Madras High Court

M/S. Chennai Metropolitan Water vs M/S.Gkc Vishwa Consortium on 26 August, 2025

Author: Abdul Quddhose

Bench: Abdul Quddhose

                                                                          Arb.O.P. (Com.Div.) No.98 of 2023

                              IN THE HIGH COURT OF JUDICATURE AT MADRAS

                                             Reserved on            : 12.08.2025

                                             Pronounced on : 26.08.2025

                                                         CORAM:

                                  THE HON'BLE MR. JUSTICE ABDUL QUDDHOSE

                                         Arb.O.P. (Com.Div.) No.98 of 2023

                     M/s. CHENNAI METROPOLITAN WATER
                      SUPPLY AND SEWERAGE BOARD,
                     Rep. by its Superintending Engineer /
                      Assistant Contracts Engineer,
                     No.1, Pumping Station Road,
                     Chintadripet,
                     Chennai - 600 002.                                                  ... Petitioner


                                                         Vs.



                     1. M/s.GKC VISHWA CONSORTIUM,
                     Rep. by its Authorized Signatory,
                     Sy. No.9(P), CII Green Building Lane,
                     Hi-Tech City, Kondapur,
                     Hyderabad - 500 084.

                     2. ICICI Bank Ltd.,
                     Rep. by its Branch Manager,
                     Commercial Building Level - 1, West Wing,
                     1-11-256, Wall Street Plaza,
                     Begumpet, Hyderabad - 500 016.




                     1/36


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                                                                                Arb.O.P. (Com.Div.) No.98 of 2023

                     3. IDBI Bank Ltd.,
                     Rep. by its Branch Manager,
                     Hyderabad Main Road,
                     5-9-89/1, Chapel Road,
                     Post Box No.370,
                     Hyderabad - 500 001.                                                      ... Respondents

                     Prayer: Petition filed under Section 34 of the Arbitration and
                     Conciliation Act, 1996 to set aside the arbitral award dated 25.03.2022
                     passed by the Sole arbitrator to the extent to which it is challenged and to
                     direct the respondents to pay the costs.

                                  For Petitioner     :         Mr.Gautam S. Raman


                                  For Respondents :            Mr.Satish Parasaran,
                                                               Senior Counsel,
                                                               for P.J. Rishikesh for R1

                                                               ORDER

This petition has been filed under Section 34 of the Arbitration and

Conciliation Act, 1996, challenging the impugned arbitral award dated

25.03.2022. The petitioner is the respondent and the first respondent is

the claimant in the arbitration. The arbitral Tribunal under the impugned

arbitral award dated 25.03.2022 has allowed the claim of the first

respondent against the petitioner to the tune of Rs.33,87,43,444/- and has

denied the counter claim of the petitioner made against the first

respondent to the tune of Rs.57,35,03,000/-. Aggrieved by the same, the

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petitioner has filed this petition under Section 34 of the Arbitration and

Conciliation Act, 1996.

2. The petitioner is the employer and the first respondent is the

contractor, who was awarded the contract by the petitioner for "providing

comprehensive water supply scheme to Manapakkam, Nandambakkam,

Okiyam Thuraipakkam, Ramapuram and providing comprehensive

underground sewerage scheme to Ramapuram". This scheme has been

taken up by the petitioner Board under the Chennai Mega City

Development Mission Fund at an estimated cost of Rs.143.96 crores

under 5 schemes.

3. The petitioner has challenged the impugned arbitral award on

the following grounds:

a) The arbitrator has erroneously awarded loss of profit of

Rs.5,99,56,072/- in favour of the first respondent. According to the

petitioner, by total non application of mind to the fact that the first

respondent was the one, who approached the petitioner for extension of

time for completing the said contract and having stopped work since

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2018, even after granting extension of time by them till 31.03.2019, was

alone responsible for the breach of contract, for which the petitioner

cannot be penalised, by directing them to pay damages by way of loss of

profit for a huge sum of Rs.5,99,56,072/- to the first respondent;

b) Stoppage of work by the first respondent lead to termination of

contract by the petitioner. According to the petitioner, the first

respondent had completely stopped work from April, 2018 onwards,

because of which, the petitioner was forced to terminate the contract as

there was fundamental breach committed by the first respondent;

c) The impugned arbitral award passed in favour of the first

respondent, declaring that the termination of the contract made by the

petitioner is void, despite the first respondent stopping work from April,

2018 onwards, is not only perverse but also patently illegal;

d) The arbitrator did not consider the fact that the first respondent

did not have the financial means to perform the contract, as their lead

partner was facing CIRP proceedings under the provisions of the

Insolvency and Bankruptcy Code, 2016 (In short 'IBC'). Therefore, the

termination of the contract by the petitioner can never be declared to be

illegal;

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e) Time is the essence of the contract. Since the first respondent

had sought for various extensions of time over and above the contractual

period, which was also granted by the petitioner till 31.03.2019, there

was no breach of contract committed by the petitioner. According to the

petitioner, the first respondent has stopped work from April, 2018

onwards and the extensions cannot be granted by the petitioner for an

indefinite period;

f) Liquidated damages can be levied without proving actual loss.

According to the petitioner, the arbitrator has erroneously held that for

levying liquidated damages, the petitioner did not prove the actual

damages suffered by them and therefore, the first respondent is entitled

for the recovery of the liquidated damages adjusted by the petitioner

from and out of the first respondent's bills. According to the petitioner,

for levying liquidated damages, actual loss need not be proved as per

Section 74 of the Indian Contract Act, 1872;

g) An insolvent entity cannot be allowed to legally continue with

the arbitral proceedings. According to the petitioner, a consortium

agreement was executed on 05.01.2013 between GKC Projects Limited

and Vishwa Infrastructures and Services Pvt. Ltd. and the said

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consortium was named as GKC Vishwa Consortium, the first respondent

herein. The lead partner is GKC Projects Ltd. According to the

petitioner, the arbitrator failed to take note of the fact that the insolvency

proceeding under Section 7 of the IBC was initiated against GKC

Projects Ltd., which is the lead partner of the first respondent. According

to the petitioner, the arbitrator also failed to take note of the fact that the

lead partner was placed under CIRP and put in moratorium as per

Section 14 of the IBC. Since the moratorium order has been passed under

Section 14 of the IBC against the lead partner of the first respondent, the

institution of suits or continuation of pending suits or proceedings

against the Corporate Debtor in any Court of Law, Tribunal, arbitration

panel or other authority is prohibited. However, according to the

petitioner, in the case on hand, the arbitrator has erroneously encouraged

the first respondent, whose lead partner was in moratorium to continue

with the arbitral proceedings and therefore, the arbitral proceedings is

non est in law.

4. The learned counsel for the petitioner, in support of the

petitioner's contentions, relied upon the following authorities:

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a) Batliboi Environmental Engineers Ltd. Vs. Hindustan Petroleum Corporation Ltd. and Another reported in 2024 (2) SCC 375;

b) Colles Cranes of India Ltd. Vs. Speedeo Spares Corporation of India reported in 1969 SCC Online 40;

c) Cotton Corporation of India Ltd. Vs. M/s.Ramkumar Mills Pvt. Ltd. reported in 2008 SCC Online Bom 488;

d) ONGC Ltd. Vs. Saw Pipes Ltd., reported in 2003 (5) SCC 705;

e) K.S. Oils Ltd. Vs. State Trade Corporation of India Ltd. reported in 2018 (146) SCL 588.

5. Relying upon the aforesaid decisions, the learned counsel for

the petitioner would submit as follows:

a) The first respondent, who has claimed loss of profit due to delay

in execution of work, must prove that other works were lost due to the

said delay;

c) For levying liquidated damages, actual loss need not be proved

as per Section 74 of the Indian Contract Act, 1872;

b) Section 46 of the Indian Contract Act, 1872 stipulates that the

promise must be performed within a reasonable time. The time was fixed,

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but, the promisee extended the time. The extensions could not go on

indefinitely, even by applying the doctrine of reasonable time. The

promise could terminate the contract after certain extensions;

d) The moratorium order passed by the National Company Law

Tribunal (NCLT) under Section 14 of the IBC will apply to proceeding

in any other law for time being in force, including the Arbitration and

Conciliation Act, 1996.

6. On the other hand, the learned senior counsel appearing for the

first respondent, after drawing the attention of this Court to the impugned

arbitral award, would submit as follows:

a) The impugned arbitral award is reasonable and fair. The award

passed by the arbitrator is not exaggerated or unwarranted. Only based

on the oral and documentary evidence submitted by both the parties, the

impugned arbitral award came to be passed;

b) Most of the delays were caused solely by the petitioner, which

has been extensively discussed by the arbitrator in the impugned arbitral

award;

c) A categorical finding has been rendered by the arbitrator that

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the petitioner failed to handover the work fronts to the first respondent,

thereby preventing the first respondent from proceeding with the works

in various sections;

d) Even if there was any delay on the part of the first respondent,

the same was condoned by the petitioner through the grant of extensions;

e) The arbitrator has clearly given a finding that there was delay on

the part of the petitioner in certifying the bills and making payments to

the first respondent, which resulted in severe financial difficulties for the

first respondent;

f) The arbitrator has also given a finding based on the evidence

with regard to the contributory factors for the delay viz., stoppage of

work due to pending Court cases, assembly elections, and the effects of

governmental decisions such as demonetization, all of which, adversely

impacted the performance of the contract;

g) The arbitrator has rightly relied upon Section 55 of the Indian

Contract Act, 1872 for coming to the conclusion that the time was not the

essence of the contract, given that the delay events were attributable to

the petitioner. Therefore, according to the first respondent, levy of

liquidated damages by the petitioner against the first respondent was

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rightly found to be unjustified by the arbitrator;

h) Additionally, the arbitrator cited Section 74 of the Indian

Contract Act, 1872 that the petitioner has neither suffered any legal

injury nor incurred any actual monetary loss that would justify the

imposition of liquidated damages;

i) The arbitrator has rightly held that the delay was attributable to

the petitioner and has rightly declared the termination of the contract to

be illegal and has rightly awarded the first respondent with loss of profit

amounting to 10% of the total value of the works;

j) The petitioner failed to demonstrate any specific loss resulting

from the alleged delay on the part of the first respondent. The same is

also recorded by the arbitrator in the impugned arbitral award;

k) Inspite of the contract having been terminated by the petitioner

in the month of November, 2018 itself, the petitioner till date has been

unable to complete the works even when the award was passed on

25.03.2022, and the same is also captured in the impugned arbitral

award. This would mean that inspite of the termination of the contract,

the pending works could not be completed by the petitioner and this

would show that the constraints and hindrances continued and the

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petitioner alone is to be held responsible for the same;

l) The petitioner has not challenged the dismissal of the counter

claim, which is with respect to risk and cost and this would mean that

they have indirectly admitted that the termination is illegal and void;

m) The moratorium under Section 14 of the IBC applied only to

one consortium member and bars proceedings against the corporate

debtor, not arbitral proceeding initiated by the Corporate Debtor. The

lead partner of the petitioner has not been declared as an insolvent but

only a new investor has taken over its management, and it remains a

going concern. No relief on this issue was sought or pressed by the

petitioner before the arbitrator;

n) Section 14 (1) (a) of the IBC restricts only debt recovery action

that may affect a corporate debtor's assets. Arbitration proceedings

initiated by the corporate debtor are outside the scope of Section 14 (1)

(a) of the IBC.

DISCUSSION:

7. As seen from the impugned arbitral award, the claims that were

allowed and the claims that were rejected by the arbitrator are detailed

hereunder:

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Claim Nature of Claim Claim Awarded / No. Amount in Rejected Rs.

1. To declare the termination of the contract by 5,99,56,072 Awarded the petitioner as null and void and consequently, award a sum of Rs.5,99,56,072/- in favour of the first respondent.

2. To direct the petitioner to make payment 2,29,10,164 Rejected towards the compensation on account of deployment of additional machinery and equipment beyond the original schedule.

3.a. To direct the petitioner to make payment 3,41,95,291 Rejected towards compensation on account of deployment of additional manpower beyond the original schedule of contract.

3.b. To direct the petitioner to make payment 80,37,099 Rejected towards compensation on account of administrative costs incurred due to delay on the part of the petitioner.

3.c. To direct the petitioner to make payment 1,07,02,351 Rejected towards compensation on account of BG/ Insurance charges incurred beyond the original schedule.

3.d. To direct the petitioner to make payment 1,00,63,757 Rejected towards compensation on account of other miscellaneous costs (Head Office Overheads) incurred beyond the original schedule 4 To direct the petitioner to make payment 8,25,76,612 Rejected towards compensation on account of other financing costs due to negative cash flows during the original schedule 5 To direct the petitioner to make payment 11,90,37,26 Awarded towards the compensation on account of 4 outstanding dues against interim payments 6 To direct the petitioner to make payment 2,58,26,833 Awarded towards Retention monies 7 To direct the petitioner to make payment 1,02,55,864 Awarded towards the amount withheld on GST from

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Claim Nature of Claim Claim Awarded / No. Amount in Rejected Rs.

8 To direct the petitioner to make payment 2,02,00,000 Awarded towards the liquidated damages 9 To direct the petitioner to make payment 1,62,04,547 Awarded towards compensation towards interest charges on delayed payments on interim bills amounting to Rs.2,11,02,417/- together with interest at the rate of 9% p.a. for the delayed payment of RA Bills (Except Bill Nos.10 and

12) 10 To direct the petitioner to make payment 4,30,00,000 Awarded towards refund of recovered amount towards material advance 11 To direct the petitioner to return the 2,40,07,000 Awarded performance Bank Guarantee 12 Interest for the outstanding amounts payable Partly by the petitioner under claim Nos.1 to 10. Awarded Interest at the rate of 10% p.a. of award from 05.07.2019 till the date of the passing of the award 13 Costs towards arbitration and other litigation Rejected expenses

8. The following are the undisputed facts:

a) The contract entered into between the petitioner and the first

respondent permits the petitioner to grant extension of time to the first

respondent to complete the contract;

b) The following extensions were granted by the petitioner to the

first respondent and the said extensions were also marked as exhibits as

detailed hereunder:

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S. Name of Schedule Extension Reference to No. Scheme Date of granted Exhibits Completion upto 1 Ramapuram 19.08.2016 18.05.2018 Ex.C18 (letters UGSS dated 18.05.2015, 12.11.2015), Ex.C27, C28, C32 2 Ramapuram 19.02.2016 31.03.2019 Ex.C18 (letters WSY Scheme dated 18.05.2015, 12.11.2015), C22, C23, C29, C31, C32, C33 3 Manapakkam 19.02.2016 31.03.2019 Ex.C18 (letters WSY Scheme dated 18.05.2015, 12.11.2015), C22, C23, C31, C32, C33 4 Okkiam 19.02.2016 31.03.2019 Ex.C18 (letters Thoraipakka dated 18.05.2015, m WSY 12.11.2015), C22, Scheme C23, C30, C32, C33 5 Nandambakk 19.08.2015 31.05.2018 Ex.C18 (letters am WSY dated 18.05.2015, Scheme 12.11.2015), C22, C24, C25, C26 6 31.03.2019 Ex.C6

c) The delay on the part of the petitioner in certifying the bills,

which have been disclosed by the arbitrator in the impugned arbitral

award in paragraph No.128 has not been disputed by the petitioner. It is

once again reproduced by this Court in this order:

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R.A. Date of Particular Bill No. Submission of Net Value of Due date as Certified on Delay in Bill Bill in Rs. per contract days 1 31.10.2013 117,600,000 14.11.2013 05.01.2014 52 2 10.09.2014 6,481,145 24.09.2014 09.10.2014 15 3 09.03.2015 6,719,812 23.03.2015 11.05.2015 49 4 30.03.2015 17,884,162 13.04.2015 15.07.2015 93 5 18.08.2015 28,476,048 01.09.2015 12.10.2015 41 6 05.10.2015 25,130,978 19.10.2015 02.02.2016 106 7 16.11.2015 4,423,336 30.11.2015 29.03.2016 120 8 15.02.2016 15,507,692 29.01.2016 29.06.2016 121 9 08.03.2016 19,237,971 22.03.2016 31.08.2016 162 10 07.04.2016 57,448,415 21.04.2016 25.10.2016 187 11 06.05.2016 24,426,923 19.12.2016 02.03.2017 286 12 09.03.2017 15,201,706 23.03.2017 25.05.2017 63 13 06.04.2017 7,189,618 20.04.2017 21.06.2017 62 14 29.06.2017 20,765,703 13.07.2017 30.11.2017 140 15 26.10.2017 14,323,918 09.11.2017 13.03.2018 124 16 26.10.2017 28,248,166 09.11.2017 13.06.2018 216 17 06.06.2018 40,057,259 20.06.2018 24.06.2019 369

d) As seen from the aforesaid tabular column, there was a delay on

the part of the petitioner in certifying the bills and making payments to

the first respondent, which has also been reproduced by the arbitrator in

paragraph No.129 of the impugned arbitral award, and the same has also

not been disputed by the petitioner.

e) The last extension of time granted by the petitioner through the

petitioner's letter dated 01.06.2018 (Ex. C6) granted extension of time

upto 31.03.2019. But, even before the expiry date of the said extension,

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the petitioner through its communication dated 10.11.2018 (Ex.C13) has

terminated the contract awarded to the respondent;

9) The petitioner contends that the arbitrator under the impugned

arbitral award has failed to take note of the fact that time was the essence

of the contract awarded to the first respondent. The arbitrator under the

impugned arbitral award, after giving due consideration to the evidence,

more particularly, the various extensions granted by the petitioner for

various reasons has held that time was not the essence of the contract and

the said finding was rendered only after taking into consideration the

ratio laid down by various decisions rendered by the Constitutional

Courts.

10. In Mc. Dermott International INC Vs. Burn Standard Co. Ltd

[2006 (11) SCC 181], the Hon'ble Supreme Court held that it is normal

for the parties to proclaim that "time is the essence of the contract", but,

in actual practice, it is not so. The case on hand is also one such case.

Mere words in the contract that time is the essence of the contract are not

enough to prove that “time is the essence of the contract”. The conduct

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of the parties plays a pivotal role to decide whether time is the essence of

the contract.

11. The Honourable Supreme Court in its judgment rendered in the

case of Welspun Speciality Solutions Ltd. Vs. Oil and Natural Gas

Corporation reported in 2021 SCC Online SC 1053 has reiterated the

principles for deciding whether time is the essence of the contract. The

Honourable Supreme Court held that collective reading of the entire

contract and its surrounding circumstances is imperative to decide

whether "time is the essence of the contract". The arbitrator under the

impugned arbitral award has followed the aforesaid decision of the

Honourable Supreme Court for coming to the conclusion that based on

the evidence placed on record which includes the extensions granted to

the petitioner by the first respondent that "time was not the essence of the

contract".

12. The Honourable Supreme Court in the aforesaid decision

concurred with the arbitral Tribunal's conclusion that the existence of

extension clauses has diluted the employers clause that time was the

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essence of the contract.

13. The arbitrator has rightly appreciated the evidence placed on

record before him which includes various extensions granted by the

petitioner in favour of the first respondent for completing the project and

has come to the right conclusion that time was not the essence of the

contract and has rightly partly allowed various claims made by the first

respondent and has also rejected the counter-claim of the petitioner.

14. The view taken by the arbitrator under the impugned arbitral

award is reasonable, plausible and has to be sustained. The arbitrator has

rightly held, based on the evidence available on record, that the time was

not the essence of the contract if the contract provides for extension of

time as well as liquidated damages. Once the petitioner has waived the

claim for liquidated damages in the earlier extensions issued by the

petitioner, the petitioner cannot claim liquidated damages for further

extensions.

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15. In Welspun Speciality Solutions Ltd. case referred to supra,

the Honourable Supreme Court has also observed that the Court should

not interfere or set aside awards in a casual manner. While doing so, the

Court should come to a clear understanding that the award is patently

illegal. In the case on hand, eventhough the contract was extended by the

petitioner in favour of the first respondent through the petitioner's letter

dated 01.06.2018, marked as Ex.C6, which gets expired only on

31.03.2019, the petitioner had terminated the contract even before the

expiry date through the petitioner's communication dated 10.11.2018

(Ex.C13).

16. The petitioner contends that the first respondent had

completely stopped the work which forced the petitioner to terminate the

contract even before the deadline fixed under the letter of extension

dated 01.06.2018 (Ex.C6) granted to the first respondent which is

31.03.2019.

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17. The Honourable Supreme Court in Welspun Speciality

Solutions Ltd. case referred to supra, also observed as follows:

a) Subject to the nature of the contract, the promissor is bound to

complete the obligation by the date for completion stated in the contract;

b) The same is subject to the exception that the promissee is not

entitled to the liquidated damages, if the promisee's own act or omission,

the promissor was prevented from completing the work before the

completion date;

c) It must be culled out from the reading of the entire contract as

well as the surrounding circumstances as to whether time is the essence

of the contract and nearly having explicit clauses to these things may be

sufficient.

18. In the case on hand, on account of the various extensions

granted by the petitioner to the first respondent for completing the

contract and on account of the fact that there was a delay on the part of

the petitioner in certifying the bills of the first respondent in settling their

dues, the arbitrator has rightly come to the finding that time was not the

essence of the contract. The arbitrator has rightly held that merely having

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an explicit clause in the contract that "time is the essence of the contract"

is not sufficient to conclude that time is the essence of the contract as it

depended upon other surrounding circumstances and the conduct of the

parties. The conduct of the petitioner in granting several extensions to

the first respondent for completing the project makes it clear that time

was not the essence of the contract as rightly held by the arbitrator in the

impugned arbitral award.

19. Section 55 of the Indian Contract Act deals with failure to

perform the contract within the agreed time in the event, time is of the

essence, and the failure to perform an obligation within the stipulated

time renders the contract voidable at the option of the innocent party. In

such a case, the innocent party is entitled to (a) terminate performance of

the contract; and (b) claim damages from the breaching party on the basis

that it has committed the fundamental breach of the contract. However,

inspite of avoiding the contract, if the innocent party accepts to hold the

performance of the contract, it may not claim compensation for any loss

occasioned by the non performance of the contract at the time granted,

unless, at the time of such acceptance, he gives notice to the promissor of

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his intention to do so.

20. In the case on hand, as observed earlier, the conduct of the

petitioner in granting extension of time to the first respondent for various

reasons not attributable to the first respondent will lead to the conclusion

that time was not the essence of the contract and the petitioner had

committed breach of the contract. In order to signify time as the essence

of the contract, there must be a specific and fixed date within which the

extended performance of the obligation has to be effected, failing which,

it has to be held that the parties themselves by their conduct have waived

the original terms of the contract, more particularly in respect of the time

being the essence of the contract.

21. Sections 73 and 74 of the Contract Act deal with the law of

damages in India. Section 73 provides for actual damages suffered by a

party in the usual course (unliquidated damages). Section 74 applies

wherein the same has been specified in the contract which is a genuine

estimate of the loss agreed by the parties.

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22. Most of the delays were caused solely by the petitioner. The

delays caused by the petitioner has been extensively discussed by the

arbitrator in the impugned arbitral award. The arbitrator has given

adequate reasons in the impugned arbitral award for arriving at a finding

that the amount of Rs.2,02,00,000/- levied on the first respondent as

adhoc liquidated damages is unjustified. The arbitrator has thereafter

directed the return of the adhoc liquidated damages amounting to

Rs.2,02,00,000/- to the first respondent adjusted by the petitioner

erroneously without justification. The reasons given for arriving at such a

finding by the arbitrator are as follows:

a) The petitioner has to prove that it had suffered loss or legal

injury due to the breach of contract alleged to have been committed by

the first respondent, which they have failed.

b) The petitioner has not even pleaded that loss has been caused to

the petitioner for the purpose of levying liquidated damages on the first

respondent;

c) A party claiming compensation has to show that quantified

amount of loss has been caused due to act or omission of the other party;

d) In the case on hand, the petitioner has not shown with sufficient

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evidence that loss has been caused to them due to the delay caused by the

first respondent in executing the work;

e) The levy of liquidated damages by the petitioner will amount to

unjust enrichment at the cost the first respondent;

f) Several authorities on the subject of levy of liquidated damages

listed out in the impugned arbitral award have also been considered by

the arbitrator for coming to the conclusion that the amount of

Rs.2,02,00,000/- levied by the petitioner against the first respondent

towards adhoc liquidated damages is unjust;

g) The petitioner has not satisfied the requirements of Section 74

of the Indian Contract Act, 1872 for the levy of liquidated damages on

the first respondent.

23. The above findings were given by the arbitrator only based on

the evidence placed on record before him by both the parties to the

dispute. This Court does not find any infirmity in the findings of the

arbitrator, who has rightly held that the levy of liquidated damages by the

petitioner is unjustified.

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24. The Arbitrator has rightly held that the termination of the

contract by the petitioner is invalid as the petitioner was responsible for

the first respondent in not proceeding with the work due to the delay on

the part of the petitioner in certifying the bills payable to the first

respondent and for the delay in making payments to the first respondent

for the said bills. The Arbitrator has given proper and valid reasons for

adjudicating various claims made by the first respondent as well as the

counter-claim made by the petitioner.

25. Most of the delays were caused solely by the petitioner on

account of the delay in certifying the bills, delay in making payments and

the delay in handing over the land; and only due to the same, the first

respondent was unable to complete the project. The Arbitrator has

rendered findings with regard to each of the claims made by the first

respondent as well as the counter-claim made by the petitioner only

based on the evidence available on record.

26. The Arbitrator has rightly found that the termination of the

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contract dated 10.11.2018 made by the petitioner terminating the contract

of the first respondent is void. The Arbitrator has rightly allowed the

claim of the first respondent for a sum of Rs.5,99,56,072/- towards the

loss of profit. The first respondent is entitled for the said sum, since the

work could not be completed only due to the fault of the petitioner. The

first respondent in the normal course of its business would have earned a

minimum profit of 10% on the total value of the contract. The Arbitrator

has rightly followed the decision of the Hon'ble Supreme Court in the

case of A.T.Brij Pant Singh (cited supra) and K.Baskaran (cited supra),

wherein the Hon'ble Supreme Court had granted compensation towards

loss of profit at 10% on the total contract value in identical

circumstances. Therefore, this Court does not find any infirmity in the

award passed by the Arbitrator with regard to claim No.1 made by the

first respondent.

27. The Arbitrator has rightly rejected claim Nos.2, 3(a), 3(b), 3(c),

3(d) and 4. The said claims pertain to; (a) compensation on account of

deployment of additional machinery and equipment beyond the original

schedule of the contract; (b) compensation on account of deployment of

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additional manpower beyond the original schedule of the contract; (c)

compensation on account of administrative costs incurred due to the

delay on the part of the petitioner; (d) compensation on account of

BG/insurance charges incurred beyond the original schedule of the

contract; (e) compensation on account of other miscellaneous costs

(Head office overheads) incurred beyond the original schedule of the

contract; and (f) compensation on account of other financing costs due to

negative cash flows during the original schedule of the contract.

28. In respect of claim No.5, the Arbitrator has rightly awarded a

sum of Rs.11,90,37,264/- in favour of the first respondent. The

Arbitrator has rightly found the following while adjudicating claim

No.5:-

(a) The claim made by the first respondent for a sum of

Rs.3,82,57,706/- towards payment of RA bill No.7 has been admitted by

the petitioner in their statement of defence dated 30.10.2019.

(b) The petitioner has also admitted a sum of Rs.3,46,55,564/- in

their statement of defence. Though the said sum for the unbilled and

executed works, the petitioner is liable to pay the said sum to the first

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respondent.

(c) The commissioning of the project could not take place only due

to the improper termination of the contract by the petitioner. Hence, a

sum of Rs.4,61,23,994/-, which was withheld by the petitioner from RA

bill Nos.1 to 16, should be paid to the first respondent.

29. The findings rendered by the Arbitrator for claim No.6 made

by the first respondent against the petitioner cannot be faulted with as

those findings are based on the evidence placed on record. The

Arbitrator while adjudicating claim No.6 made by the first respondent

has rightly determined that a sum of Rs.2,58,26,833/- was erroneously

withheld by the petitioner as retention money from RA bill Nos.1 to 16.

The Arbitrator for coming to such a finding with regard to claim No.6

has taken into consideration the admission made by the petitioner in its

statement of defence. Therefore, the Arbitrator has rightly directed the

petitioner to pay the said sum of Rs.2,58,26,833/- to the first respondent.

30. The Arbitrator has rightly given a finding that the petitioner

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has falsely withheld the payment of Rs.1,02,55,864/- towards GST from

RA bill Nos.15 and 16 of the first respondent. The Arbitrator has rightly

taken into consideration the admission made by the petitioner in their

statement of defence filed before the Arbitrator for awarding a sum of

Rs.1,02,55,864/- in favour of the first respondent in respect of claim

No.7.

31. In respect of claim No.8, the Arbitrator has rightly awarded a

sum of Rs.2,02,00,000/- to the first respondent, which is the amount

withheld by the petitioner as liquidated damages. The Arbitrator has

rightly found that withholding of the liquidated damages is invalid, since

the first respondent is not responsible for the delay in completing the

project. The first respondent having produced evidence before the

Arbitrator that the petitioner was responsible for the delay in completing

the project, the Arbitrator was right in directing the petitioner to return a

sum of Rs.2,02,00,000/- falsely withheld by them by way of liquidated

damages.

32. In respect of claim No.9 made by the first respondent, the

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Arbitrator has rightly awarded a sum of Rs.1,62,04,547/- in favour of the

petitioner for the delayed payment of RA bills (except bill Nos.10 to 12)

in favour of the first respondent, though awarding interest at the rate of

9% per annum instead of 13.5% per annum claimed by the first

respondent. Admittedly, there were delays on the part of the petitioner in

making payments to the first respondent under RA bills raised by the first

respondent. Therefore, this Court does not find any infirmity in the

finding of the Arbitrator in respect of claim No.9 made by the first

respondent.

33. Claim No.10 was made by the first respondent seeking refund

of the Material Bank Guarantee amounting to Rs.4,30,00,000/-. The

Arbitrator has rightly held that since the termination of the contract by

the petitioner is invalid and the evidence placed on record also proves

that the materials had been used by the first respondent at the work site,

the first respondent is entitled for the fund of Material Bank Guarantee

amounting to Rs.4,30,00,000/-.

34. Claim No.11 was made by the first respondent seeking refund

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of the Performance Bank Guarantee furnished by the first respondent to

the tune of Rs.2,40,07,000/-. The Arbitrator has rightly held that the first

respondent is entitled to the refund of the said amount, since the

termination of the contract made by the petitioner is invalid.

35. In respect of claim No.12, the interest awarded by the

Arbitrator at the rate of 10% per annum on the determined amount from

the date of filing of the claim statement before the Arbitrator, i.e., on

05.07.2019, till the date of the passing of the award, is also proper, and

this Court does not find any infirmity in the said finding, since the

petitioner has wrongfully terminated the contract awarded to the first

respondent.

36. Since only based on the evidence available on record, the

Arbitrator has rightly held that the termination of the contract made by

the petitioner is invalid, the question of awarding counter-claim in favour

of the petitioner does not arise. The Arbitrator has rightly rejected the

counter-claim made by the petitioner against the first respondent in the

arbitration.

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37. Section 14 of the IBC Insolvency and Bankruptcy Code, 2016,

does not bar the proceedings initiated by the corporate debtor. The

Insolvency and Bankruptcy Code, 2016, is a beneficial legislation, which

endeavours to revive the corporate debtors and ensures that the corporate

debtor continues as a going concern during the insolvency process. The

moratorium imposed in terms of Section 14 of the Code does not in any

express terms apply to proceedings which are to the benefit of corporate

debtors. The entire object, purpose and import of Section 14 is to protect

and preserve the assets of the corporate debtor during the resolution

process by halting the proceedings initiated against the corporate debtor,

which may result in depreciation or alienation of the assets of the

corporate debtor. Section 14 does not in any express terms impinges

upon or halts proceedings initiated by the corporate debtor which result

in appreciation of its assets or its enrichment. The aforesaid scheme of

the act is discernible from various provisions of the Insolvency and

Bankruptcy Code. Therefore, the contention of the petitioner that since

the lead partner of the petitioner "GKC Projects Ltd." was facing CIRP

proceedings and on account of the passing of the moratorium order, the

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arbitral award passed in favour of the first respondent is in violation of

Section 14 of the IBC, has to be rejected by this Court.

38. The decisions relied upon by the learned counsel for the

petitioner referred to in paragraph No.4 of this order have also got no

bearing to the facts of the instant case for the following reasons:-

(a) Since the termination of the contract by the petitioner is

invalid, the first respondent is entitled for the loss of profit at 10% on the

total value of the contract as held by the Hon'ble Supreme Court in

A.T.Brij Pant Singh (cited supra).

(b) In the case on hand, the first respondent has proved through

oral and documentary evidence that the petitioner had erroneously

terminated the contract even before the deadline fixed under the earlier

extension and the Arbitrator has also rightly given a finding that the

termination of the contract by the petitioner is invalid. Therefore, since

the termination of the contract is found to be invalid, the question of levy

of liquidated damages by the petitioner does not arise. Therefore, no

amount of money can be retained by the petitioner, which is due and

payable to the first respondent as per the contract.

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extensions granted by the petitioner in favour of the first respondent for

completing the project. Once extensions have been granted, Section 46

of the Indian Contract Act relied upon by the learned counsel for the

petitioner does not arise.

(d) The moratorium order passed by the NCLT under Section 14 of

the IBC will not apply to the proceedings initiated by the corporate

debtor for the recovery of money against its debtors.

(e) The scope of Section 34 of the Arbitration and Conciliation Act

is limited. Only in cases where the award has been passed in violation of

public policy and the arbitral award suffers from patent illegality or it

falls under the various other grounds mentioned in Section 34 of the