that meet the criteria's standards. In addition to having a primary focus on construction,
including design, quality, and timelines, a construction contract should establish a strict
framework outlining participants' obligations, allocating risks, recognizing parties' rights in
law and equity as appropriate, and offering mechanisms for timely and efficient dispute
resolution.

A. FORMATION OF CONSTRUCTION CONTRACTS

Beyond those that ordinarily govern contract construction, there are no additional rules or
principles that apply when parties enter into a specific building contract that govern how their
agreement should be interpreted.3 Construction contract law is the application of conventional

1
Chitty on Contracts, Volume II, Specific Contracts (31st Edition), Sweet & Maxwell, Page 710
2
Accounting Standard (AS) 7 available at http://www.mca.gov. in/Ministry/notification/pdf/AS_7.pdf as on
August 23, 2019.
contract law principles to a specific situation. 4 Therefore, it is crucial to comprehend the
context in which a specific construction contract term is being attempted to be construed.
Therefore, it's crucial to determine whether a legal contract has been formed as a first step.
Construction contract formation is the subject of the majority of disagreements. 5 This is due
to the numerous negotiations, proposals, counteroffers, tenders, advance bank guarantees, and
related paperwork that frequently accompany a building contract. Parties may have a
tendency to start working before a contract is actually executed. If one party fails to
acknowledge work done by the other in advance, the performing party will be forced to incur
costs and lose the value of the work done. On the other hand, a party might anticipate that
work will start before it really does, but the performing party might not think that a contract is
actually in place. In such a situation, the employer may anticipate the completion of certain
work and may have a claim for delays, if any, or non-completion of work, even though the
performing party may not even be aware that a valid, binding contract exists. Conflicts result
from this. Employing the traditional rules of contract on offer and acceptance is the basic test
for establishing whether a contract is legitimate or if a valid contract has come into existence
to be binding on the parties. For instance, it will be crucial to ascertain if a clear, unequivocal
intention to be legally bound by the contract can be extrapolated from the contract if work has
already started in advance of the signing of a formal contract. Any reliance on ambiguous
language in the tender documents or on a party's understanding without adequate supporting
evidence would not be sufficient to prove the formation of a legally binding contract. Testing
whether key clauses are present in the construction contract is another method. Legal experts
carefully examine which clauses are ambiguous, show a clear aim, or are a necessary term.

3
Justine Sweet, Standard Construction Contracts: Academic Orphan, 31 Constr. Law. 38 (2011), Berkeley Law
Scholarship Repository, (January 01, 2011) Available at:https://lawcat. berkeley.edu/record/1124602?ln=en
4
Modern Engineering (Bristol) Ltd. vs. Gilbert-Ash (Northern) Ltd. [1974] AC 689
5
Chitty on Contracts, , Volume II, Specific Contracts (31st Edition), Sweet & Maxwell, Page 711
 APPLICABILITY OF PROVISIONS OF CPC TO INTERIM INJUNCTIONS IN
INFRASTRUCTURAL DISPUTES

Interim Injunction is granted by the court under section 9 as well as section 17 of Arbitration
and Conciliation Act, 1996. The section 9 injunction is granted prior to the arbitration
proceeding starts and is granted by a court. 6 However, the section 17 injunction is invoked
only after the proceeding has come to the end and award has been passed but not enforced. 7
The latter is granted by the arbitral tribunal. Moreover, it is pertinent to note that the main
purpose behind this is to maintain the status quo of the matter along with protecting the rights
of the aggrieved party. Section 9 of the Act stipulates the powers of the court to grant interim
relief before or during the arbitral proceedings or after the passing of the arbitral award and
also lays down a restriction under clause (3) after the constitution of the Arbitral Tribunal
unless such circumstances exist which may render a remedy under Section 17 inefficacious.
Section 17 lays down that the parties may apply to the Arbitral Tribunal for interim relief
during the arbitral proceedings. The general principles which are taken into account while
granting interim relief are:
(i) prima facie case;
(ii) balance of convenience in favour of grant of interim relief; and
(iii) Irreparable injury or loss to the applicant for interim relief.
Though, the Arbitral Tribunal is not bound by the Civil Procedure Code, 1908 but the general
principles are fairly taken into account while determining the questions.8
This raises a question whether the court is restricted in its scope in terms of the provisions of
the Civil Procedure Code also whether it is barred from entertaining an application under
Section 9 of the Act after the constitution of the Arbitral Tribunal.
Answering this issue it is pertinent to note that, in deciding a petition under Section 9 of the
Act, a court cannot ignore the basic principles of CPC. 9 At the same time, the power of the
court to grant relief is not curtailed by the procedural provision in the CPC. 10 The power
under Section 9 of the Act should not ordinarily be exercised ignoring the basic principles of
procedural law as laid down in CPC, as the procedural requirement is always subservient to
the substantive law.11 However, the technicalities of CPC cannot prevent the Court from
6
The Arbitration Conciliation Act, 1996, s 9
7
The Arbitration Conciliation Act, 1996, s 17
8
Civil Procedure Code, 1908
9
Gainwell Commosales (P) Ltd. v. Minsol Ltd., 2022 SCC OnLine Cal 3975
10
Jagdish Ahuja Vs. Cupino Limited [2020 SCC OnLine Bom 849]
11
Saiyad Mohd. Bakar El-Edroos v. Abdulhabib Hasan Arab, (1998) 4 SCC 343
securing the ends of justice.12 Thus, as per the Court, if a strong prima-facie case is made out
and the balance of convenience is in favour of interim relief being granted, the court
exercising power under Section 9 of the Act should not withhold relief on the mere
technicality of absence of averments, incorporating the grounds for attachment before
judgment under Order 38 Rule 5 of CPC.13

A. INTERIM INJUNCTIONS AND TIMELINES FOR APPOINTMENT OF ARBITRATORS

As far as interim injunctions are concerned, a specific timeline within which the parties had
to appoint the arbitrators must be provided. The main concern must be to preserve the status
quo, so as to facilitate the arbitral process, to be initiated by the parties. For this reason, the
Court added that it was also “open to Section 9 court to, while passing pre-arbitral interim
measures of protection under Section 9, condition such grant by requiring the parties
benefiting therefrom, to institute arbitral proceedings within a specified timeframe.” 14 This is
also enunciated within the language of the provision after the 2015 amendments to the Act
where if the arbitration is not commenced within 90 days of interim relief under Section 9,
the same stands vacated.15

B. VALIDITY OF INTERIM INJUNCTION U/S 9

The power under Section 9(1)(ii)(e) is “not only circumscribed by the language of clause (ii)
of Section 9 using the expression ‘interim measure,’ 16 but reiterates the said expression in
clause (e) and further uses the word ‘protection’, again indicating that it is de hors final
adjudication and at best on a prima facie view of the matter”. 17 Therefore, a court could not
assume the power of adjudication which the parties had vested in the Tribunal, in the garb of
the said clause (e).18 Lastly, an interim injunction application under the aforementioned
section cannot be rejected under the grounds mentioned under it once the tribunal has been
constituted and has entertained the application.19

12
Valentine Maritime Ltd. v. Kreuz Subsea (P) Ltd., 2021 SCC OnLine Bom 75
13
Essar House Private Limited v. Arcellor Mittal Nippon Steel India Limited, 2022 SCC OnLine SC 1219.
14
Mumbai International Airport Ltd. v. Airports Authority of India (2021) 278 DLT 75.
15
The Arbitration Conciliation (2015 Amendment Act), s 9 (2)
16
The Arbitration Conciliation Act, 1996, s 9(1)(ii)
17
The Arbitration Conciliation Act, 1996, s 9(1)(ii)(e)
18
National Highways Authority of India v. Bhubaneswar Expressway (P) Ltd 2021 SCC OnLine Del 2421
19
Jaya Industries v. Mother Dairy Calcutta, 2023 SCC OnLine Cal 2051