Seat is a very important aspect of arbitration process. While entering into a contract parties need to decide and incorporate in the arbitration agreement or the arbitrator or the court will determine the same. Indian Arbitration and Conciliation Act,1996 does not define the term seat. Section 20 defines only the “place of arbitration” which is often used interchangeably with the seat and venue which often leads to controversy. It has been ascertained and explained in various judgments of the Supreme Court of India, but controversy keeps arising in different factual settings and become the subject matter of decisions by the courts. The term ‘seat’ is of utmost importance as it connotes the situs of arbitration. One of the beauties of Arbitration process is neutral seat of arbitration, that means parties by consent or contract may choose a seat of arbitration, even though otherwise the courts in that seat do not have the jurisdiction over the parties or dispute. Many a times the contracts are drafted by lawyers who do not have sufficient exposure to the arbitration process and hence courts ended up in reading the existing incomplete/ contradicting arbitration clauses and interpreting the intention of the parties to determine the seat of arbitration

Normally all infrastructure contracts specify a scheduled completion date (herein after SPCD) in the contract. This date is the date on which date the contractor must complete the project work and handover to the employer. But normally due to delays attributable to the employer, delays attributable to the contractor and delays due to Force majeure incidents, contract completion date gets postponed, and disputes arise. The contractor must report to the Employer/ Engineer to the reasons for the delay and seek extension of time, prior to expiry of the contract period or within the timelines provided in the contract. The Engineer / Employer keeping the baseline project approved by both the parties as the basis, shall consider the delay events and the appropriate grant extension of time, as soon as possible so that the contractor can revise the construction plan according to the time extended and complete the project within the extended SPCD.

But in many cases, the Employer do not decide the application seeking extension of time expeditiously and decide it belatedly and allows the contractor to continue with the work. Once the contractor is allowed to continue the work beyond the SPCD date without a revised completion date, all the timelines mentioned in the contract gets extended and time is set at large. There is no accepted “project completion date” and hence the contractor’s obligation with respect to date of completion gets converted to completion of the project within “a reasonable time”. Hence the concept of time is the essence of the contract1 does not apply to these situations

In most of the contracts, it is mentioned that “Time is the essence” of the contract and for any reason it cannot be diluted. But at the same time these contracts also have clauses providing a process for extension of time if the project gets delayed and corresponding delay damages to be computed daily basis or weekly basis of delay period. These clauses of EOT and damages for the delay period demonstrates that the intention of the parties was not to strictly make time is the essence of the contract. If strictly time is the essence of the contract, then if the project is not completed on the PCOD date, the contract is voidable and, in such cases, Liquidated damages also can be imposed. But when EOT clauses and delay damage clauses are there in the contract, that contract loses its character of time is the essence. Hence, the obligation of the contractor is to complete the contract within a reasonable time.

The next challenge is how to find the reasonable time in such situations where time is not the essence of the contract or time is set at large by the conduct of the parties.2 The arbitrator must examine the sustainability of each of the delay event claimed by the contractor and compute the impact on the basis of the timelines provided in the base line program and not on the basis of expedited or revised construction plan. This is because the base line program is decided by both the parties prior to commencement of the project. The base line program is planned to take into consideration the full scope of project, total time granted by the employer, sequence of implementation, timelines required for completion of various components, challenges expected in the site, corresponding resources that could be employed in the light of the cost of the project etc., But the later construction programs are planned only for the balance work to be completed taking into consideration the stage of the project and the scheduled completion date. In such a situation the revised construction program cannot be reliable to estimate the normal time required for completion of a component of the project. Hence, it is safe that the reasonable time that can be granted as reasonable extension based on the original base line program.

The Liquidated damages is the predetermined damages that can be imposed by the employer, in case of failure of the contractor to complete the work within the final date provided in the contract. Hence the Liquidated damages can be imposed on the contractor by the employer only if the contract is a contract in which time, is the essence. If the contract is having an EOT clause or it has delay damage clause it cannot be a contract where time is essence. If by conduct of parties’ time is at large, then also time is not the essence. Hence, in contracts that fall under either of the categories Liquidated damages cannot be imposed

The only way to make a contract in which time is not the essence as a contract in which time is essence, the employer can give reasonable time by way of a notice and fix a date for completion.3If the contractor fails to complete the project even after granting reasonable time, then employer can surely impose liquidated damages