Delhi High Court
Govt Of Nct Of Delhi vs M/S Harbel Singh And Sons on 22 April, 2025
Author: Subramonium Prasad
Bench: Subramonium Prasad
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 22nd APRIL, 2025
IN THE MATTER OF:
+ O.M.P. (COMM) 350/2024
GOVT OF NCT OF DELHI .....Petitioner
Through: Mr. Dinesh Malik, Panel Counsel
with Mr. Puneet Jain, Mr. Lavish
Arora, Advocates.
versus
M/S HARBEL SINGH AND SONS .....Respondent
Through: Mr. Avinash Trivedi and Mr. Rahul
Aggarwal, Advocates.
CORAM:
HON'BLE MR. JUSTICE SUBRAMONIUM PRASAD
JUDGMENT
1. The present petition under Section 34 of the Arbitration and
Conciliation Act, 1996 has been filed by the Petitioner challenging the
Impugned Arbitral Award dated 19.04.2024 passed by the learned Sole
Arbitrator.
2. Shorn of unnecessary details, the facts leading to the filing of present
petition are as under:-
a. The Petitioner floated a Tender for Construction of Additional
classrooms in existing premises under jurisdiction under EO
Zone-24 of DDE (South) (Priority-I) SH: C/o SPS type
Classrooms, Labs & MP Halls including Internal & External
water supply sanitary & Electrical Installations, Development
of site and firefighting system etc., at School of Bhatti Mines
(School ID: 1923026) (Package-2) ("Work")
b. It is stated that the Respondent emerged as the Lowest Bidder
and was awarded the works on 27.02.2016. A formal Agreement
bearing no. 36/EE/EMD/S&SE/PWD/2015-16 was entered into
between the parties. In terms of the Agreement, the Respondent
had to complete the Work in 135 days starting from 07.03.2016
and the stipulated date of completion was 19.07.2016
c. It is stated that Extension of Time ( "EOT" ) was granted by the
Petitioner upto the actual date of completion i.e., 03.10.2017
without levying compensation. It is stated that the work was
completed with a delay of approximately 14 months.
d. It is stated that the Respondent/Claimant raised certain disputes
with regards to the amount allegedly due and payable. The
disputes were referred by the Respondent/Claimant to the Chief
Engineer vide a letter dated 17.10.2022 for appointment of
Arbitrator under Clause 25(ii) of the abovementioned
Agreement.
e. The Chief Engineer vide a Letter bearing No.
55(60)/CE(Proj.)/PWD/Arb./FO./1073(E) dated 08.12.2022
appointed a Sole Arbitrator to decide and adjudicate the
claims/disputes and make an Award.
f. The Arbitrator entered reference on 14.12.2022 and filed a
disclosure as per Section 12 of the Arbitration and Conciliation
Act. It is stated that both the Parties waived the applicability of
Section 12(5) of the Arbitration and Conciliation Act by an
express agreement in writing.
g. It is stated that the Respondent/Claimant had filed 8 heads of
Claims which were further divided into 17 Claims and one
Counter Claim was filed by the Petitioner.
h. The Oral hearing was concluded on 16.10.2023 and the Award
was reserved
i. The final award was passed on 19.04.2024.
3. It is this award that is challenged by the Petitioner only with respect to
Claim No. 1.2 (Substituted Item No. 1), 2.3, 4, 5.2, 5.3 and 8, by way of the
present petition under Section 34 of the Arbitration and Conciliation Act,
1996. It is stated that the remaining part of the Award is accepted by the
Petitioner.
4. The Arbitrator before going on the merits, found it necessary to
adjudicate upon the preliminary issues as raised by the Petitioner. The issues
are as follows:-
"Issue No.1: The Respondent raised the issue that the
claims are barred by limitation.
Issue No.2: The Respondent raised the issue of
undertaking given by the Claimant on EOT Proforma,
so it has got binding force or not.
Issue No.3: The Respondent raised the issue final bill
was accepted by the Claimant as full and final.
Issue No.4: The Respondent stated that Notice under
Section 55 of the Indian Contract Act is necessary to
claim compensation under Section 73 of the Indian
Contract Act. "
5. Regarding Issue No. 1, the learned Arbitrator, after considering the
argument of the Petitioner that Clause 25 of the Agreement provides for a
limitation period of only 120 days and the reply of the Respondent/Claimant
that the argument of the Petitioner herein is hit by Section 28 of the Contract
Act has held that in view of Section 28 of the Indian Contract Act, the
Limitation Act and the exclusion of period under COVID-19 up to
28.02.2022 and various judicial pronouncements, the Claims of the
Respondent/Claimant were within limitation. The Arbitrator has further held
that since huge amounts were stuck with the Petitioner herein, i.e., the
Respondent before the Arbitrator, the undertaking given by the Respondent
herein on the EOT proforma surrendering his claims is not voluntary and
given under duress.
6. The Arbitrator has also held that the contention of the Petitioner
herein that all the legitimate payments have been made and the final bill was
acceptable to the Claimant is not correct as amounts were found withheld on
one count or the other and merely signing on the final bill does not mean
that a final settlement has been reached but it only proves that what is
mentioned in the bill is accepted but never that the bill is final in all respects.
7. The Arbitrator again after relying on various judgments came to a
conclusion that the Agreement between the parties contains a clause for EOT
and levy therefore time was not the essence of the Agreement and hence
Notice under Section 55 of the Indian Contract Act is not necessary to claim
compensation under Section 73 of the Indian Contract Act
8. The Arbitrator has awarded a sum of Rs. 2,76,69,866/- (principal
amount) under Claim Nos. 1.1, 1.2, 1.4, 2.1, 2.2, 2.3 & 4. The Arbitrator has
also awarded interest under Claim No. 5.2 and 5.3
9. The learned Counsel for the Petitioner contends that the Impugned
Award has been passed in contravention of the public policy of India and
frivolous claims have been allowed by the Arbitrator without any cogent
reasoning
10. It is further stated that the Arbitrator has awarded Rs. 2,28,422/-
against Extra Item Nos. 2/3, 3/12, and 5/3 stating that the rates were not
rendered as per the provisions of the agreement. This award has been
accepted by the Petitioner.
11. The learned Counsel for the Petitioner submits that an amount of Rs.
1,13,22,658/- has been awarded against Substitute Item No. 1 which has
been worked out arbitrarily by the Arbitrator by considering 90% of the rate
as proposed by the Contractor which was on the higher side and was not as
per the actual market rate prevailing at that time. It is further stated that the
rate paid in the RA bills for Substitute Item No. 1 was not the approved rate
but was only the provisional rate paid to the Respondent/Claimant for
helping him to make interim bill payments. It is also stated that the market
rate was not approved by the Petitioner herein but was paid to the
Respondent/Claimant in accordance with Clause 12.2B of the Agreement. It
is therefore contended that the Arbitrator has rewritten the terms of the
Agreement. It is also stated that this part of the Award is contrary to Clause
12.2 & 12.4 of the Agreement and is liable to be set aside.
12. The learned Counsel of the Petitioner further submits that the Claim
No. 2.3 has been awarded by the Arbitrator by grossly neglecting the
provisions of the Agreement. It is stated that there is no provision for
compensation for escalation due to increase in cost of materials other than
cement and steel in the agreement and the Arbitrator while granting the
same has gone beyond the terms of the Agreement. It is further contended
that no objection was ever raised by the Respondent/Claimant to any
extension of the Agreement and no modification to the terms of the
agreement was ever asked by the Respondent/Claimant. It is also stated that
no Notice under Section 55 of the Indian Contract Act was served on the
Petitioner.
13. It is stated by the learned Counsel for the Petitioner that while
allowing Claim No. 4, the Arbitrator failed to consider that no Notice under
Section 55 of the Indian Contract Act was served on the Petitioner. It is also
stated that there is no evidence led by the Respondent/Claimant to show that
there was any coercion or the undertaking i.e., no claims will be made for
this delay, was given under duress. It is also contended that no proof of
losses was submitted by the Respondent/Claimant and the Arbitrator has
awarded Rs. 21,62,073/- simply based on a formula without any proof of
losses. The Arbitrator has also erroneously awarded interest @12% per
annum pre and post award which is without any cogent reasoning and is
liable to be set aside.
14. It is further stated that the Arbitrator could not have awarded Claim
No. 8 in favour of the Respondent/Claimant as the Work was awarded on
27.02.2016, i.e., in pre-GST era when only DVAT was applicable. It is also
stated that DVAT in the pre-GST era was much more that GST which was
applicable at the time when the award was passed.
15. Per contra, the Learned Counsel for the Respondent/Claimant has
supported the findings given by the Arbitrator in the Impugned Award.
16. Heard the Counsels for the Parties and perused the material on record
17. The Parameters of inference by Courts under Section 34 of the
Arbitration and Conciliation Act has been laid down by the Apex Court in
plethora of judgments. The Apex Court in Associate Builders v. DDA,
(2015) 3 SCC 49, has held as under:-
"29. It is clear that the juristic principle of a "judicial
approach" demands that a decision be fair, reasonable
and objective. On the obverse side, anything arbitrary
and whimsical would obviously not be a determination
which would either be fair, reasonable or objective.
30. The audi alteram partem principle which
undoubtedly is a fundamental juristic principle in
Indian law is also contained in Sections 18 and
34(2)(a)(iii) of the Arbitration and Conciliation Act.
These sections read as follows:
"18.Equal treatment of parties.--The parties shall
be treated with equality and each party shall be
given a full opportunity to present his case.
***
34.Application for setting aside arbitral award.--
(1)***
(2) An arbitral award may be set aside by the court
only if--
(a) the party making the application furnishes proof
that--
***
(iii) the party making the application was not given
proper notice of the appointment of an arbitrator or
of the arbitral proceedings or was otherwise unable
to present his case;"
31. The third juristic principle is that a decision which
is perverse or so irrational that no reasonable person
would have arrived at the same is important and
requires some degree of explanation. It is settled law
that where:
(i) a finding is based on no evidence, or
(ii) an Arbitral Tribunal takes into account
something irrelevant to the decision which it arrives
at; or
(iii) ignores vital evidence in arriving at its decision,
such decision would necessarily be perverse.
32. A good working test of perversity is contained in
two judgments. In Excise and Taxation Officer-cum-
Assessing Authority v. Gopi Nath & Sons [1992 Supp
(2) SCC 312] , it was held : (SCC p. 317, para 7)
"7. ... It is, no doubt, true that if a finding of fact is
arrived at by ignoring or excluding relevant
material or by taking into consideration irrelevant
material or if the finding so outrageously defies
logic as to suffer from the vice of irrationality
incurring the blame of being perverse, then, the
finding is rendered infirm in law."
In Kuldeep Singh v. Commr. of Police [(1999) 2 SCC
10 : 1999 SCC (L&S) 429] , it was held : (SCC p. 14,
para 10)
"10. A broad distinction has, therefore, to be
maintained between the decisions which are
perverse and those which are not. If a decision is
arrived at on no evidence or evidence which is
thoroughly unreliable and no reasonable person
would act upon it, the order would be perverse. But
if there is some evidence on record which is
acceptable and which could be relied upon,
howsoever compendious it may be, the conclusions
would not be treated as perverse and the findings
would not be interfered with."
33. It must clearly be understood that when a court is
applying the "public policy" test to an arbitration
award, it does not act as a court of appeal and
consequently errors of fact cannot be corrected. A
possible view by the arbitrator on facts has necessarily
to pass muster as the arbitrator is the ultimate master
of the quantity and quality of evidence to be relied
upon when he delivers his arbitral award. Thus an
award based on little evidence or on evidence which
does not measure up in quality to a trained legal mind
would not be held to be invalid on this score [ Very
often an arbitrator is a lay person not necessarily
trained in law. Lord Mansfield, a famous English
Judge, once advised a high military officer in Jamaica
who needed to act as a Judge as follows:"General, you
have a sound head, and a good heart; take courage
and you will do very well, in your occupation, in a
court of equity. My advice is, to make your decrees as
your head and your heart dictate, to hear both sides
patiently, to decide with firmness in the best manner
you can; but be careful not to assign your reasons,
since your determination may be substantially right,
although your reasons may be very bad, or essentially
wrong".It is very important to bear this in mind when
awards of lay arbitrators are challenged.] . Once it is
found that the arbitrators approach is not arbitrary or
capricious, then he is the last word on facts. In P.R.
Shah, Shares & Stock Brokers (P) Ltd. v. B.H.H.
Securities (P) Ltd. [(2012) 1 SCC 594 : (2012) 1 SCC
(Civ) 342] , this Court held : (SCC pp. 601-02, para
21)
"21. A court does not sit in appeal over the award of
an Arbitral Tribunal by reassessing or
reappreciating the evidence. An award can be
challenged only under the grounds mentioned in
Section 34(2) of the Act. The Arbitral Tribunal has
examined the facts and held that both the second
respondent and the appellant are liable. The case as
put forward by the first respondent has been
accepted. Even the minority view was that the
second respondent was liable as claimed by the first
respondent, but the appellant was not liable only on
the ground that the arbitrators appointed by the
Stock Exchange under Bye-law 248, in a claim
against a non-member, had no jurisdiction to decide
a claim against another member. The finding of the
majority is that the appellant did the transaction in
the name of the second respondent and is therefore,
liable along with the second respondent. Therefore,
in the absence of any ground under Section 34(2) of
the Act, it is not possible to re-examine the facts to
find out whether a different decision can be arrived
at."
34. It is with this very important caveat that the two
fundamental principles which form part of the
fundamental policy of Indian law (that the arbitrator
must have a judicial approach and that he must not act
perversely) are to be understood. "
18. Further the Apex Court in Delhi Metro Rail Corporation Limited v.
Delhi Airport Metro Express Private Limited, (2024) 6 SCC 357, has
observed as under:-
"34. The contours of the power of the competent court
to set aside an award under Section 34 has been
explored in several decisions of this Court. In addition
to the grounds on which an arbitral award can be
assailed laid down in Section 34(2), there is another
ground for challenge against domestic awards, such as
the award in the present case. Under Section 34(2-A)
of the Arbitration Act, a domestic award may be set
aside if the Court finds that it is vitiated by "patent
illegality" appearing on the face of the award.
35. In Associate Builders v. DDA [Associate Builders v.
DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , a
two-Judge Bench of this Court held that although the
interpretation of a contract is exclusively within the
domain of the arbitrator, construction of a contract in
a manner that no fair-minded or reasonable person
would take, is impermissible. A patent illegality arises
where the arbitrator adopts a view which is not a
possible view. A view can be regarded as not even a
possible view where no reasonable body of persons
could possibly have taken it. This Court held with
reference to Sections 28(1)(a) and 28(3), that the
arbitrator must take into account the terms of the
contract and the usages of trade applicable to the
transaction. The decision or award should not be
perverse or irrational. An award is rendered perverse
or irrational where the findings are:
(i) based on no evidence;
(ii) based on irrelevant material; or
(iii) ignores vital evidence.
36. Patent illegality may also arise where the award is
in breach of the provisions of the arbitration statute, as
when for instance the award contains no reasons at all,
so as to be described as unreasoned.
37. A fundamental breach of the principles of natural
justice will result in a patent illegality, where for
instance the arbitrator has let in evidence behind the
back of a party. In the above decision, this Court in
Associate Builders v. DDA [Associate Builders v. DDA,
(2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] observed :
(SCC pp. 75 & 81, paras 31 & 42)
"31. The third juristic principle is that a decision
which is perverse or so irrational that no reasonable
person would have arrived at the same is important
and requires some degree of explanation. It is settled
law that where:
(i) a finding is based on no evidence, or
(ii) an Arbitral Tribunal takes into account
something irrelevant to the decision which it
arrives at; or
(iii) ignores vital evidence in arriving at its
decision,
such decision would necessarily be perverse.
***
42.1. ... 42.2. (b) A contravention of the
Arbitration Act itself would be regarded as a
patent illegality -- for example if an arbitrator
gives no reasons for an award in contravention of
Section 31(3) of the Act, such award will be liable
to be set aside."
(emphasis supplied)
38. In Ssangyong Engg. & Construction Co. Ltd. v.
NHAI [Ssangyong Engg. & Construction Co. Ltd. v.
NHAI, (2019) 15 SCC 131 : (2020) 2 SCC (Civ) 213] ,
a two-Judge Bench of this Court endorsed the position
in Associate Builders [Associate Builders v. DDA,
(2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , on the
scope for interference with domestic awards, even after
the 2015 Amendment : (Ssangyong Engg. &
Construction Co. case [Ssangyong Engg. &
Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 :
(2020) 2 SCC (Civ) 213] , SCC p. 171, paras 40-41)
"40. The change made in Section 28(3) by the
Amendment Act really follows what is stated in
paras 42.3 to 45 in Associate Builders [Associate
Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC
(Civ) 204] , namely, that the construction of the
terms of a contract is primarily for an arbitrator to
decide, unless the arbitrator construes the contract
in a manner that no fair-minded or reasonable
person would; in short, that the arbitrator's view is
not even a possible view to take. Also, if the
arbitrator wanders outside the contract and deals
with matters not allotted to him, he commits an error
of jurisdiction. This ground of challenge will now
fall within the new ground added under Section
34(2-A).
41. ... Thus, a finding based on no evidence at all or
an award which ignores vital evidence in arriving at
its decision would be perverse and liable to be set
aside on the ground of patent illegality. Additionally,
a finding based on documents taken behind the back
of the parties by the arbitrator would also qualify as
a decision based on no evidence inasmuch as such
decision is not based on evidence led by the parties,
and therefore, would also have to be characterised
as perverse."
(emphasis supplied)
39. In essence, the ground of patent illegality is
available for setting aside a domestic award, if the
decision of the arbitrator is found to be perverse, or so
irrational that no reasonable person would have
arrived at it; or the construction of the contract is such
that no fair or reasonable person would take; or, that
the view of the arbitrator is not even a possible view.
[Patel Engg. Ltd. v. North Eastern Electric Power
Corpn. Ltd., (2020) 7 SCC 167 : (2020) 4 SCC (Civ)
149.] A "finding" based on no evidence at all or an
award which ignores vital evidence in arriving at its
decision would be perverse and liable to be set aside
under the head of "patent illegality". An award
without reasons would suffer from patent illegality. The
arbitrator commits a patent illegality by deciding a
matter not within his jurisdiction or violating a
fundamental principle of natural justice.
40. A judgment setting aside or refusing to set aside an
arbitral award under Section 34 is appealable in the
exercise of the jurisdiction of the court under Section
37 of the Arbitration Act. It has been clarified by this
Court, in a line of precedent, that the jurisdiction under
Section 37 of the Arbitration Act is akin to the
jurisdiction of the Court under Section 34 and
restricted to the same grounds of challenge as Section
34. [MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163,
para 14 : (2019) 2 SCC (Civ) 293; Konkan Railway
Corpn. Ltd. v. Chenab Bridge Project Undertaking,
(2023) 9 SCC 85, para 18 : (2023) 4 SCC (Civ) 458 :
2023 INSC 742, para 14.] "
19. Applying the principles as laid down by the Apex Court in Delhi
Metro Rail Corporation Limited (supra), this Court proceeds to apply them
to the facts of this case.
20. A lot of stress has been given on the fact that the Arbitrator has gone
beyond the provisions of the Agreement vide which work was awarded to
the Respondent/Claimant. A perusal of the Award shows that the Arbitrator
while adjudicating Claims, was well within the four corners of the
Agreement.
21. The Arbitrator while deciding the preliminary issues has discussed
case laws on each and every point to come to a conclusion. While deciding
Claim No. 1.2 related to Substitute Item No. 1, reliance was placed on
Clause 12B of the Agreement which reads as under:-.
"B. For Maintenance works:
In the case of Substitute Item(s) being the schedule
items (Delhi Schedule of Rates items), these shall be
paid as per the schedule rate plus cost index (at the
time of tender) plus/minus percentage above/ below
quoted contract amount. Payment of Substitute in case
of non-schedule items (Non-DSR items) shall be made
as per the prevailing market rate."
22. The Arbitrator after considering and interpreting the provisions of the
Agreement has held that the Respondent/Claimant had submitted the rate
analysis of Substitute Item No. 1 on 22.02.2017. It was stated that in
accordance with Clause 12.2B of the Agreement, the Petitioner had to
finalise the rate within 60 days of submission of the rate analysis i.e., up to
20.04.2017 but no proof was given by the Petitioner as to whether such a
rate was approved within the time prescribed under the Agreement or not.
The Arbitrator has also applied its mind by stating that using his experience
and expertise in the field of building work, the reasonable rate should be
90% of the rate claimed by the Respondent/Claimant.
23. Adjudicating Claim No. 2.3, which has been disputed by the
Petitioner, the Arbitrator, after thoroughly considering the submissions made
by both the parties, has held as under:-
"15.24. The pleas taken by the respondent regarding
notice u/s 55 and undertaking given have been decided
by the Tribunal under para 15.10 herein before and
held that claimant is entitled to be compensated.
15.25. The claim is on account of increase in prices of
materials which are not covered under clause-10CA
i.e. other than cement & steel. The formula adopted by
the claimant is as provided in clause-10CC of GCC
appended with the agreement. It is fact that clause-
10CC is not applicable in the present agreement.
However, since this is damage claim and only formula
has been adopted to arrive at the amount of
compensation due to increase in prices of materials for
the work done during prolongation period so is
allowed in view of various judgments. The increase in
prices are very well established by cost indices issued
by the Govt. of India from time to time. The claimant
adopted the % component of material as 40% which is
very reasonable because if % component of materials
under clause-10CA is calculated on actual work done
then it comes to 23% (reference clauses 10C & 10CA
page-18 of NIT and the quantity of material used as
per page-299 to 302 of SOC). Then adding 25% for
labour will come to 48 %. Thus, the component for
materials other than cement & steel would come to
52% (100-48) whereas the claimant has adopted only
40%. The claimant is found eligible for payment due to
increase in rates of materials for the work done from
SDOC up to ADOC. Considering 40% component and
various price indices at various times, the amount of
claim has been worked out as Rs. 25,35,193/- for civil
portion and Rs.4,55,550/- for electrical portion
totaling Rs. 29,90,743/- by adopting base indices for
the period under consideration and placed at exhibit
C-2.3A of SOC. The data, date & amount of bills, price
indices adopted by the claimant and the calculations
checked by the respondent and found correct as per
joint reconciliation submitted vide letter dated
19.08.2023. However, it is seen that the claimant has
adopted base cost index (CI) prevailing as on date of
tender in Jan., 2016. Since, clause-10CC is not
applicable so the claimant itself has to absorb the
increase in rates of materials under claim upto SDOC
that is upto July, 2016 as well as to mitigate the same
being the claim u/s 73 of ICA. The claimant has
calculated total amount under the claim as Rs.
29,90,743/- at page-375 of SOC. However, due to
factors of base cost index & mitigation to my mind a
reasonable amount can be arrived by allowing 70% of
the claimed amount which would meet ends of justice.
Accordingly, payable amount comes to Rs. 20,93,520/-
(29,90,743 x 70%) and is awarded in favour of
claimant under claim No. 2.3."
24. On perusal of the same, it can be said that the Arbitrator has given
cogent reasoning while granting Claim No. 2.3 to the Respondent /Claimant
after taking in view the objections of the Petitioner herein.
25. The Arbitrator while granting compensation to the
Respondent/Claimant has meticulously analysed the submissions of both the
Parties and has held as under -
"17.4 The pleas taken by the respondent regarding
limitation, undertaking and notice u/s 55 of ICA have
already decided by Tribunal under para-12.5, 12.14 &
12.25 herein before and so are not tenable.
17.5. From the perusal of the documents, submissions,
arguments advanced by the parties and court
judgments relied upon by the parties, it reveals that the
work was delayed primarily due to various delays not
attributable to the claimant which is further
strengthened by the fact that the respondent has
granted EOT for the entire delay without levy of any
compensation under clause-2 of the agreement and so I
hold that the claimant is entitle for the compensation.
17.6. Total delay justified by the respondent as per
exhibit C-6, is 532 days including 205 days on account
of extra work whereas actually extra days on account
of extra work comes to 218 day (page-398 of SOC).
Thus total justified days comes to 545 days ( 532-
205+218). It is also revealed from exhibit C-6, based
on which EOT was granted, at entry No. 6,7 & 8 at
page-80&81 of SOC, that a delay of 109+9+144
totaling 252 days have been considered which were
due to non availability of material and ban on
construction activities on account of statutory orders
and not On account of respondent. Therefore, I feel it
appropriate that for the purpose of damages, justified
delays attributable to the respondent be taken by
deducting these 252 days from the justified 545 days
which comes to 293 days as net delay. Further, on
perusal of the pleadings and provisions contained in
clause-12.1 of the agreement, allowable extra days on
account of actual extra work done calculated by the
claimant as 218 days (page-398 of SOC] which is
found correct. These 218 days are due to extra work
allowed by the respondent which means claimant's
resources were gainfully used during this period and
are to be deducted from the net delay. Thus justified
delay for purpose of overhead damage is considered as
75 days (293 minus 218) as reasonable therefore I hold
that claimant is entitled for a net prolongation of 75
days for compensation on account of delays under this
head on account of loss suffered due to additional
liability of overheads. It is also hold that such a loss
cannot be treated as remote loss in terms of Section-73
of the Indian Contract Act, 1872.
17.7 As per the judgment in the matter of McDermott
International Inc. Vs Burn Standard Company
Ltd.(supra) wherein it has held by the Apex Court that-
"Section 55 and 73 of the Indian Contract Act do not
lay down the mode and manner as to how and in what
manner the computation of damages or compensation
has to be made. There is nothing in Indian Law to
show that any of the formula adopted in other
countries is prohibited in law or same would be
inconsistent with the law prevailing in India". It was
further held that "As computation depends upon
circumstances and method to compute damages, how
quantum thereof should be determined in a matter
which would fall for the decision of the arbitrator".
17.8. It is fact that the claimant did not provide any
details/proof of loss as claimed but it is also fact that
the claimant has remained for 442 days more at site,
for no fault on its part i.e. beyond the stipulated period
of contract which definitely cannot be ignored that no
extra expenses were not incurred.
17.9. In my view, the compensation for loss of
overheads can be reasonably assessed by taking help
from Schedule „F‟ of the agreement. In this schedule,
percentage on cost of material and labour to cover „all
overheads and profit‟ has been mentioned as 15%
(Page-18 of agreement) which is evidently based on
DGW(CPWD)'s guidelines. CPWD guidelines which
are in public domain also state that out of 15%, 7.5%
accounts for overheads. Hence, overheads in this case
can be taken as 7.5% of tendered cost according to
which average overheads per day, for the stipulated
period, works out as under:
17.11. Based on above calculations, average
overheads charges per day worked out Rs.41,182.35,
the additional overheads charges for 75 days of net
prolongation period comes to Rs. 30,88,676/-. This
amount however calls for some moderation as the
contractor has to mitigate the losses when work is
prolonged which however in the nature of the work to
my mind cannot be more than 30%.
17.12. Having regard to the facts as stated above, 75
days being considered compensable against total delay
of 442 days, in my assessment that it would be just and
fair to allow 70% of amount as worked out above i.e.
30,88,676 X 70/100 = Rs. 21,62,073/- as compensation
on account of additional overheads. Accordingly,
considering all the facts, circumstances and the legal
position, I award Rs. 21,62,073/- in favour of claimant
against claim No.4(i)"
26. Claim No. 5 has been dealt by the Arbitrator by holding as under:-
"20.14. I have perused the record before me, the
submissions made and judgments relied upon by the
parties. The present claim is for interest on various
amounts, the claimant has claimed all the three interest
i.e. pre suit, pendent lite and future interest. Whereas
respondent has refuted the claim on the ground that
claims are not maintainable hence claim of interest is
also not maintainable.
20.15. So far as presuit interest is concerned, notice
under section 3(l)(b) of Interest Act-1978 is mandatory
which the claimant has first time given notice of
interest on 17.10.2022 (C-13 & C-14) hence the
claimant is held entitled to interest from 17.10.2022 to
date of award. Therefore, keeping in mind the
provisions of Section 31(7) (a) of the A&C Act, 1996, I
award simple interest @10% per annum w.e.f
17.10.2022 till the date of this award on the awarded
amounts under claim Nos.1.1, 1.2, 1.4, 2.1, 2.2, 2.3 and
20.16. No future interest will be payable in case
respondent make the payment of awarded amount
within a period of 90 days from the date of award
received by the respondent, failing which future
interest will be payable @ 11% p.a. from the date of
award till the date of actual payment."
27. The Arbitrator while adjudicating the issue regarding Goods and
Service Tax on the awarded claims has held as under;-
"23.3. So far as the Arbitration agreement is
concerned, there is no limitation with regard to power
for making any declaratory award. Section 7 of the
Arbitration & Conciliation Act, 1996 also covers
disputes in respect of a defined legal relationship.
Section 28(1) of the Arbitration & Conciliation Act
mandates the Arbitrator to decide the dispute
submitted to Arbitration in accordance with the
substantive Law for the time being in force in India.
Hence, I do not find any prohibition in law or bar
regarding arbitrability for making declaratory awards
by the Arbitrators. In fact, it is a practice in most
jurisdictions to make declaratory awards, including on
interpretation of contracts, by the Arbitral Tribunals.
23.4. In this case, the declaratory award is based on
the plea that in case the claimant has to pay GST on
award amount, the said amount of GST should be
reimbursed by the respondent. I find no reason if the
claimant incurs liability of GST on awarded sum and
lawfully and properly pays the same to the
Government, then the same should be reimbursed by
the respondent. This shall be an additional tax burden
and is covered under clause 38 of the GCC forming
part of the contract.
23.5. In view of above, I make a declaratory award
that the claimant shall submit details within 30 days of
receipt of award amount, the GST amount actually
paid to the Government on the awarded sum which
shall be reimbursed by the respondent within 30 days
of submission of details of such payment by the
claimant failing which a simple interest @ 10% will be
payable by the respondent to the claimant till actual
date of payment."
28. The Arbitrator has therefore meticulously looked into the facts and the
Arbitrator being the master of the evidence adduced before it and as held by
the Apex Court times without number that the Courts while exercising
jurisdiction under Section 34 of the Arbitration & Conciliation Act does not
substitute its own conclusion to the one arrived at by the Arbitrator unless
there is some material or basis to come to a conclusion that the perversity of
the Award goes to the root of the matter and there is no possibility of an
alternative interpretation that may sustain the award and that the Court
exercising jurisdiction under Section 34 of the Arbitration & Conciliation
Act should not interfere with the conclusion of the arbitrator even if there is
a more stronger conclusion which is more probable or plausible.
29. A perusal of the abovesaid judgment indicates the interpretation of the
terms of the Contract which is before the Arbitrator is within the domain of
the Arbitrator and only if it found that the contract has been construed in a
manner that no fair mind or a reasonable person would, then only patent
illegality arises. It has to be demonstrated that the view taken by the
Arbitrator is not a plausible view in any sense possible. Observations made
by the Arbitrator cannot be regarded as a plausible view where the Court is
of the opinion that no reasonable person could plausibly have taken it.
Further, to set aside an Award, it has to be demonstrated that the findings of
the Arbitrator are based on nil evidence, based on irrelevant material or it
ignores vital evidence.
30. This Court is of the opinion that the Sole Arbitrator has dealt with and
has considered all the material that was placed before him. There is no
prescribed format under the Arbitration and Conciliation Act, in which an
arbitral award must be made. After going through the award this Court could
not find any observation made by the Arbitrator which was devoid of merit
or was made without considering the submissions made by the Petitioner or
the Respondent/Claimant or was outside the purview of the Agreement
entered into between the parties.
31. All the 4 issues laid down by the Sole Arbitrator before getting into
the merits of the matter have been dealt with by relying on the material as
well as submissions made by the parties before the Sole Arbitrator and this
Court is of the opinion that the view taken by the Sole Arbitrator is a
plausible one.
32. In the view of the above, this Court does not find any reason to
interfere with the Award dated 19.04.2024.
33. The present petition is dismissed along with pending applications, if
any.
SUBRAMONIUM PRASAD, J
APRIL 22, 2025
RJ/YC
