MBL Case

MANU/DE/8454/2023
Equivalent/Neutral Citation: 2023:DHC :9067
IN THE HIGH COURT OF DELHI

O.M.P. (COMM) 311/2021
Decided On: 12.12.2023
MBL Infrastructures Limited Vs. Delhi Metro Rail Corporation
Hon'ble Judges/Coram:
Chandra Dhari Singh, J.
Counsels:
For Appellant/Petitioner/Plaintiff: Anusuya Salwan, Nikita Salwan, Sonika Singh and
Rachit Wadhwa, Advocates
For Respondents/Defendant: Ankur Chhibber, Parv Garg, Pawas Kulshreshtha and K.S.
Rekhi, Advocates
Case Category:
ARBITRATION MATTERS
Case Note:
Arbitration - Award - Legality of - Section 34 of Arbitration and Conciliation
Act, 1996 (A&C Act) - Present petitions under Section 34 of A&C Act challenge
Arbitral Award passed by Arbitral Tribunal - Whether award under challenge
need interference - Held, Tribunal's view is flawed; despite acknowledging
respondent's delay and wrongful contract termination, damages aren't
awarded to petitioner - It wrongfully held that as per clauses of Contract
petitioner is only liable to extension of time - Tribunal failed to consider that
contract instead of being extended has been wrongfully terminated by
respondent - Award is legally flawed; despite recognizing respondent's delay
in Claim No. 1, damages aren't granted to petitioner - Petitioner made out
case of intervention by this Court with regard to Claim no. 3 and 4 - Petition
partly allowed. [105], [106]
JUDGMENT
Chandra Dhari Singh, J.
1 . The instant petition under Section 34 of the Arbitration and Conciliation Act, 1996
(hereinafter the Act ) has been filed on behalf of the petitioner seeking the following
reliefs:
"i. Set aside the award passed by the Hon'ble Arbitral Tribunal dated
06.03.2020 with respect to Claim No. 3, 4, 6, 7 & 8.
ii. Any other order or relief as this Hon'ble Court deems fit and proper may be
passed in the facts and circumstances of the present case."
FACTUAL MATRIX
06-05-2024 (Page 1 of 47) www.manupatra.com National Law University Jodhpur

2. The facts of the case in a nutshell are extracted hereinbelow-
(a) The Petitioner is M/s. MBL Infrastructure Ltd. is Public Limited Company
engaged in the business of Civil Engineering projects and has a Pan India
presence. The respondent is Delhi Metro Railway Corporation, a joint venture of
Government of NCT of Delhi and Government of India and is a registered
company under the Companies Act.
(b) The respondent invited tenders for 'Construction of Sarai Station including
architectural finishing, water supply, sanitary installation, external development
works etc. and structure works of PD area on Badarpur - Faridabad Corridor of
Delhi, MRTS Phase III ' on 9th March, 2012.
(c) On 9th March 2012, the petitioner submitted its tender which was accepted
by the respondent on 9th May 2012.
(d) The stipulated dates for commencement and completion of the project were
21st May, 2012 and 20th November, 2013 respectively, spanning over a period
of 18 months. The value of the contract was Rs. 41.57 crores.
(e) The petitioner furnished 2 performance bank guarantees amounting to Rs.
4,15,71,525/- @ 10 % contract values. The petitioner had also furnished two
Bank Guarantees for a total amount of Rs. 2,28,64,240/- dated 23rd July 2012
valid upto 20th November 2013 issued by Bank of Baroda in terms of Clause
11.2.1 of the General Conditions of Contract (hereinafter GCC) towards
mobilization advance. In lieu of the same, on 6th September 2012, the
respondent released the first instalment of mobilization advance amounting to
Rs. 1,03,92,881/- vide bankers cheque dated 6th September 2012.
(f) Thereafter, the petitioner was handed over the construction site partially
after a delay of more than six months on 20th December, 2012. On 28th
January 2013, the petitioner requested for handing over the possession of the
remaining plot for Sarai Metro Station which was subsequently denied by the
respondent.
(g) On 2nd August, 2013, the respondent issued a Notice under clause 13.1 of
GCC for alleged failure of the petitioner to adhere to work programs and non-
compliance of other obligations.
(h) The respondent vide letter dated 30th September 2023, denied the facts on
record and informed the petitioner that it was liable for action under Clause
13.1 of GCC. The petitioner replied to the said letter on 11th October 2013
stating that there was no delay on the part of the petitioner.
(i) On 1st November, 2013, the respondent terminated the contract and
encashed the bank guarantees furnished by the petitioner.
(j) The matter was referred to arbitration vide letter dated 1st April, 2015, and
accordingly an Arbitral Tribunal was convened on 15th April, 2015.
(k) The Arbitral Tribunal after hearing the parties rendered its award on 6th
March, 2020. The learned Tribunal held that the default in terms of delay of the
project was on part of the respondent and accordingly, it allowed Claim No. 1
and partly allowed Claim No.5, however, dismissed Claim Nos. 2,3,4,6,7 & 8. It

also dismissed all the Counter claims of the respondent.
(l) The learned Tribunal after examining the evidence on record concluded that
as the respondent was in breach of contract, thus, the termination of the
contract was illegal. The learned Tribunal also held the encashment of
Performance Bank Guarantee to be totally unjustified in view of reach of the
agreement on behalf of the respondent and thus disallowed the claims for
damages, loss of profits, interest and costs under Claims 3, 4, 6, 7 and 8.
(m) Aggrieved by the rejection of claim nos. 3, 4, 6, 7 and 8 in the impugned
Award, the petitioner has filed the present petition on the grounds of patent
illegality.
SUBMISSIONS
3. The parties argued the instant matter at length on several dates of listing before this
Court on the issue of limitation as well as on merits. A combined consideration of the
contentions raised in the pleadings, written submissions as well as the contentions
raised during the course of hearing lay out the following broad arguments on behalf of
the parties.
(on behalf of the petitioner)
4. Learned Counsel, Ms. Salwan appearing for the petitioner submitted that the instant
petition under Section 34 of the Act, 1996 is to raise important issues relating to a limb
of "public policy" on the grounds that the impugned Award is in contravention with the
"fundamental policy" of Indian law and that the impugned Award is vitiated by "patent
illegality" appearing on the face of the Award on extraneous considerations de hors and
contrary to the terms of the contract executed between the parties and in complete
disregard of the evidence on record, in deciding the controversy between the parties.
5 . It is submitted that the learned Tribunal had accepted the expenditure incurred by
the petitioner for tools, plant, overheads and the injury that has been caused to the
petitioner on account of the actions of the respondent. However, the learned Tribunal
still refused to allow petitioner's claim for damages, cost and interest.
6 . It is further submitted that as per Para 6.3.3.2 of the impugned Award the learned
Tribunal held that the petitioner was not in breach of contract but in fact it was the
respondent. However, the denial of damages was inconsistent with the aforesaid
conclusion arrived at by the learned Tribunal.
7. It is contended that once the learned Tribunal has concluded that it is the respondent
who has committed a fundamental breach and is responsible for delay in completion of
work, then the learned Tribunal cannot reject payment of damages as the parties cannot
contract out of provisions of Indian Contract Act 1872 and the rights created by Section
73 and 55 of the said Act cannot be contractually waived.
8 . It is further contended that findings of the learned Tribunal to the effect that the
petitioner is not entitled to overheads towards mobilization/demobilization are contrary
to its own findings at Para 6.3.5.2 of the Impugned Award.
9. It is submitted that the learned Tribunal failed to appreciate the position of law under
Section 73 of Indian Contract Act as per which, the petitioner is entitled to compensate
for the losses incurred on overheads and reduction in the productivity from machinery

and other tools deployed as well as damages on account of breach of contract/illegal
termination of conditions by the respondent. Thus, the award rendered by learned
Tribunal in respect of Claim 3 and 4 is unsustainable.
10. It is contended that the rejection of Claim 6 is erroneous insofar as there is no
clause in the contract providing for damages on account of loss of commercial
reputation. However, the learned Tribunal failed to appreciate the illegality on part of
respondent has directly impacted financial position of the petitioner. Due to said actions
of the respondent, there was initiation of Corporate Insolvency Resolution Process under
Insolvency and Bankruptcy Code, 2016 against the petitioner.
11. It is submitted that the learned Tribunal has wrongly placed reliance upon Clause
17.10 of GCC to reject the Claim No. 7 for costs and the same is patently illegal as a
bare perusal of Section 31-A of Arbitration and Conciliation Act, 1996 clearly states that
absolute discretion is vested with learned Tribunal to determine the said costs.
12. It is further submitted that the rejection of Claim No. 8 is also rebutted by stating
that the petitioner was entitled to award of interest and wrongful deprivation of the
same is bad in law.
13. Learned counsel appearing on behalf of the petitioner contended that Impugned
Award passed by the Arbitral Tribunal is arbitrary and inconsistent, therefore, liable to
be partially set-aside in accordance with the provision of Section 34 (2A) of the Act.
14. Hence, in view of the above, it is prayed that the instant petition may be allowed
and the Impugned Award may be set aside.
(on behalf of the respondent)
15. Per Contra, Mr. Ankur Chhibber learned counsel appearing on behalf of respondent
submitted that the instant petition is nothing but an abuse of the process of law. It is
submitted that it is a settled law that a Court shall not sit in appeal over the award of an
Arbitral Tribunal by re-assessing or reappreciating evidence of the arbitral proceeding
since an arbitrator is the master of the quality and quantity of the evidence.
16. It is further submitted that an award can be challenged only under the grounds
mentioned in Section 34 of the Act, 1996. Therefore, in the absence of any such
ground, it is not possible to re-examine the facts or evidence on the record.
17. Learned counsel for the respondent submitted that the learned Arbitral Tribunal had
adopted a judicial approach by considering all the evidence placed on record by both
the parties. It is further submitted that the Arbitral Tribunal has given a detailed award
which runs into seventy two pages and the award provides analysis of the detailed facts
and the arguments of both the parties.
18. It is contended that the learned Arbitral Tribunal after examining the contentions of
both parties and the documents furnished thereof and having heard the parties on
several dates passed the award in favour of the respondent in regards to the claims
which has been challenged by the petitioner before this Court.
19. It is submitted that the Tribunal has rightly looked into the conduct of the parties
and the correspondence exchange between the parties to decide the issues at hand and
award the claim. The interpretation of the contract is within the domain of the learned
Arbitral Tribunal, and such interpretation ought not to be interfered with in a challenge

under Section 34 of the Act, especially in view of the fact that no cogent grounds have
been set out by the petitioner that warrants interference.
20. It is submitted that reliance by petitioner on Section 73 of the Indian Contract Act is
misplaced since Claim No. 3 is sought on account of delay by respondent and not on
any breach of contract. Further in respect of Claim No. 4, it is averred that the petitioner
has not been able to point out a single patent illegality in the Impugned Award. It is a
well settled principle that any claim before the Arbitrator must be proved and in case of
no evidence, the Arbitrator cannot allow the claim merely on the basis of statement of
claim.
21. It is further submitted that the learned Tribunal has rightly in accordance with the
Clause 2.2 of GCC and Clause 8.3 of GCC has held that there is no provision of only
monetary claim in cases there is a delay on the part of the respondent and the petitioner
is entitled to only reasonable extension of time.
22. It is submitted in respect of Claim No. 6 that the petitioner has not adduced any
evidence to show that it entered into a liquidity crunch due to breach of contract by the
respondent herein and in the absence of any direct nexus, the said claim is barred for
being remote and indirect.
23. It is submitted in respect of Claim No. 7 that merely because the petitioner is the
successful party, it would not entitle it to costs of arbitration. Further, in respect of
Claim No. 8, it is submitted that Clause 17.0 of GCC specifically bars payment of any
interest for any period, till the date on which award is made. Therefore, in terms of
contractual provision, no interest is accrued to the petitioner.
24. Accordingly, there are no grounds available to the petitioner herein for challenging
the instant award on the grounds under Section 34 of the Act.
25. In view of the facts and circumstances, the instant petition is de hors of any merit
and deserves to be rejected outrightly.
ANALYSIS AND FINDINGS
26. I have heard learned counsel for the parties at length, who have taken me through
the award passed by the learned Arbitral Tribunal, provisions of the contract executed
between the parties and the correspondence exchanged between them as well as other
relevant documents.
27. I may, at this stage, deal with the contention urged on behalf of the respondent
that as per the jurisdiction of the Court to set aside an arbitral award is limited to
grounds set out in Section 34 of the Act, this Court ought not to interfere with the
same. It was contended that none of the grounds on which a Court is authorized to
interfere with an arbitral award are present in the case at hand. Alternatively, it was
contended that even if a contrary view is possible on the facts proved before the Arbitral
Tribunal, the Court cannot, in the absence of any compelling reason, interfere with the
view taken by the arbitrators as if it was setting in appeal over the award made by the
Tribunal. Therefore, it is imperative to revisit section 34 of the Act.
28. Section 34 of the Act, 1996 reads as under:-
"34. Application for setting aside arbitral award.-
(1) Recourse to a Court against an arbitral award may be made only by

an application for setting aside such award in accordance with sub-
section (2) and sub-section (3).
(2) An arbitral award may be set aside by the Court only if-
(a) the party making the application [establishes on the basis
of the record of the arbitral tribunal that]'
(i) a party was under some incapacity; or
(ii) the arbitration agreement is not valid under the law to
which the parties have subjected it or, failing any indication
thereon, under the law for the time being in force; or
(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; or
(iv) the arbitral award deals with a dispute not contemplated
by or not falling within the terms of the submission to
arbitration, or it contains decisions on matters beyond the
scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to
arbitration can be separated from those not so submitted, only
that part of the arbitral award which contains decisions on
matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral
procedure was not in accordance with the agreement of the
parties, unless such agreement was in conflict with a provision
of this Part from which the parties cannot derogate, or, failing
such agreement, was not in accordance with this Part; or
(b) the Court finds that'
(i) the subject-matter of the dispute is not capable of
settlement by arbitration under the law for the time being in
force, or
(ii) the arbitral award is in conflict with the public policy of
India. [Explanation 1.'For the avoidance of any doubt, it is
clarified that an award is in conflict with the public policy of
India, only if,-
(i) the making of the award was induced or affected by fraud
or corruption or was in violation of Section 75 or Section 81;
or
(ii) it is in contravention with the fundamental policy of Indian
law; or
(iii) it is in conflict with the most basic notions of morality or
justice. Explanation 2.'For the avoidance of doubt, the test as
to whether there is a contravention with the fundamental policy

of Indian law shall not entail a review on the merits of the
dispute.]
[(2-A) An arbitral award arising out of arbitrations other than
international commercial arbitrations, may also be set aside by the
court, if the court finds that the award is vitiated by patent illegality
appearing on the face of the award: Provided that an award shall not be
set aside merely on the ground of an erroneous application of the law
or by reappreciation of evidence.]
(3) An application for setting aside may not be made after three
months have elapsed from the date on which the party making that
application had received the arbitral award or, if a request had been
made under Section 33, from the date on which that request had been
disposed of by the arbitral tribunal:
Provided that if the Court is satisfied that the applicant was
prevented by sufficient cause from making the application
within the said period of three months it may entertain the
application within a further period of thirty days, but not
thereafter.
(4) On receipt of an application under sub-section (1), the Court may,
where it is appropriate and it is so requested bya party, adjourn the
proceedings for a period of time determined by it in order to give the
arbitral tribunal an opportunity to resume the arbitral proceedings or to
take such other action as in the opinion of arbitral tribunal will
eliminate the grounds for setting aside the arbitral award.
[(5) An application under this section shall be filed by a party only
after issuing a prior notice to the other party and such application shall
be accompanied by an affidavit by the applicant endorsing compliance
with the said requirement.
(6) An application under this section shall be disposed of expeditiously,
and in any event, within a period of one year from the date on which
the notice referred to in sub-section (5) is served upon the other
party.]"
29. Under Section 34 of the Act it is well-settled position that the Court does not sit in
appeal over the arbitral award and may interfere on merits on the limited ground as
provided under Section 34(2)(b)(ii) of the Act, i.e., if the award is against the public
policy of India. As per the legal position clarified through decisions of this Court prior
to the amendments in the 1996 Act in 2015, a violation of India public policy in turn,
includes a violation of the fundamental policy of Indian law, a violation of the interest
of India, conflict with justice or morality and existence of patent illegality in the arbitral
award. The concept of the fundamental policy of Indian Law would cover the
compliance with the statutes under judicial precedents adopting a judicial approach,
compliance with the principles of nature justice, and reasonableness.
30. It is only if one of the conditions is met that the Court may interfere with an arbitral
award in terms of Section 34(2)(b)(ii) of the Act, but the said interference does not
entail a review of the merits of the dispute as it is limited to the situations where the
findings of the arbitration are arbitrary, capricious, or perverse, or when the conscience

of the Court is shocked, or when the illegality is not trivial but goes to the root of the
matter. An arbitral award may not be interfered with, if the view taken by the learned
arbitrator is a possible view based on the facts.
3 1 . Hence, there is a limitation on the powers of this Court while examining its
jurisdiction under Section 34 of the Act, 1996, however, at the same time, if the
interpretation put forward by the Arbitral Tribunal, on the face of it is incorrect and
rendering a Clause in the Agreement to be redundant, such interpretation cannot be
sustained.
3 2 . This Court relied on the case of Reliance Infrastructure Ltd. v. State of Goa
MANU/SC/0553/2023 : 2023:INSC:514 wherein the Hon'ble Supreme Court held as
under
"47. Having regard to the contentions urged and the issues raised, it shall also
be apposite to take note of the principles enunciated by this Court in some of
the relevant decisions cited by the parties on the scope of challenge to an
arbitral award under Section 34 and the scope of appeal under Section 37 of
the Act of 1996.
4 8 . In MMTC Limited (supra), this Court took note of various decisions
including that in the case of Associate Builders (supra) and exposited on the
limited scope of interference under Section 34 and further narrower scope of
appeal under Section 37 of the Act of 1996, particularly when dealing with the
concurrent findings (of the Arbitrator and then of the Court). This Court, inter
alia, held as under:-
"11. As far as Section 34 is concerned, the position is well-settled by
now that the Court does not sit in appeal over the arbitral award and
may interfere on merits on the limited ground provided under Section
34(2)(b)(ii)i.e. if the award is against the public policy of India. As per
the legal position clarified through decisions of this Court prior to the
amendments to the 1996 Act in 2015, a violation of Indian public
policy, in turn, includes a violation of the fundamental policy of Indian
law, a violation of the interest of India, conflict with justice or morality,
and the existence of patent illegality in the arbitral award. Additionally,
the concept of the "fundamental policy of Indian law" would cover
compliance with statutes and judicial precedents, adopting a judicial
approach, compliance with the principles of natural justice, and
Wednesbury [Associated Provincial Picture Houses v. Wednesbury
Corpn., MANU/UKWA/0002/1947 : [1948] 1 K.B. 223 (CA)]
reasonableness. Furthermore, "patent illegality" itself has been held to
mean contravention of the substantive law of India, contravention of
the 1996 Act, and contravention of the terms of the contract.
1 2 . It is only if one of these conditions is met that the Court may
interfere with an arbitral award in terms of Section 34(2)(b)(ii), but
such interference does not entail a review of the merits of the dispute,
and is limited to situations where the findings of the arbitrator are
arbitrary, capricious or perverse, or when the conscience of the Court is
shocked, or when the illegality is not trivial but goes to the root of the
matter. An arbitral award may not be interfered with if the view taken
by the arbitrator is a possible view based on facts. (See Associate

Builders v. DDA [Associate Builders v. DDA, MANU/SC/1076/2014 :
2014:INSC:809 : (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204]. Also see
ONGC Ltd. v. Saw Pipes Ltd. [ONGC Ltd. v. Saw Pipes Ltd.,
MANU/SC/0314/2003 : (2003) 5 SCC 705]; Hindustan Zinc Ltd. v.
Friends Coal Carbonisation [Hindustan Zinc Ltd. v. Friends Coal
Carbonisation, MANU/SC/8095/2006 : (2006) 4 SCC 445]; and
McDermott International Inc. v. Burn Standard Co. Ltd. [McDermott
International Inc. v. Burn Standard Co. Ltd., MANU/SC/8177/2006 :
(2006) 11 SCC 181])
13. It is relevant to note that after the 2015 Amendment to Section 34,
the above position stands somewhat modified. Pursuant to the insertion
of Explanation 1 to Section 34(2), the scope of contravention of Indian
public policy has been modified to the extent that it now means fraud
or corruption in the making of the award, violation of Section 75 or
Section 81 of the Act, contravention of the fundamental policy of Indian
law, and conflict with the most basic notions of justice or morality.
Additionally, sub-section (2-A) has been inserted in Section 34, which
provides that in case of domestic arbitrations, violation of Indian public
policy also includes patent illegality appearing on the face of the
award. The proviso to the same states that an award shall not be set
aside merely on the ground of an erroneous application of the law or
by reappreciation of evidence.
14. As far as interference with an order made under Section 34, as per
Section 37, is concerned, it cannot be disputed that such interference
under Section 37 cannot travel beyond the restrictions laid down under
Section 34. In other words, the court cannot undertake an independent
assessment of the merits of the award, and must only ascertain that the
exercise of power by the court under Section 34 has not exceeded the
scope of the provision. Thus, it is evident that in case an arbitral award
has been confirmed by the court under Section 34 and by the court in
an appeal under Section 37, this Court must be extremely cautious and
slow to disturb such concurrent findings."
49. In the case of Ssangyong Engineering (supra), this Court has set out the
scope of challenge under Section 34 of the Act of 1996 in further details in the
following words:'
"37. Insofar as domestic awards made in India are concerned, an
additional ground is now available under sub-section (2-A), added by
the Amendment Act, 2015, to Section 34. Here, there must be patent
illegality appearing on the face of the award, which refers to such
illegality as goes to the root of the matter but which does not amount
to mere erroneous application of the law. In short, what is not
subsumed within "the fundamental policy of Indian law", namely, the
contravention of a statute not linked to public policy or public interest,
cannot be brought in by the backdoor when it comes to setting aside an
award on the ground of patent illegality.
3 8 . Secondly, it is also made clear that reappreciation of evidence,
which is what an appellate court is permitted to do, cannot be
permitted under the ground of patent illegality appearing on the face of

the award.
39. To elucidate, para 42.1 of Associate Builders [Associate Builders v.
DDA, MANU/SC/1076/2014 : 2014:INSC:809 : (2015) 3 SCC 49 :
(2015) 2 SCC (Civ) 204], namely, a mere contravention of the
substantive law of India, by itself, is no longer a ground available to
set aside an arbitral award. Para 42.2 of Associate Builders [Associate
Builders v. DDA, MANU/SC/1076/2014 : 2014:INSC:809 : (2015) 3
SCC 49 : (2015) 2 SCC (Civ) 204], however, would remain, for if an
arbitrator gives no reasons for an award and contravenes Section 31(3)
of the 1996 Act, that would certainly amount to a patent illegality on
the face of the award.
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, MANU/SC/1076/2014 : 2014:INSC:809 :
(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. What is important to note is that a decision which is perverse, as
understood in paras 31 and 32 of Associate Builders [Associate Builders
v. DDA, MANU/SC/1076/2014 : 2014:INSC:809 : (2015) 3 SCC 49 :
(2015) 2 SCC (Civ) 204], while no longer being a ground for challenge
under "public policy of India", would certainly amount to a patent
illegality appearing on the face of the award. 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."
50. The limited scope of challenge under Section 34 of the Act was once again
highlighted by this Court in the case of PSA SICAL Terminals (supra) and this
Court particularly explained the relevant tests as under:-
"43. It will thus appear to be a more than settled legal position, that in
an application under Section 34, the court is not expected to act as an
appellate court and reappreciate the evidence. The scope of
interference would be limited to grounds provided under Section 34 of
the Arbitration Act. The interference would be so warranted when the
award is in violation of "public policy of India", which has been held to
mean "the fundamental policy of Indian law". A judicial intervention on
account of interfering on the merits of the award would not be
permissible. However, the principles of natural justice as contained in
Section 18 and 34(2)(a)(iii) of the Arbitration Act would continue to be

the grounds of challenge of an award. The ground for interference on
the basis that the award is in conflict with justice or morality is now to
be understood as a conflict with the "most basic notions of morality or
justice". It is only such arbitral awards that shock the conscience of the
court, that can be set aside on the said ground. An award would be set
aside on the ground of patent illegality appearing on the face of the
award and as such, which goes to the roots of the matter. However, an
illegality with regard to a mere erroneous application of law would not
be a ground for interference. Equally, reappreciation of evidence would
not be permissible on the ground of patent illegality appearing on the
face of the award.
44. A decision which is perverse, though would not be a ground for
challenge under "public policy of India", would certainly amount to a
patent illegality appearing on the face of the award. However, 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.
45. To understand the test of perversity, it will also be appropriate to
refer to paragraph 31 and 32 from the judgment of this Court in
Associate Builders (supra), which read thus:
"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.
3 2 . 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.""
51. In Delhi Airport Metro Express (supra), this Court again surveyed the case-
law and explained the contours of the Courts' power to review the arbitral
awards. Therein, this Court not only re-affirmed the principles aforesaid but
also highlighted an area of serious concern while pointing out "a disturbing
tendency" of the Courts in setting aside arbitral awards after dissecting and re-
assessing factual aspects. This Court also underscored the pertinent features
and scope of the expression "patent illegality" while reiterating that the Courts

do not sit in appeal over the arbitral award. The relevant and significant
passages of this judgment could be usefully extracted as under:'
"26. A cumulative reading of the UNCITRAL Model Law and Rules, the
legislative intent with which the 1996 Act is made, Section 5 and Section
34 of the 1996 Act would make it clear that judicial interference with the
arbitral awards is limited to the grounds in Section 34. While deciding
applications filed under Section 34 of the Act, Courts are mandated to
strictly act in accordance with and within the confines of Section 34,
refraining from appreciation or reappreciation of matters of fact as well
as law. (See Uttarakhand Purv Sainik Kalyan Nigam Ltd. v. Northern
Coal Field Ltd. [Uttarakhand Purv Sainik Kalyan Nigam Ltd. v. Northern
Coal Field Ltd., MANU/SC/1634/2019 : 2019:INSC:1292 : (2020) 2 SCC
455 : (2020) 1 SCC (Civ) 570], Bhaven Construction v. Sardar Sarovar
Narmada Nigam Ltd. [Bhaven Construction v. Sardar Sarovar Narmada
Nigam Ltd., MANU/SC/0008/2021 : 2021:INSC:9 : (2022) 1 SCC 75]
and Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram Saran [Rashtriya
Ispat Nigam Ltd. v. Dewan Chand Ram Saran, MANU/SC/0327/2012 :
(2012) 5 SCC 306].)
*********
28. This Court has in several other judgments interpreted Section 34 of
the 1996 Act to stress on the restraint to be shown by Courts while
examining the validity of the arbitral awards. The limited grounds
available to Courts for annulment of arbitral awards are well known to
legally trained minds. However, the difficulty arises in applying the well-
established principles for interference to the facts of each case that
come up before the Courts. There is a disturbing tendency of Courts
setting aside arbitral awards, after dissecting and reassessing factual
aspects of the cases to come to a conclusion that the award needs
intervention and thereafter, dubbing the award to be vitiated by either
perversity or patent illegality, apart from the other grounds available for
annulment of the award. This approach would lead to corrosion of the
object of the 1996 Act and the endeavours made to preserve this
object, which is minimal judicial interference with arbitral awards. That
apart, several judicial pronouncements of this Court would become a
dead letter if arbitral awards are set aside by categorising them as
perverse or patently illegal without appreciating the contours of the said
expressions.
29. Patent illegality should be illegality which goes to the root of the
matter. In other words, every error of law committed by the Arbitral
Tribunal would not fall within the expression "patent illegality". Likewise,
erroneous application of law cannot be categorised as patent illegality.
In addition, contravention of law not linked to public policy or public
interest is beyond the scope of the expression "patent illegality". What is
prohibited is for Courts to reappreciate evidence to conclude that the
award suffers from patent illegality appearing on the face of the award,
as Courts do not sit in appeal against the arbitral award. The permissible
grounds for interference with a domestic award under Section 34(2-A)
on the ground of patent illegality is when the arbitrator takes a view
which is not even a possible one, or interprets a clause in the contract

in such a manner which no fair-minded or reasonable person would, or
if the arbitrator commits an error of jurisdiction by wandering outside
the contract and dealing with matters not allotted to them. An arbitral
award stating no reasons for its findings would make itself susceptible
to challenge on this account. The conclusions of the arbitrator which are
based on no evidence or have been arrived at by ignoring vital evidence
are perverse and can be set aside on the ground of patent illegality.
Also, consideration of documents which are not supplied to the other
party is a facet of perversity falling within the expression "patent
illegality".
30. Section 34(2)(b) refers to the other grounds on which a court can
set aside an arbitral award. If a dispute which is not capable of
settlement by arbitration is the subject-matter of the award or if the
award is in conflict with public policy of India, the award is liable to be
set aside. Explanation (1), amended by the 2015 Amendment Act,
clarified the expression "public policy of India" and its connotations for
the purposes of reviewing arbitral awards. It has been made clear that
an award would be in conflict with public policy of India only when it is
induced or affected by fraud or corruption or is in violation of Section
75 or Section 81 of the 1996 Act, if it is in contravention with the
fundamental policy of Indian law or if it is in conflict with the most basic
notions of morality or justice.
*********
42. The Division Bench referred to various factors leading to the
termination notice, to conclude that the award shocks the conscience of
the court. The discussion in SCC OnLine Del para 103 of the impugned
judgment [DMRC v. Delhi Airport Metro Express (P) Ltd.,
MANU/DE/0161/2019] amounts to appreciation or reappreciation of the
facts which is not permissible under Section 34 of the 1996 Act. The
Division Bench further held [DMRC v. Delhi Airport Metro Express (P)
Ltd., MANU/DE/0161/2019] that the fact of AMEL being operated
without any adverse event for a period of more than four years since
the date of issuance of the CMRS certificate, was not given due
importance by the Arbitral Tribunal. As the arbitrator is the sole Judge
of the quality as well as the quantity of the evidence, the task of being a
Judge on the evidence before the Tribunal does not fall upon the Court
in exercise of its jurisdiction under Section 34. [State of Rajasthan v.
Puri Construction Co. Ltd., MANU/SC/0865/1994 : (1994) 6 SCC 485]
On the basis of the issues submitted by the parties, the Arbitral Tribunal
framed issues for consideration and answered the said issues.
Subsequent events need not be taken into account."
(emphasis supplied)
52. In the case of Haryana Tourism Ltd. (supra), this Court yet again pointed
out the limited scope of interference under Sections 34 and 37 of the Act; and
disapproved interference by the High Court under Section 37 of the Act while
entering into merits of the claim in the following words:
"8. So far as the impugned judgment and order passed by the High
Court quashing and setting aside the award and the order passed by

the Additional District Judge under Section 34 of the Arbitration Act are
concerned, it is required to be noted that in an appeal under Section 37
of the Arbitration Act, the High Court has entered into the merits of the
claim, which is not permissible in exercise of powers under Section 37
of the Arbitration Act.
9. As per settled position of law laid down by this Court in a catena of
decisions, an award can be set aside only if the award is against the
public policy of India. The award can be set aside under Sections 34/37
of the Arbitration Act, if the award is found to be contrary to : (a)
fundamental policy of Indian Law; or (b) the interest of India; or (c)
justice or morality; or (d) if it is patently illegal. None of the aforesaid
exceptions shall be applicable to the facts of the case on hand. The
High Court has entered into the merits of the claim and has decided the
appeal under Section 37 of the Arbitration Act as if the High Court was
deciding the appeal against the judgment and decree passed by the
learned trial Court. Thus, the High Court has exercised the jurisdiction
not vested in it under Section 37 of the Arbitration Act. The impugned
judgment and order passed by the High Court is hence not
sustainable."
53. As regards the limited scope of interference under Sections 34/37 of the
Act, we may also usefully refer to the following observations of a 3-Judge
Bench of this Court in the case of UHL Power Company Limited v. State of
Himachal Pradesh, MANU/SC/0019/2022 : 2022:INSC:20 : (2022) 4 SCC 116:'
"15. This Court also accepts as correct, the view expressed by the
appellate court that the learned Single Judge committed a gross error
in reappreciating the findings returned by the Arbitral Tribunal and
taking an entirely different view in respect of the interpretation of the
relevant clauses of the implementation agreement governing the parties
inasmuch as it was not open to the said court to do so in proceedings
under Section 34 of the Arbitration Act, by virtually acting as a court of
appeal.
16. As it is, the jurisdiction conferred on courts under Section 34 of
the Arbitration Act is fairly narrow, when it comes to the scope of an
appeal under Section 37 of the Arbitration Act, the jurisdiction of an
appellate court in examining an order, setting aside or refusing to set
aside an award, is all the more circumscribed."
5 4 . The learned Attorney General has referred to another 3-Judge Bench
decision of this Court in the case of Sal Udyog Private Limited (supra), wherein
this Court indeed interfered with the award in question when the same was
found suffering from non-consideration of a relevant contractual clause. In the
said decision too, the principles aforesaid in Delhi Airport Metro Express,
Ssangyong Engineering and other cases were referred to and thereafter, this
Court applied the principles to the facts of that case. We shall refer to the said
decision later at an appropriate juncture.
5 5 . Keeping in view the aforementioned principles enunciated by this Court
with regard to the limited scope of interference in an arbitral award by a Court
in the exercise of its jurisdiction under Section 34 of the Act, which is all the

more circumscribed in an appeal under Section 37, we may examine the rival
submissions of the parties in relation to the matters dealt with by the High
Court.
33. It is settled law that the ground under Section 34 of the Act gives way to setting
aside an Arbitral Award with a very minimal scope of intervention. A party cannot
simply raise an objection on the ground of Section 34 if the Award is simply against
them. Section 34 of the Act, 1996 requires a distinct transgression of law, the clear lack
of which thereof makes the petition simply a pointless effort of objection towards an
Award made by a competent Arbitral Tribunal.
34. Keeping these principles in mind, I will now examine the present case.
35. In the instant petition, the petitioner has challenged claim no. 3, 4, 6, 7 and 8. This
Court will peruse each and every claim and adjudicate upon whether they merit
interference by way of the instant petition.
Claim no. 3- Damages on Account of Idling of Machines and loss of overheads
3 6 . Claim 3 pertains to damages on account of idling of machines and loss of
overheads due to inaction and delays by the respondent amounting to Rs. 1,57,84,798/-
, the Arbitral Tribunal's analysis is reproduced hereinunder-
"iv) As discussed above. Contractual provisions governing delay is covered
under Clause 8.3 of GCC and that for Extension of Time under Clause 8.4 of
GCC. Clause 8.3 (along with Clause 2.2) clearly indicates that failure or delay
by the Employer or the Engineer to hand over site etc. shall not entitle the
contractor to damages or compensation, it provides simply for extension of
time as, in the opinion of the Engineer are reasonable. Clause 8.4.1 of GOG
dealing with Extension of Time not on Contractor's fault also includes:
'a) The Contractor's work held up for not being given possession of or
access to site in accordance with the Contract (sub para 'b' of Clause
8.4.1 of GCC);
b) Any act of prevention or Breach of Contract by the Employer and not
mentioned in this Clause (sub para 'e' of Clause 8.4.1. of GCC).' Such a
provision encompasses all delays over which the contractor has no
control. This will also include any delays for which both the
Respondent and the Claimant are responsible. However, as is seen.
Clause 8.3 of GCC of the Contract Agreement does not provide for any
financial compensation to the Claimant even if the Claimant is not
responsible for the delay.
v) The Claimant have cited a number of judgments of High Courts and the
Supreme Court, as mentioned In Paragraphs 8.1.3 supra, in support of their
case and applicability of Section 73 of the Indian Contract Act, 1872, providing
for compensation to be paid in case of breach of a contract, to the party who
suffers loss due to such breach. The Tribunal have studied the relevant
paragraphs of these judgments, as referred to by the Claimant. It is seen that
these judgments pertain to cases having different dimensions and different
provisions of the contracts, which may not be applicable to the situations of the
present case. The Tribunal is guided by the Sub- section (3) of Section 28 of
the Arbitration and Conciliation Act, 1996 as amended by Arbitration and

Conciliation (Amendment) Act, 2015, which provides as under: "(3) While
deciding and making an award, the arbitral tribunal shall, in all cases, take into
account the terms of the contact and trade usages applicable to the
transactions".
The Tribunal has considered the case in the spirit of the above provision of the
Act. It has also come out that the Respondent were eager to get the Project
completed at the earliest. The Respondent have admitted that there were certain
delays, like handing over of the land, on their part and certain other delays
including planning and execution issues (amply discussed in Claim-1) on the
part of the Claimant.
8.3.4 After careful consideration of the facts and circumstances of the case,
written and oral submissions by the Parties and as discussed above, the
Tribunal have come to the conclusion that the Respondent is not bound, as per
terms and conditions of the Contract, to compensate the Claimant for delayed
performance of the Contract.'
37. The learned Tribunal held that the petitioner suffered certain damages on account
of idling of machinery and loss of overheads because there was a default on the part of
the respondent in fulfilling the obligations under the Contract.
3 8 . Moreover, the Tribunal has referred to the relevant clauses of the Contract i.e.,
Clause 2.1 of GCC, Clause 2.2 of GCC as well as Clause 8.3 of GCC. The Tribunal has
further held that in accordance with these clauses it is explicitly mentioned that the
petitioner shall be entitled only to reasonable extension of time and there can be
monetary claims payable in this regard.
39. According to Clause 8.3 of GCC, it enunciates that any delay on account of the
respondent shall entitle the contractor to a remedy of extension of time which the
Engineer deems reasonable. The delay includes in its ambit the handing over of site
necessary for execution of work, giving of necessary notice for the purpose of
commencement of work, provide necessary drawing or instructions or clarification or
clarification or to supply any material, plant or machinery, which as per the terms and
conditions of the Contract is the obligation of the employer. Hence, the Tribunal finally
held that as per the Clause 8.3 of GCC the Contract does not provide any compensation
to the petitioner by way of damages.
40. The learned Tribunal further held that it is acting in accordance with Section 28 of
the Act as per which the Tribunal shall take into its consideration the terms of the
contract and trade usages which are applicable to the transactions. Accordingly, the
Tribunal held that respondent is not bound as per the Contract for any compensation to
the Claimant for delayed performance of the Contract.
4 1 . This Court before commenting on the merits of the case deems it fit that the
reference shall be made to Award passed by the learned tribunal for Claim no. 1
wherein the Tribunal attributed the delay pertaining to the completion project on the
respondent. The relevant paras of the Impugned Award are reproduced herein below:
"6.3.3.2 Conclusion: Examination of above allegations made by the Respondent
indicates that the reasons brought out by the Respondent as above are not the
basic reasons why the work did not achieve the desired progress with time. The
expected date for land availability as also not known to the Claimant to be in
readiness for the same. The activities alleged to be delayed by the Claimant

would have been critical if the land for the work area as well as construction
were made available from the beginning. Even the first set of drawings for pile
foundations was issued after more than two months after the result of pile load
test was available. Ideally, the pile rig should have been remobilized soon after
21.12.2012, when part land for construction was made available, but then there
were no structural drawings for carrying out of execution till 21.02.2012. The
pile load test was required for the final drawings, but the land for installation of
initial piles for load test could be temporarily made available on 16.10.2012. As
time for availability of land was uncertain, there was no tempo for carrying out
preparatory works. The Batching plant was not installed till 28.08.2012 (though
no further activity was held up on this account) as land for work area became
available on 27.06.2012. Thus, one is to consider cause and effect. Thus, under
facts and circumstances of the case Tribunal finds that the Claimant is not
responsible for delay in mobilization and start of the work as alleged by the
Respondent;"
XXX
"6.3.5.3 Conclusion:
(i) In view of above, delays in making available land does not get
condoned by the GCC 2.2 as there is a difference between 'no land' and
'making available land progressively'. There is no provision in the
Contract for payment for idling rig. Piling rig was demobilized twice-
once after execution of test piles in October 2013; second after
completing piles in grid 2 and 3 on 29.05 2013 due to obstructions in
grid 1. Though advance drawings were available on 18.01.2013, GFC
drawings for the pile foundations was issued on 21.02.2013. When the
notice under Clause 13.1 alleging failure in meeting obligation under
13.2.1 (g) & (i) was issued on 2.08.2013, there was no agreed
programme of work due to various delays. The revised programme was
approved on 19.09.2013, yet in the second notice dated 30.09.2013 the
Respondent states that according to the revised programme the piling
work was to be completed by 30.08.2013 and there is a delay of 45
days. Surely, the slippage of 45 days could not have occurred in just
11 days from 19.09.2019. Thus, provision of GCC Clause 4.13 does not
seem to have been followed by the Respondent. The reality of
obstructions due to close proximity of existing electric poles or flooding
of the site due to poor drainage facility in the area, which became acute
due to excavations for the pile caps, cannot be wished away by
provisions of Construction Specifications Section 1.2.12, 3.6
Earthwork. Such hindrances do affect the progress and are to be
considered while evaluating progress on any date.
(ii) Notice dated 2.08.2013 is under GCC Clause 13.2 for failure to
meet Contractor's obligation as specified in Clause 13.2.1 (g) and (i).
Clause 13.2 has the heading 'Termination of Contract due to
Contractor's Default'. 13.2.1 (g) is about failure to adhere to agreed
programme or is unlikely to complete the works. Clause 13.2.1(i) is
about failure to employ competent or additional staff or labour.
Analysis of sequence of events indicates that till 2.08.2013 (date of
first notice) or subsequently also, the delays were beyond the control
of the Claimant and as such it cannot be construed that it is due to

Contractor's Default. Additional workers were deployed in the key
categories of carpenters and fitters according to data provided by the
Respondent. Thus, finding of the Tribunal is that delays are not due to
Claimants default. Considering above findings, the Tribunal has come
to the conclusion that under fact and circumstances of the case,
termination of the Contract and forfeiture of the performance security
by the Respondent is not tenable under the Contract Agreement."
42. Upon perusal of the abovesaid paras pertaining to the award of Claim no. 1, it is
crystal clear that the learned Tribunal has held that the delay in completion of the
project is attributable to the respondent. It has further categorically held that as per
notice dated 2nd August 2013, under clause 13.2 of the GCC regarding failure to meet
contractor's obligations as per the contract has been given wrongly. Since as per the
material on record the tribunal held that the delays were beyond the control of the
petitioner and the same cannot be construed as its fault.
4 3 . Furthermore, the Tribunal highlighted the fact that there were surplus workers
deployed in the key categories of Carpenter and fitters as per the data provided by the
respondent. Therefore, the Tribunal held that the termination of the contract and
forfeiture of performance security by the respondent is not in accordance with the
contract.
44. This Court is of the opinion that the clauses which restricts the right of the party in
claiming damages is a restrictive clause. Such a clause will defeat the purpose of the
Indian Contract Act, 1872. Under section 55 and 73 of the said Act, the aggrieved party
is entitled to claim damages, and there cannot be any restriction or prohibition
exercised by the other party. It is the right of the aggrieved party to claim such
damages.
4 5 . Under section 23 of the Indian Contract Act, 1872, states that such clause is
opposed to public policy since it aims at restraining the aggrieved party from claiming
its rightful dues.
46. Such kind of clauses are also not in public interest since they hinder the smooth
operation of the commercial transaction. Furthermore, they create an environment
which is not conducive for the purpose of business transactions. Moreover, the said
clauses cannot restrain the Tribunal from awarding damages, which are otherwise
payable by the employer on account of its breach of contract
47. This Court will now discuss the various judgments passed by the Courts regarding
whether the Tribunal can award damages for delay on the part of the employer in
completion of the project when the Contract executed between the parties does not
provide for any monetary damages to the contractor and entitles the Contractor merely
for extension of time.
48. The Hon'ble Supreme Court held in the judgment of Asian Techs Ltd. v. Union of
India, MANU/SC/1620/2009 : (2009) 10 SCC 354 as follows:
"12. The High Court by the impugned order allowed the appeal and revision
making the following observations:
"We, therefore, hold that the award passed by the arbitrator in respect
of Claims 1 to 3, 5, 9, 17, 19, 21, 23, 24, 26, 30, 33, 35, 37, 38, 40,
41, 44 and 46 is against the conditions agreed to by the contracting

parties and in conscious disregard of the terms of the contract and also
the arbitration clause from which the arbitrator derives his authority.
We are, however, not interfering with the award in respect of Claim 12
alone, which in our view is binding on the appellants. We hold that
Arbitration Clause 70 was a conditional one giving finality to the
decisions of CWE as per the various provisions, Clauses 62(G) and
11(C) of the contract. The award of the arbitrator and the orders of the
court below in arbitration, OPs Nos. 4 and 18 of 1994 to the extent to
which they are covered by Clauses 62(G) and 11(C) except Claim 12
are set aside and the arbitration, OP No. 18 of 1994 filed by the Union
of India is allowed as above. The appeal and the revision are allowed
as above. In the facts and circumstances of this case, we are not
awarding costs."
It can be seen that the High Court has set aside the arbitrator's award holding
that under the finality clause under Clauses 11(C) and 62(G), the decision of
the Commander Works Engineer (CWE) is final and binding and has been
exempted from the purview of the arbitration clause, which is Clause 70 of the
contract. Thus the High Court held that the arbitrator travelled beyond the terms
of reference.
13. In this connection we may refer to Clause 70 of the contract which is the
arbitration clause. The said clause reads as follows:
"70. Arbitration.-All disputes, between the parties to the contract (other
than those for which the decision of CWE or any other person is by the
contract expressed to be final and binding) shall, after written notice by
either party to the contract to the other of them, be referred to the sole
arbitration of an Engineer Officer to be appointed by the authority
mentioned in the tender documents."
14. Clause 11 of the contract reads as follows:
"11. Time, delay and extension.-(A) Time is of the essence of the
contract and is specified in contract documents or in each individual
works order.
As soon as possible after the contract is let or any substantial works
order is placed and before work under it has begun, the GE and the
contractor shall agree upon a time progress chart. The chart shall be
prepared in direct relation to the time stated in the contract documents
or the works order for completion of the individual items thereof,
and/or the contract or works order as a whole.
(B) If the works be delayed:
(a) by reason of non-availability of government stores
mentioned in Schedule 13; or
(b) by reason of non-availability or breakdown of government
tools and plant mentioned in Schedule C then, in any such
event, notwithstanding the provisions hereinbefore contained,
the GE may in his discretion, grant such extension of time as
may appear reasonable to him and the contractor shall be

bound to complete the works within such extended time. In the
event of the contractor not agreeing to the extension granted
by the Garrison Engineer, the matter shall be referred to the
accepting officer (or CWE in case of contract accepted by the
Garrison Engineer) whose decision shall be final and binding.
(C) No claim in respect of compensation or otherwise, howsoever
arising, as a result of extensions granted under Conditions (A) and (B)
above shall be admitted."
15. Clause 62(G) of the contract states as under:
"(G) For all contracts-
If any work, the rate for which cannot be obtained by any of the
methods referred to in Paras (A) to (E) above, has been ordered on the
contractor, the rate shall be decided by the GE on the basis of the cost
to the contractor at site of works plus 10% to cover all overheads and
profit. Provided that if the contractor is not satisfied with the decision
of the GE he shall be entitled to represent the matter to the CWE within
seven days of receipt of the GE's decision and the decision of the CWE
thereon shall be final and binding.
If any alterations or additions (other than those authorised to be
executed by day work or for an agreed sum) have been covered up by
the contractor without his having given notice of his intention to do so,
the Engineer-in-charge shall be entitled to appraise the value thereof
and in the event of any dispute the decision of the GE thereon shall be
final and binding."
xxx
1 9 . It is well settled that in the case of non-speaking awards under the
Arbitration Act, 1940 the court has very little scope of interference vide State of
Rajasthan v. Nav Bharat Construction Co. [MANU/SC/1460/2005 : (2006) 1 SCC
86], Raipur Development Authority v. Chokhamal Contractors
[MANU/SC/0280/1990 : (1989) 2 SCC 721] , Arosan Enterprises Ltd. v. Union
of India [MANU/SC/0595/1999 : (1999) 9 SCC 449] , Ispat Engg. & Foundry
Works v. SAIL [MANU/SC/0389/2001 : (2001) 6 SCC 347] and D.D. Sharma v.
Union of India [MANU/SC/0419/2004 : (2004) 5 SCC 325].
xxx
21. Apart from the above, it has been held by this Court in Port of Calcutta v.
Engineers-De-Space-Age [MANU/SC/0735/1996 : (1996) 1 SCC 516] that a
clause like Clause 11 only prohibits the Department from entertaining the claim,
but it did not prohibit the arbitrator from entertaining it. This view has been
followed by another Bench of this Court in Bharat Drilling & Treatment (P) Ltd.
v. State of Jharkhand [(2009) 16 SCC 705] ."
49. This Court has extensively dealt with the position of law in the judgment of Simplex
Concrete Piles (India) Ltd. v. Union of India, MANU/DE/4538/2010 as follows:
"10. In deciding this issue of the disentitlement to damages to the contractor

(because of Ramnath International's case) or the entitlement to damages (on
account of Asian Techs Limited's case), however, I would prefer to decide this
case and base this judgment wholly, independently on my view that clauses
which bar and disentitle a contractor to claim its just claims/damages/monetary
entitlement, and which a contractor is entitled to by virtue of provisions of
Sections 73 and 55 of the Contract Act, are void by virtue of Section 23 of the
Contract Act, 1872. I am also taking up this aspect of Section 23 first because
the present discussion will help in deciding whether correct law is laid down in
Ramnath International's case or in Asian Techs Limited's case. It is therefore
necessary, at this stage, to reproduce Section 23 of the Contract Act. The same
reads as under:
"23. What considerations and objects are lawful, and what not.' The
consideration or object of an agreement is lawful, unless-
it is forbidden by law 1; or
is of such a nature that, if permitted, it would defeat the
provisions of any law; or
is fraudulent; or
involves or implies injury to the person or property of another;
or the Court regards it as immoral, or opposed to public policy.
In each of these cases, the consideration or object of an
agreement is said to be unlawful. Every agreement of which the
object or consideration is unlawful, is void."
A reading of the aforesaid provision of Section 23 shows that where the
consideration or object of an agreement is unlawful, the said agreement is void.
The consideration or object of an agreement is unlawful if it is forbidden by law
or it is of such a nature that if permitted it defeats the provisions of law or the
same involves injury to the person or property of another or the Court regards it
as immoral or opposed to public policy. Two parts of this Section are relevant
for determining the issue in the present case. The first part being that a clause
in an agreement is unlawful and void when the same is opposed to public policy.
The second part is that such a contractual clause is void if allowing operation of
such clause will defeat the provisions of law.
11. The expression "public policy" has been a subject matter of various
decisions of the Supreme Court. It has been held that the expression "public
policy" has to be interpreted in the context of the statute in which such
expression appears. The expression "public policy" as per the requirement and
the context of the statute in which the expression is found, has been accordingly
interpreted by the Supreme Court. What is therefore the meaning which should
be attributed to this expression as found in Section 23 is the question. Instead
of referring to various judgments, I would seek to refer to the observations and
the ratio of the Supreme Court in one of its recent judgments reported as Indian
Financial Association of Seventh Day Adventists v. M.A. Unneerikutty,
MANU/SC/3291/2006 : (2006) 6 SCC 351on the meaning of this expression in
Section 23. I refer to this judgment because in a few paragraphs the Supreme
Court has encapsulated the law with regard to the expression 'public policy? and
in the process has also referred to its earlier decisions on the point as also the

relevant commentaries of certain authors. Paras 16 to 19 of the said judgment
lays down the ratio with regard to the meaning of the expression "public policy",
and which I with all humility adopt, for the purpose of the decision in the
present case. These paragraphs 16 to 19 read as under:
16. Section 23 of the Contract Act lays down that the object of an
agreement becomes unlawful if it was of such a nature that, if
permitted, it would defeat the provisions of any law.
17. The term "public policy" has an entirely different and more extensive
meaning from the policy of the law. Winfield defined it as a principle of
judicial legislation or interpretation founded on the current needs of the
community. It does not remain static in any given community and varies
from generation to generation. Judges, as trusted interpreters of the
law, have to interpret it. While doing so, precedents will also guide them
to a substantial extent.
18. The following passage from Maxwell, Interpretation of Statutes, may
also be quoted to advantage here:
"Everyone has a right to waive and to agree to waive the
advantage of a law or rule made solely for the benefit and
protection of the individual in his private capacity which may be
dispensed with without infringing any public right or public
policy. Where there is no express prohibition against
contracting out of it, it is necessary to consider whether the Act
is one which is intended to deal with private rights only or
whether it is an Act which is intended as a matter of public
policy."
19. The doctrine of public policy may be summarised thus 11:
"Public policy or the policy of the law is an illusive concept; it
has been described as 'untrustworthy guide', 'variable quality',
'uncertain one', 'unruly horse', etc.; the primary duty of a court
of law is to enforce a promise which the parties have made and
to uphold the sanctity of contracts which form the basis of
society, but in certain cases, the court may relieve them of their
duty on a rule founded on what is called the public policy; but
the doctrine is extended not only to harmful cases but also to
harmful tendencies; this doctrine of public policy is only a
branch of common law, and just like any other branch of
common law, it is governed by precedents; the principles have
been crystallised under different heads and though it is
permissible for the courts to expound and apply them to
different situations, it should only be invoked in clear and
incontestable cases of harm to the public."
(Underlining supplied)
12. The following principles can be culled out from the aforesaid paragraphs:
(i) Public policy is a changing concept, it is not static but dynamic; it
changes from time to time and the Courts have been empowered while

interpreting this doctrine to resort to, judicial legislation euphemistically
called 'interpretation', to further the public interest, equity, good
conscience and justice.
(ii) A law which is made for individual benefit can be waived by an
individual/private person, however, when such law includes a public
interest/public policy element, such rights arising from the law cannot
be waived because the same becomes a matter of public policy/public
interest.
14. A Division Bench of this court has also recently considered the legal position
under Section 23 of the Contract Act in the judgment reported as Ircon
International Ltd. v. NBCC, 155 (2008) DLT 226. The relevant paragraphs of this
judgment are paras 15, 20, 21, 27 and 28:
15. The learned Counsel for the appellant has also relied upon
MANU/SC/0783/2006 : (2006) 2 SCC 628 : AIR 2006 SC 963,
MANU/BH/0067/1965 : (2006) 6 SCC 315 : AIR 1965 Pat. 239 : AIR 1996 All.
72 and AIR (37) 1950 Lah. 174 wherein the part of the arbitration agreement,
"which makes the arbitrator's determination 'final' and binding between the
parties" and declares that the parties have waived the right of an appeal or
objection 'in any jurisdiction', has been held to be hit by Section 28 of the
Contract Act and also being against public policy.
20. After considering the judgments relied upon by the appellant and discussed
by us above, we are of the opinion that a person may waive his rights. Such
waiver of rights is permissible even in relation to a benefit conferred under the
law. But it is trite that no right can be waived where public policy or public
interest is involved. The contract between the parties must be in obedience to
law and not in derogation thereof. Contracting out is permissible provided it
does not deal with a matter of public policy. An agreement under no
circumstances can violate the public policy [Centrotrade Minerals and Metal Inc.
v. Hindustan Copper Ltd., MANU/SC/8146/2006 : (2006) 11 SCC 245].
21. Section 28 of the Contract Act which provides for agreements in restraint of
legal proceedings as void, the parties cannot by a contract seek to exclude the
application of a statutory provision as it is not valid Mukul Dutta Gupta v. Indian
Airlines Corpn., MANU/WB/0075/1962 : AIR 1962 Cal. 1311.The most obvious
and direct form of contracting out of a statute is where a party agrees not to
make a claim for a benefit for which a statute provides. But it may take many
other forms, varying with the nature, subject matter and the object or purpose
of the statute, and the means selected to escape from its provisions or its
operations. Express statutory prohibitions against contracting out renders void
an agreement or clause that is inconsistent with it. But when there is no express
prohibition in the statute, an agreement; the operation of which defeats or
circumvents the purpose or policy of the statute, would also be barred.
27. The object of the rule is, that no party/person should be left remedy less.
Necessary corollary to this would be that, if no adequate remedy is provided for
by a special statute through the Forum established under it for a particular
purpose/situation, civil Courts remedy to administer justice cannot be said to be
ousted to deal with even such cases.
28. So far as the part in the arbitration, clause in the said agreement regarding

the non-applicability of the Act of 1996 is concerned, we consider that it is void
and the parties cannot by themselves exclude the statute itself which is being
drafted by the Legislature to look after the arbitration matters.
(underlining is mine)
1 5 . The issue therefore boils down to whether rights which are created by
Section 73 and 55 of the Contract Act can or cannot be contractually waived. If
there is a public policy or public interest element in these Sections, then the
rights under these sections cannot be waived. Let us examine the matter. If we
look at that portion of the Contract Act, 1872 till Section 73 it broadly
comprises of three parts. The first part is the formation and the requirements
for the formation of a legal agreement/contract. The second part deals with the
performance thereof. The third part deals with the effect of breach of the
contract.
Provisions pertaining to the effect of breach of contract, two of which
provisions are Sections 73 and 55, in my opinion, are the very heart,
foundation and the basis for existence of the Contract Act. This is because a
contract which can be broken at will, will destroy the very edifice of the
Contract Act. After all, why enter into a contract in the first place when such
contracts can be broken by breaches of the other party without any
consequential effect upon the guilty party' It therefore is a matter of public
policy that the sanctity of the contracts and the bindingness thereof should be
given precedence over the entitlement to breach the same by virtue of
contractual clauses with no remedy to the aggrieved party. Contracts are
entered into because they are sacrosanct. If Sections 73 and 55 are not allowed
to prevail, then, in my opinion, parties would in fact not even enter into
contracts because commercial contracts are entered into for the purpose of
profits and benefits and which elements will be non-existent if deliberate
breaches without any consequences on the guilty party are permitted. If there
has to be no benefit and commercial gain out of a contract, because, the same
can be broken at will without any consequences on the guilty party, the entire
sub-stratum of contractual relations will stand imploded and exploded. It is
inconceivable that in contracts performance is at the will of a person without
any threat or fear of any consequences of a breach of contract. Putting it
differently, the entire commercial world will be in complete turmoil if the effect
of Sections 55 and 73 of the Contract Act are taken away.
In view of the observations of the Supreme Court in the case of India Financial
(supra) and the Division Bench of this court in Ircon International (supra) and
again of the Supreme Court in the case of M.G. Brothers, the expressions
"public policy" and "if permitted will defeat the provisions of law" in Section 23
have to be interpreted to further the object of the Contract Act and not defeat
the same. That being so, it is clearly a matter public policy and public interest
that the sanctity of the contracts are preserved. To permit a contractual clause
having the object to defeat the very contract itself, is a matter of grave public
interest. If such a Clause is allowed to stand, then, the same will defeat the
very basis of existence of the Contract Act. Having thus expounded at some
length I thus need not say any further on the intendment of the Contract Act
and the public interest/public policy behind Sections 55 and 73 thereof.
1 6 . Provisions of the contract which will set at naught the legislative
intendment of the Contract Act, I would hold the same to be void being against

public interest and public policy. Such clauses are also void because it would
defeat the provisions of law which is surely not in public interest to ensure
smooth operation of commercial relations. I therefore hold that the contractual
clauses such as Clauses 11A to 11C, on their interpretation to disentitle the
aggrieved party to the benefits of Sections 55 and 73, would be void being
violative of Section 23 of the Contract Act. The interpretation given by the
Supreme Court in the Ram Nath International case is a literal and strict
interpretation of clauses whereby the expression "reason beyond the control of
the contractor" has been so strictly and literally interpreted to include even
those cases which are on account of the defaults of the employer itself and but
for the said judgment I would have preferred to interpret the clauses in the
manner which the Arbitrator has done and not strike them down by applying
Section 23 of the Contract Act. I have also reproduced above the reasoning
given in the Award which in my opinion, would otherwise have been enough to
dispose of this case, however, the said findings in the award being totally
against a direct opposite interpretation given to such clauses by the Supreme
Court, would therefore have to give way.
17. I may finally note that the Supreme Court in its recent judgment reported
as G. Ramachandra Reddy v. UOI, MANU/SC/0998/2009 : (2009) 6 SCC 414
has, though without referring to Section 23 of the Contract Act, held that a
clause in a contract cannot prevent the award of damages although the same
are otherwise payable in law.
18. The issue which now remains to be addressed however is does Ram Nath
International's judgment hold the field or the judgment in Asian Techs Ltd
applies' This indeed is a vexed question and ordinarily, as already stated, I
would not have ventured to enter into this area of controversy but, since, the
learned senior counsel for the petitioner has very strongly pressed for decision
on this aspect also, I am accordingly adverting to this aspect. Before doing so,
I may note that both the judgments of Asian Techs Ltd. and Ram Nath
International are of benches of two Judges. Further, the decision in Asian Techs
case does not refer to the judgment of Ram Nath International case although
identical clauses have also been dealt with in the Asian Techs case. In terms of
the various Full Bench judgments of different High Courts and the Division
Bench judgment of this Court, I have the onerous obligation, as the learned
senior counsel for the petitioner put, to decide that which of the two judgments
should operate. One way in my opinion, would be that the effect of the two
cases and the ratio of the two cases can be said to be distinguishable because
the judgment in the Ram Nath International case, does not deal with the
position that Arbitrators right to award such damages is unfettered and a
contractual clauses which debars payment of damages only prevents the
department from doing so. That however, would be an over simplification,
because, both the judgments squarely deal with the issue of an arbitration
Award entitling or disentitling a contractor for damages.
1 9 . In my opinion, if I look at the issue from both the micro and macro
positions, keeping in focus the intendment of legislation called the Contract Act,
then, the judgment in the case of Asian Techs Ltd. can be said to laying down a
law which would further the object and purpose of the Contract Act. I must
hasten to add that I am still doubtful whether I am entitled to decide the aspect
that out of two decisions of Supreme Court, which one is to prevail, therefore,
my observations are strictly in terms of the limited parameters of the facts of

the present case required to decide the aspect of the entitlement or the
disentitlement to damages in view of the provisions of Section 55 and 73 of the
Contract Act. I would with all due respect to the learned senior counsel for the
petitioner, would not venture further and would leave it finally for a larger
Bench of this court or the Supreme Court itself to consider whether at all there
is any conflict between the judgments of Ram Nath International and Asian
Techs Ltd and if there is a conflict, the ratio of which of the two judgments
ought to prevail. I am therefore, deciding this case, to make things very clear,
only on the basis of the decision that contractual clauses which prohibit the
entitlement to rightful damages of a person is clearly hit and are void by virtue
of Section 23 of the Contract Act.
50. This court has extensively dealt with the aforesaid principal of law in the judgment
of Ircon International Ltd. v. GPT-Rahee JV, MANU/DE/0938/2022 as follows:
"32. The contention that the Arbitral Tribunal has failed to appreciate that only
a small fraction of the total admitted amount was payable by Ircon at the
material time, is unpersuasive.
33. It is clear that Arbitral Tribunal had examined various facets of the disputes
and has taken an informed decision. The scope of interference on the ground of
patent illegality under Section 34(2A) of the A&C Act does not extend to re-
appreciating the material before the Arbitral Tribunal and re- adjudicating the
disputes.
34. The contention that the impugned award is vitiated by patent illegality as it
is based on no evidence is also unmerited. It is necessary to bear in mind that
the Indian Evidence Act, 1872 and the strict rules of evidence are inapplicable
to arbitral proceedings. The Arbitral Tribunal is required to render a decision
after evaluating the material placed before it.
XXX
39. The Arbitral Tribunal accepted that there was certain delay on the part of
the respondent as well. However, the Arbitral Tribunal concluded that the
delays on the part of Ircon were in respect of "critical aspects" and the said
delays were dominant in prolongation of the works. The conclusion of the
Arbitral Tribunal in this regard is set out below:
"10.160. The Respondent has committed fundamental breaches in not
providing site for construction of workshop etc. in time. Further there
has been abnormal delay I providing good GFC for construction
drawings. Delay was also caused because of change in drawings from
time to time. Like-wise, absence of incorporation of strengthening
provisions in the drawings too caused the delay. The timeless, as
specified in the contract, were not adhered to. There were some other
delays caused by the Respondent. It is also recorded that there were
initial delays on the part of the Claimant as well as insofar as
preparatory work is concerned as the signing of the contract itself was
delayed due to non-submission of Performance Security, Bank
Guarantee for mobilization advance, etc. An overall picture which
emerges is that for significant part of the contract, there is
contributory/concurrent delay on the part of Claimant as well which
happened parallel during the project. However, certain delays occurred

solely because of the non-fulfilment of obligations by the Respondent."
4 0 . The Arbitral Tribunal is of the view that given that the parties had
contributed to certain delays, it was essential to apply the principle of
apportionment. After evaluating the reasons for the delay, the Arbitral Tribunal
concluded that half of the delay could be apportioned to both Ircon and the
respondent. However, for the remaining half, Ircon was solely responsible for
the same. Therefore, only half of the claim made by the respondent on account
of idling costs was allowed by the Arbitral Tribunal. The relevant paragraph of
the impugned award embodying the said conclusion is set out below:
"10.171 Keeping in view all the aforesaid considerations, I am of the
view that the Claimant would be entitled to the losses suffered by it
because of certain fundamental delays on the part of the Respondent,
but at the same time, the claim preferred by the Claimant to be reduced
by applying the principle of apportionment because of the reason that
to some extent, delays are caused due to the factors attributable to the
Claimant itself. After considering the overall circumstances, the period
of delay solely attributable to the Respondent is reduced to half, as for
the other period, the Claimant is also liable and therefore, cannot take
advantage. The Claims for compensation on the ground of delay are
adjudicated on this yardstick."
51. This court will now refer to the judgments wherein the same clauses of the GCC of
the respondent has been considered by the tribunal and given finding that apart from
Extension of time the contractor can also claim damages due to the delay on the part of
the employer.
52. The Coordinate Bench of this court in the judgment of Ircon International Ltd. v.
DMRC, MANU/DE/6833/2023 held as follows:
"15. Contractor's entire challenge to the impugned Award is premised on the
ground of 'patent illegality' which has been explained in plethora of decisions
lastly being Delhi Airport Metro Express (P) Ltd. v. DMRC1, wherein it was
stated that:' "29. Patent illegality should be illegality which goes to the root of
the matter. In other words, every error of law committed by the Arbitral
Tribunal would not fall within the expression "patent illegality". Likewise,
erroneous application of law cannot be categorised as patent illegality. In
addition, contravention of law not linked to public policy or public interest is
beyond the scope of the expression "patent illegality". What is prohibited is for
courts to reappreciate evidence to conclude that the award suffers from patent
illegality appearing on the face of the award, as Courts do not sit in appeal
against the arbitral award. The permissible grounds for interference with a
domestic award under Section 34(2-A) on the ground of patent illegality is
when the arbitrator takes a view which is not even a possible one, or interprets
a clause in the contract in such a manner which no fair-minded or reasonable
person would, or if the arbitrator commits an error of jurisdiction by wandering
outside the contract and dealing with matters not allotted to them. An arbitral
award stating no reasons for its findings would make itself susceptible to
challenge on this account. The conclusions of the arbitrator which are based on
no evidence or have been arrived at by ignoring vital evidence are perverse and
can be set aside on the ground of patent illegality. Also, consideration of
documents which are not supplied to the other party is a facet of perversity

falling within the expression "patent illegality"."
16. Through Claim No. 2, Contractor had claimed extra cost incurred due to
prolongation of the project. As noted above, the Contract was delayed by 18
months for which, Contractor had sought four EOTs by way of four letters
namely 17.02.2017, 12.10.2017, 26.12.2017 and 23.08.2018, which were
granted by the DMRC.
17. Pertinently, DMRC granted EOT on all the four occasions without imposing
any liquidated damages. Indisputably, the Contractor reserved its right to seek
compensation only at the time of seeking third EOT vide its letter dated
26.12.2017, and in the earlier requests it did not claim any monetary
compensation due to the extensions.
1 8 . AT declined to compensate the Contractor for the remaining 12-month
period holding that the Contractor had accepted EOT granted by DMRC without
compensation and no right to claim the same was reserved by the Contractor,
unlike the third EOT sought for the period 01.01.2018 to 30.06.2018. According
to the Contractor, the AT committed a judicial error amounting to patent
illegality in denying compensation on the ground that the Contractor had
forgone its right to claim compensation for the extension sought on the other
three occasions.
1 9 . Contractor has referred to judgments in K.N. Sathyapalan v. State of
Kerala2, Asian Techs Ltd. v. Union of India3, Bharat Drilling v. State of
Jharkhand4 and Simplex Concrete Piles (India) Pvt. Ltd. v. Union of India5 to
contend that even though Clause 4.4 of the Contract and Clauses 2.2 and 8.3 of
GCC prohibit the payment of monetary compensation in the cases of EOT
however, the Contractor could still claim compensation under Section 73 of the
Contract Act, in the event of breach of contract-which the DMRC did by not
handing over the sites to the Contractor by the promised time.
20. According to this Court, the Contractor is not required to go as far as to
invoke Section 73 of the Contract Act and the aforesaid judgments to assail the
award, since the AT has rather recognised the Contractor's right to claim
compensation regardless of prohibitive nature of Clause 4.4 of the Contract and
Clauses 2.2 and 8.3 of GCC by referring to the judgment in Simplex Concrete
Piles (Supra). AT's reluctance to award compensation stems from the
Contractor's own waiver of the right to claim compensation, that happened in
the first, second and fourth EOT sought by the Contractor, as opined by the AT.
AT read the four extension letters sent by the Contractor and interpreted them
to conclude that it was only the third one dated 26.12.2017, where the right to
claim compensation was reserved. Therefore, according to the AT, out of 18
months of extension, only 6 months were eligible for compensation. The AT
does return a finding of fact and interpretation of the contract clauses, in favour
of the Contractor, to conclude that DMRC was responsible for delaying the
progressive handing over of the sites to the Contractor.
21. The interpretation of the extension letters by AT, is very well within its
judicial prerogative. It will be judicially inappropriate for this court sitting in
this jurisdiction, to re- examine the evidence and re-interpret the same as per
its own understanding. The interpretation adopted by the AT of the evidence is
a plausible view and certainly not the kind that will call for any interference

from this court."
53. Furthermore in the judgment of Delhi Metro Rail Corporation Ltd. v. J. Kumar-Crtg
JV MANU/DE/1385/2022 held as follows:
"30. The next question to be examined is whether the Arbitral Tribunal's
decision to award sum of Rs. 7,68,46,375/- as compensation on account of
idling/under-utilization of resources deployed at Ashram station during the
initial period of twenty-nine months due to delay in finalizing the revised layout
of the station and the delay in handing over of the land, is patently illegal.
31. The Arbitral Tribunal evaluated the evidence led by the parties and found
that there was an inordinate delay on the part of DMRC in handing over the land
at Ashram Station. The said land was required to be handed over by August,
2012. The works were to commence on 16.07.2012 and the stipulated period
for completion of the Contract was agreed at three years six months.
Admittedly, there was a delay of more than twenty- eight months in handing
over the site. Further, the length of the station was also reduced. The delay was
largely for various reasons including certain litigation in respect of "Marble
House" area. Admittedly, the Architectural Designs Drawings had to be revised
to restrict the length of the station within the available area and to add another
floor for creating additional space. DMRC opposed the claim by referring to the
contractual provisions. It relied on Clause 2.2 of GCC and Clause 8.3 of GCC,
which are set out below:
"2.2. The Employer shall grant the Contractor right of access to, and/or
possession of, the Site progressively for the completion of Works. Such
right and possession may not be exclusive to the Contractor. The
Contractor will draw/modify the schedule for completion of Works
according to progressive possession/light of such sites.
If the Contractor suffers delay from failure on the part of the Employer
to grant right of access to, or possession of the Site, the Contractor
shall give notice to the Engineer in a period of 28 days of such
occurrence. After receipt of such notice the Engineer shall proceed to
determine any extension of time to which the Contractor is entitled and
shall notify the Contractor accordingly.
For any such delay in handing over of site, Contractors will be entitled
to only reasonable extension of time and no monetary claims
whatsoever shall be paid.
*** *** *** ***
8.3. In case of delay on the part of the Contractor, the Contractor shall
be liable to pay liquidated damages and any other compensation for the
damages suffered by the Employer as per clause 8.5. This is without
prejudice to the right of the Employer to rescind the Contract.
Failure or delay by the Employer or the Engineer, to hand over to the
Contractor the Site necessary for execution of Works or any part of the
Works, or to give necessary notice to commence the Works For to
provide necessary Drawings or instructions or classifications or to
supply any material, plant or machinery, which under the Contract the

responsibility of the Employer, shall in no way affect or vitiate the
Contract or alter the character thereof; or entitle the Contractor to
damages or compensation thereof but in any such casa, the Engineer
shall extent the time period for the completion of the Contract, as in his
opinion is/are reasonable."
32. The Arbitral Tribunal examined the said clauses and found that the same
were violative of Section 23 of the Contract Act. The Arbitral Tribunal had also
relied upon the following passage from the decision dated 23.02.2010 of this
Court in Simplex Concrete Piles v. Union of India, MANU/DE/4538/2010 :
(2010) 115 DRJ 616:
"Provisions of the contract which will set at naught the legislative
intendment of the Contract Act, I would hold the same to be void being
against public• interest and public policy. Such clauses are also void
because it would defeat the provisions of law which is surely not in
public interest to ensure Smooth operation of commercial relations. I
therefore hold that the contractual clauses such as Clauses 11A to 11C,
on their interpretation to disentitle the aggrieved party to the benefits
of Sections 55 and 73, would be void being violative of Section 23 of
the Contract Act."
33. The Arbitral Tribunal found that DMRC was in breach of its obligation. It
had the option to order suspension of work as per the Contract clause at
Ashram Station, however, it had failed to do so. In the circumstances, DMRC
was required to compensate CRTG for its breaches. In the circumstances, the
Arbitral Tribunal held that Clauses 2.2 and 8.3 of GCC would not absolve DMRC
of its liability to pay compensation.
34. The Arbitral Tribunal has jurisdiction to decide the question of fact as well
as of law. Clearly, the decision of the Arbitral Tribunal that by virtue of Section
23 of the Contract Act, Clauses 2.2 and 8.3 of GCC which proscribe CRTG from
claiming compensation due under Sections 55 and 73 of the Contract Act are
unenforceable, is a plausible view [See : Simplex Concrete Piles v. Union of
India (Supra)].
3 5 . In view of the above, DMRC's petition is unmerited and is liable to be
dismissed."
5 4 . In view of the aforesaid judgement, it is settled law that the learned Arbitral
Tribunal can award damages when the clause of the contract contemplates that only
extension of time can be given as remedy when there is a delay on the part of the
employer. Hence, the act of awarding the damages to the aggrieved party does not
amount to transgression from the terms of the contract.
55. Furthermore, as per Section 23 of the Indian Contract Act when there is a Contract
which contains clauses that are against the public policy then such consideration or
object of an agreement is considered unlawful and void.
56. In the instant facts, the impugned award merits interference since the award has
shocked the conscience of the court due to the fact that despite holding that there is a
delay on the part of the respondent and there has been wrongful termination of the
contract by the respondent. The learned Tribunal has not awarded any damages to the
petitioner. Learned Arbitral Tribunal has wrongly not awarded any damages to the

petitioner.
57. The learned Tribunal failed to appreciate the fact that such a clause which restricts
the right of the party to claim damages is a prohibitionary clause and is wrongly
disentitles the aggrieved party to claim damages. Such clause is against the public
policy since it is contrary to the fundamental policy of Indian law.
58. The learned Tribunal has failed to appreciate the issue at hand that the contract has
already been terminated and the petitioner could not take recourse to Extension of time.
Hence, the situation is unprecedented for and no clause in the contract which deals with
the situation wherein the contract is terminated at the end of the respondent due to the
default on its part. Therefore, in such a situation, the arbitrator has to travel beyond the
terms of the contract since there is no provision dealing with the same in the contract.
5 9 . It has wrongly relied upon the Clause 2.2 and Clause 8.3 of GCC to hold that
despite the delay on the part of the respondent, the petitioner is entitled to extension of
time. Since, the petitioner's contract is terminated and there is no extension of time
which the petitioner could have availed of.
60. In such a situation, this court is of the opinion that the party aggrieved must be
compensated in terms of unliquidated damages. Unliquidated damages are awarded to
restore the aggrieved party to the same position as deems reasonable, which it would
have been in if there was no breach of contract. It has been held by the various courts
in a catena of judgements, that when there is a breach of contract, the party which has
been the contract is liable to pay damages to the party aggrieved.
61. This Court is of the opinion that, the learned Tribunal has erred in not awarding the
damages to the petitioner despite holding that the delay is attributable to the
respondent. Hence, rendering the petitioner remediless.
62. The learned Tribunal should have taken looked into the situation at hand, there is
no extension of time which could have been granted to the petitioner since the contract
had terminated. Moreover, the petitioner never committed any such delay in execution
of the contract as held by the Tribunal itself.
6 3 . In the instant petition, the petitioner has placed on record various damages
suffered by him due to the delay caused by the respondent in execution of the contract.
Such as the delay in handing over of hindrance free site, delay in delay in issuing goods
for construction drawings, delay in providing decisions and instructions, act or
omissions of other contractor on whose performance, the performance of the petitioner
was dependent, etc.
64. In light of the aforesaid findings, this Court is of the view that rejection of Claim
No. 3 in the Impugned Award by relying upon Clause 8.3 is erroneous as the said clause
pertains to power of engineer and the nature of claim that can be made before the
engineer. Thus, the same cannot be interpreted to exclude Arbitrator from its ambit
from granting an award of damages or compensating the petitioner for breach of
contract as contemplated by Section 73 of Indian Contract Act.
65. The Hon'ble Supreme Court in Asian (Supra) and this Court in Simplex Concrete
(Supra) has cogently enumerated that keeping the sanctity of contracts and its
bindingness is a matter of public policy and the same must be given precedence over
the entitlement to breach of the said contract vide clauses rendering no remedy of
damages to the aggrieved party.

66. Thus, the rejection of Claim No. 3 in Impugned Award is liable to be set aside and
the petitioner is entitled for damages due to inaction and delays by the respondent.
Claim no. 4- Loss of profit
67. With respect to Claim No. 4, which underscores the loss of profit to the tune of
20% of total contract value of Rs. 41,57,15,242/- less than work done of Rs.
7,47,06,820/- , the Arbitral Tribunal's analysis is reproduced hereinunder-
"9.3.3 i) Issues related to the delay in start and execution have been analysed
and discussed in detail in the case of Claim 1.
ii) Clause 8.3 of the GCC is very specific which says that in case of failure or
delay by the Employer in handing over the site or to provide necessary
drawings, which under the Contract is the responsibility of the Employer, in no
way entitle the Contractor to damages or compensation thereof. The relevant
extract of Clause 8.3 is already reproduced in para 8.3.3 supra.
iii) As brought out in para 6.3.4.2 supra the Tribunal is guided by the
Subsection (3) of Section 28 of the Arbitration and Conciliation Act, 1996 as
amended by Arbitration and Conciliation (Amendment) Act, 2015, which
provides as under:
"(3) While deciding and making an award, the arbitral tribunal shall, In
all cases, take into account the terms of the contact and trade usages
applicable to the transactions".
iv) In view of position brought out above, and provision of GCC Clause 8.3, the
claim for loss of profit preferred by the Claimant is not tenable.
9.3.4 Decision of the Tribunal: As discussed in para 9.3.3, the Claim 4 for loss
of profit on unexecuted portion of the work is rejected by the Tribunal."
68. The learned Tribunal has relied upon the Clause 8.3 of GCC and accordingly held
that any delay on account of the respondent shall entitle the Contractor to a remedy of
extension of time which the Engineer deems reasonable. Moreover, the Contract does
not provide any compensation to the petitioner by way of damages.
69. Therefore, the learned Tribunal acting in accordance with the terms and conditions
of the Contract cannot award damages despite there being a delay on part of the
petitioner.
7 0 . The Hon'ble Supreme Court in the judgment of Unibros v. All India Radio
MANU/SC/1176/2023, enunciated the scope of claiming loss of profit in an arbitral
proceedings. The relevant portion of the said judgment is reproduced herein below:
"8. The appeal is directed towards dismissal of the appellant's claim for
compensation relating to loss of profits (Claim No. 12). It is undeniably
established that the appellant's claim for loss of profit stems from the delay
attributed to the respondent in completing the project. It is further evident that
the loss of profit sought in the present case is primarily based on the grounds
that the appellant, having been retained longer than the period stipulated in the
contract and its resources being blocked for execution of the work relatable to
the contract in question, it could have taken up any other work order and
earned profit elsewhere.

9 . The contentions advanced on behalf of the appellant tasks us to resolve a
recurring issue which, while not unprecedented, has consistently confronted the
courts leading it to navigate various circumstances under which a claim for loss
of profit may be allowed in cases of delay simpliciter in the execution of a
contract.
10. However, the contentions so raised, need not detain us for too long. Quite
apart from the appeal raising the question as to whether a claim on account of
loss of profit is liable to succeed merely on the ground that there has been
delay in the execution of the construction contract, attributable to the employer,
the question that first needs to be answered on facts and in the circumstances
is whether the Second Award is in conflict with the public policy of India (as
held by the learned Single Judge, since affirmed by the Division Bench).
11. What would constitute "public policy of India" has been lucidly explained
by this Court in ONGC Ltd. v. Saw Pipes Ltd.6:
"31..., the phrase 'public policy of India' used in Section 34 in context
is required to be given a wider meaning. It can be stated that the
concept of public policy connotes some matter which concerns public
good and the public interest. What is for public good or in public
interest or what would be injurious or harmful to the public good or
public interest has varied from time to time. However, the award which
is, on the face of it, patently in violation of statutory provisions cannot
be said to be in public interest. Such award/judgment/decision is likely
to adversely affect the administration of justice."
12. Subsequent decisions of this Court have interpreted "public policy of India"
to include, among others, compliance with fundamental policy of Indian law,
statutes and judicial precedents, need for judicial approach, compliance with
natural justice, Wednesbury unreasonableness and patent illegality. We may
refer to the decision in Associated Builders (supra) in this behalf.
15. Considering the aforesaid reasons, even though little else remains to be
decided, we would like to briefly address the appellant's claim of loss of profit.
In Bharat Cooking Coal (supra), this Court reaffirmed the principle that a claim
for such loss of profit will only be considered when supported by adequate
evidence. It was observed:
"24. ... It is not unusual for the contractors to claim loss of profit
arising out of diminution in turnover on account of delay in the matter
of completion of the work. What he should establish in such a situation
is that had he received the amount due under the contract, he could
have utilised the same for some other business in which he could have
earned profit. Unless such a plea is raised and established, claim for
loss of profits could not have been granted. In this case, no such
material is available on record. In the absence of any evidence, the
arbitrator could not have awarded the same."
(emphasis ours)
16. To support a claim for loss of profit arising from a delayed contract or
missed opportunities from other available contracts that the appellant could
have earned elsewhere by taking up any, it becomes imperative for the claimant

to substantiate the presence of a viable opportunity through compelling
evidence. This evidence should convincingly demonstrate that had the contract
been executed promptly, the contractor could have secured supplementary
profits utilizing its existing resources elsewhere.
17. One might ask, what would be the nature and quality of such evidence' In
our opinion, it will be contingent upon the facts and circumstances of each
case. However, it may generally include independent contemporaneous
evidence such as other potential projects that the contractor had in the pipeline
that could have been undertaken if not for the delays, the total number of
tendering opportunities that the contractor received and declined owing to the
prolongation of the contract, financial statements, or any clauses in the contract
related to delays, extensions of time, and compensation for loss of profit. While
this list is not exhaustive and may include any other piece of evidence that the
court may find relevant, what is cut and dried is that in adjudging a claim
towards loss of profits, the court may not make a guess in the dark; the
credibility of the evidence, therefore, is the evidence of the credibility of such
claim.
18. Hudson's formula, while attained acceptability and is well understood in
trade, does not, however, apply in a vacuum. Hudson's formula, as well as
other methods used to calculate claims for loss of off-site overheads and profit,
do not directly measure the contractor's exact costs. Instead, they provide an
estimate of the losses the contractor may have suffered. While these formulae
are helpful when needed, they alone cannot prove the contractor's loss of
profit. They are useful in assessing losses, but only if the contractor has shown
with evidence the loss of profits and opportunities it suffered owing to the
prolongation.
19. The law, as it should stand thus, is that for claims related to loss of profit,
profitability or opportunities to succeed, one would be required to establish the
following conditions : first, there was a delay in the completion of the contract;
second, such delay is not attributable to the claimant; third, the claimant's
status as an established contractor, handling substantial projects; and fourth,
credible evidence to substantiate the claim of loss of profitability. On perusal of
the records, we are satisfied that the fourth condition, namely, the evidence to
substantiate the claim of loss of profitability remains unfulfilled in the present
case."
71. The Hon'ble Supreme Court in the aforesaid judgment has enunciated on the aspect
that in cases where there is a loss of profit alleged by the party claiming such loss and
has produced material on record for the same. Moreover, the party claiming such loss of
profit shall establish that a situation is that had he received the amount due under the
contract, he could have utilised the same for some other business in which he could
have earned profit from it.
7 2 . In the instant petition, the petitioner has placed on record certain proofs to
substantiate its claim for loss of profit and the Tribunal has the jurisdiction to
transgress the boundary of the GCC and award loss of profit to the petitioner.
73. The Tribunal's cannot in accordance with the clauses of the Contract restrict the
party from getting the loss of profit which it otherwise is duly entitled for. Since, there
has been a delay on the part of the respondent and the petitioner has suffered loss of

profit due to the same.
74. In view of the discussion as well as the reasoning of this Court in allowing the
Claim no. 3 of the petitioner, this Court is of the view that reliance placed by the
Tribunal upon Clause 8.3 is misconceived as it only pertains to the case of delay and
not the eventuality of wrongful termination which is the basis of the aforesaid Claim.
Moreover, such Claim was made for loss of profits in view of illegal termination of
contract and hence, the same cannot be rejected by relying on Clause 8.3.
75. Thus, rejection of Claim 4 by Impugned Award is liable to be set aside and the
petitioner is entitled to the loss of profit.
76. Accordingly, the claim no. 4 has been set aside by this Court.
Claim 6- Financial loss to the claimant due to loss of commercial reputation
77. In respect of Claim no. 6, which pertains to financial loss to the petitioner due to
loss of commercial reputation to the tune of Rs. 3,48,75,000/- , the Tribunal's analysis
is reproduced hereinbelow-
"The Claimant have based their claim on impairment of financial standing with
financial institutions. This is quantified by a statement that cash margins in
issue of bank guarantees has been increased from 0.5% per annum to 1.25%
per annum resulting in annual financial loss of Rs. 3,48,75,000/-. This would
translate to a requirement of Bank Guarantee to the tune of 465 Cr in a year. No
supporting evidence for the same has been furnished. The Tribunal considers
that whether it is a case of liquidated financial loss or unliquidated, financial
loss has to be proved in accordance with the established principle of law and
evidence. Merely alleging the loss is not sufficient to claim damages. 11.3.2
The Claimant have alleged that due to wrongful termination of the Contract, the
Claimant entered into a vicious circle of liquidity crisis ultimately leading to
Corporate Insolvency Resolution Process under IBC 2016. Considering the
position indicated in the 'Resolution Plan' furnished by the Claimant in CD VII,
Contract CC-16 does not seem to be the cause of the insolvency resolution
process 2016. Accordingly, basing CC-16 as the sole reason for financial loss
leading to CIRP is not tenable.
11.3.3 There is no clause in the Contract which entitles the Claimant to claim
any amount on account of loss of commercial reputation.
11.3.4 The Arbitral Tribunal finds that the claim is unsubstantiated by the
Claimant and not due under any Clauses of the Contract.
11.4 Decision of the Tribunal: Finding that the claim of Rs. 3,48,75,000.00 on
account of loss of commercial reputation is unsubstantiated and not covered by
any Contract provision, as discussed above, the Tribunal rejects the same."
78. The Tribunal has held that the petitioner has merely alleged that there is a loss of
commercial reputation however, there is no proof produced in this regard by the
petitioner. Moreover, the Tribunal is of the view that the petitioner's contention due to
the alleged wrongful termination of the Contract and the petitioner had to undergo
through a liquidity crisis which led to the Corporate Insolvency Resolution Process
under Insolvency Bankruptcy Code, 2016 is not the sole reason for financial losses
incurred by the petitioner. Hence, due to no evidence/ material on record, the learned

Tribunal held that the claim for financial reputation is not substantiated by the
petitioner.
79. In light of the aforesaid findings, this Court is of the view that it is a matter of
record that the petitioner was subjected to proceedings under the Insolvency and
Bankruptcy Code, 2016. However, the inference of alleged liquidity crunch resulting
from actions of respondent and leading the petitioner into Corporate Insolvency
Resolution Process is erroneous since, there is no evidence placed on record in this
regard. Moreover, there is no clause in the Contract pertaining to damages which can be
claimed on account of loss of financial reputation.
80. This Court is of the view that the petitioner, in accordance with the Indian Contract
Act have to prove that there is an actual loss to its financial reputation which the it has
failed to produce on record. Further, the Claim herein is narrowly restricted to the
extent of the loss which is a direct consequence of breach of contract.
81. Thus, the rejection of Claim no. 6 by the Impugned Award by the Tribunal merits
no interference and the petitioner is not entitled to compensation insofar as loss of
commercial reputation to the tune of Rs. 3,48,75,000/- is concerned.
Claim no. 7- Cost of the Arbitration
82. In respect of Claim no. 7, which underscores cost of Arbitration Proceedings, the
Tribunal's analysis is reproduced hereinbelow-
"12.3.1 The Claimant have argued that they have to incur cost of the arbitration
as the Respondent have denied their due and genuine payments. It is further
stated that the Tribunal has powers to award cost in terms of Section 31 of the
Arbitration and Conciliation Act.
12.3.2 The Respondent have argued that the Claimant have dragged the
Respondent into arbitration and as such the Claimant is not entitled for their
claim. It is added by the Respondent that it is the Respondent who are entitled
for Rs. 50,00,000/- toward cost of arbitration and not the Claimant. [This is not
withstanding the fact that under counterclaim 4, the Respondent have claim of
only Rs. 25,00,000/- towards cost of arbitration].
12.3.3 Section 31 of the Arbitration and Conciliation Act does not bind the
Tribunal to award cost in all cases. Section 31(8) of 1996 Act starts with
"Unless otherwise agreed by the parties,-(a) the cost of the arbitration shall be
fixed by the arbitral Tribunal; b) the amount of such costs; and when such
costs are to be paid."
12.3.4 Clause 17.11 of the GOG stipulates as under-
"17.11: Cost of Arbitration - The cost of arbitration shall be borne by
the respective parties. The cost shall, Inter alia, include the fees of the
Arbitrator(s) as per rates fixed by the Employer from time to time".
12.3.5 Both the parties to the Contract have agreed to the above stipulation
while entering into the Agreement.
12.3.6 Decision of the Tribunal: In view of above discussions and specific
provision of Clause 17.11 of the GOG in the Contract the Tribunal rejects the
demand of the Claimant for the cost of present Arbitration. The claim of the

Respondent towards cost of the arbitration has been decided by the Tribunal in
para 17.3.2 infra. Whereas the Section 31-A of the Amendment Act 2015 Act
reads "...shall have the discretion to determine whether costs are payable by
one party to another'
83. The learned Tribunal has relied upon Clause 17.11 of GCC which states that cost of
arbitration shall be borne by the parties and accordingly, the Tribunal held that both the
parties were to bear their respective cost of arbitration.
84. After looking into the reasons given above by the learned Arbitrator, it is crystal
clear that the learned Arbitrator has considered the submissions made by the parties as
well as the documents which were referred by them, and after considering them, has
reached to the right conclusion that as per the terms of the GCC the cost of arbitration
shall be borne by the parties. Accordingly, the Tribunal directed that both the parties
shall bear their respective cost of arbitration.
85. Thus, the rejection of Claim no. 7 of the petitioner in the Impugned Award by the
Tribunal merits no interference.
Claim no. 8- Payment of Interest
86. In respect of Claim no. 8, which underscores payment of interest, the Tribunal's
analysis is reproduced hereinbelow-
"13.3.1 The Claimant have Claimed pre-suit, pendent-lite and future interest @
18% per annum on all the claims preferred under this arbitration on following
grounds;
i) Their dues have not been paid on time and as such they have to be
compensated for the deprivation of the same;
ii) The Tribunal have powers to grant pre-suit, pendent-lite and future
interest as per Section 31(7) (a) & (b) of the Arbitration and
Conciliation Act;
iii) The case laws mentioned in para 13.1.5 support such a claim of the
Claimant.
13.3.2 The Respondent have argued that the Claimant is neither entitled for
any loss under the contract nor the interest thereon, whether anti-lite,
pendente-lite and post-lite interest, as alleged by the Claimant.
13.3.3 The Tribunal observes that there has been difference of opinion between
the Parties regarding certain payments. These have manifested in the shape of
claims and counterclaims which are under adjudication by this Tribunal. In all
such disputes, the Claimant/Counterclaimant always allege that they have been
deprived of their rightful dues and as such need to be compensated for the
same. The present arbitration case is in no way different, to seek and merit any
specific and special relief.
13.3.4 The Claimant have sought relief quoting Section 31(7) (a) & (b) of the
Arbitration and Reconciliation Act 1996, which reads;
"7(a) Unless otherwise agreed by the parties, where and insofar as an
arbitral award is for payment of money,

7(b) A sum directed to be paid by an arbitral award shall, unless the
award otherwise directs, carry interest at the rate of eighteen per
centum per annum from the date of award to the date of payment."
13.3.5 Clause 17.10 of the GCC in this regard, stipulates as under:
"Where the Arbitral Award is for the payment of money, no interest
shall be payable on whole or any part of the money for any period, till
the date on which the award is made".
Both the parties have agreed to the GCC clause 17.10 while entering into this
Agreement. As such the Tribunal holds that with both the parties agreeing that
there shall be no payment of interest till date of award, question of payment of
interest as per provisions of Section 31 (7)(a) of the Act 1996 does not arise.
13.3.6 The Claimant have cited case laws as in para 13.1.5 in support of their
claim. The Tribunal finds that these are not applicable to the facts,
circumstances and contract provisions of the present case. It is well
established, through these judgements also, that where the Contract Agreement
does not prohibit grant of interest and where a party claims interest and that
dispute (along with principal amount or independently) is referred to the
arbitrator, he shall have powers to award interest pendente lite. In the present
case Clause 17.10 of the Contract between the Parties is very specific when it
stipulates that no interest shall be payable on whole or any part of the money
for any period, till the date on which the award is made".
13.3.7 Decision of the Tribunal: Considering the above analysis and findings,
the Tribunal awards NIL interest anti lite as well as pendente lite. As regards
interest from the date of award, provisions of para 18.2.1 infra shall be
applicable."
8 7 . The learned Tribunal has referred to Clause 17.10 of GCC which stipulates that
there shall be no payment of interest till date of award. Accordingly, the Tribunal did
not award any anti- lite and pendente lite interest.
88. This Court is of the view that the Arbitral Tribunal being a creature of the Contract
and has to act according to the clauses of the Contract.
89. Therefore, the rejection of Claim No. 8 by Impugned Award merits no interference
and the petitioner is not entitled to payment of interest.
SETTING ASIDE OF THE AWARD UNDER SECTION 34
90. In view of the foregoing discussion, this Court is of the opinion that clause 3 and
clause 4 of the Impugned Award are on the face of it, patently in violation of statutory
provisions of Contract law therefore, they are not in public interest. Such an award is
likely to adversely affect the administration of justice.
91. The said claims should be set aside since it is contrary to fundamental policy of
Indian Law and patently illegal. Moreover, the illegality in these claims are such that
they go to the root of the matter and is not of trivial nature.
92. Furthermore, the award of the learned tribunal in terms of these claims is so unfair
and unreasonable that shocks the conscience of the Court since, the learned tribunal
despite taking into consideration the delay caused in the project is attributable to the

respondent, it did not give any remedy to the petitioner. The tribunal gave the
reasoning that the petitioner cannot be given since, the Contract only provides for
extension of time. However, the learned Tribunal failed to appreciate the fact that in the
peculiar facts, the petitioner was not given the same and instead, the Contract was
terminated by the respondent. Such a situation which was not anticipated in the
Contract, the learned Tribunal should have transgressed the boundary of Contract and
granted the relief to the petitioner which it is rightly entitled to and have accordingly,
have also placed material on record to support their claims.
93. In view of the aforesaid discussion, this Court will discuss the scope of setting
aside the Award under Section 34 of the Act.
94. It is a settled principle of law that various claims of the award can be severed and
the court by way of entertaining an application under section 34 can set aside certain
claims of the award which in the opinion of the court is perverse and illegal. Such
piecemealing of award would not affect the claims which have been upheld by the court.
95. Modification of the award is when, the court makes certain changes/modification in
the claim example by way of modifying the amount of damages awarded, modifying the
interest rate, etc., instead of setting aside claim. The purpose of ensuring that there is
no modification of the award passed by the tribunal is that the modification requires
that there should be appreciation of evidence and pleadings on record. Under section 34
of the Act, this court cannot re appreciate the pleadings and evidence on record to
arrive at conclusion and accordingly make changes in the award passed by the tribunal.
This Court under section 34 can therefore set aside certain claims on the grounds
mentioned in section 34 of the Act.
96. Such claims which are set aside by the court does not amount to modification of
the award. It merely infers that the court has partially set aside the award.
9 7 . The aforesaid principle of law pertaining to setting aside of the Award under
Section 34 of the Act has been discussed in the judgment of Dyna Technologies (P) Ltd.
v. Crompton Greaves Ltd. MANU/SC/1765/2019 : 2019:INSC:1395 : (2019) 20 SCC 1,
this Court held as follows: (SCC p. 15, paras 36-37)
"36. At this juncture it must be noted that the legislative intention of providing
Section 34(4) in the Arbitration Act was to make the award enforceable, after
giving an opportunity to the Tribunal to undo the curable defects. This
provision cannot be brushed aside and the High Court [Crompton Greaves Ltd.
v. Dyna Technologies (P) Ltd., MANU/TN/8428/2007] could not have proceeded
further to determine the issue on merits.
37. In case of absence of reasoning the utility has been provided under Section
34(4) of the Arbitration Act to cure such defects. When there is complete
perversity in the reasoning then only it can be challenged under the provisions
of Section 34 of the Arbitration Act. The power vested under Section 34(4) of
the Arbitration Act to cure defects can be utilised in cases where the arbitral
award does not provide any reasoning or if the award has some gap in the
reasoning or otherwise and that can be cured so as to avoid a challenge based
on the aforesaid curable defects under Section 34 of the Arbitration Act.
However, in this case such remand to the Tribunal would not be beneficial as
this case has taken more than 25 years for its adjudication. It is in this state of
affairs that we lament that the purpose of arbitration as an effective and
expeditious forum itself stands effaced."

98. In the judgment titled Larsen Air Conditioning and Refrigration Company v. Union
of India MANU/SC/0876/2023, the Hon'ble Supreme Court held as follows:
"15. The limited and extremely circumscribed jurisdiction of the court under
Section 34 of the Act, permits the court to interfere with an award, sans the
grounds of patent illegality, i.e., that "illegality must go to the root of the
matter and cannot be of a trivial nature"; and that the tribunal "must decide in
accordance with the terms of the contract, but if an arbitrator construes a term
of the contract in a reasonable manner, it will not mean that the award can be
set aside on this ground" [ref : Associate Builders (supra)]. The other ground
would be denial of natural justice. In appeal, Section 37 of the Act grants
narrower scope to the appellate court to review the findings in an award, if it
has been upheld, or substantially upheld under Section 34. It is important to
notice that the old Act contained a provision which enabled the court to modify
an award. However, that power has been consciously omitted by Parliament,
while enacting the Act of 1996. This means that the Parliamentary intent was to
exclude power to modify an award, in any manner, to the court. This position
has been iterated decisively by this court in M. Hakeem:
"42. It can therefore be said that this question has now been settled
finally by at least 3 decisions [McDermott International Inc. v. Burn
Standard Co. Ltd., MANU/SC/8177/2006 : (2006) 11 SCC 181],
[Kinnari Mullick v. Ghanshyam Das Damani, MANU/SC/0514/2017 :
(2018) 11 SCC 328 : (2018) 5 SCC (Civ) 106], [Dakshin Haryana Bijli
Vitran Nigam Ltd. v. Navigant Technologies (P) Ltd.,
MANU/SC/0135/2021 : 2021:INSC:140 : (2021) 7 SCC 657] of this
Court. Even otherwise, to state that the judicial trend appears to favour
an interpretation that would read into Section 34 a power to modify,
revise or vary the award would be to ignore the previous law contained
in the 1940 Act; as also to ignore the fact that the 1996 Act was
enacted based on the Uncitral Model Law on International Commercial
Arbitration, 1985 which, as has been pointed out in Redfern and Hunter
on International Arbitration, makes it clear that, given the limited
judicial interference on extremely limited grounds not dealing with the
merits of an award, the "limited remedy" under Section 34 is
coterminous with the "limited right", namely, either to set aside an
award or remand the matter under the circumstances mentioned in
Section 34 of the Arbitration Act, 1996."
1 6 . In view of the foregoing discussion, the impugned judgment warrants
interference and is hereby set aside to the extent of modification of rate of
interest for past, pendente lite and future interest. The 18% per annum rate of
interest, as awarded by the arbitrator on 21.01.1999 (in Claim No. 9) is
reinstated. The respondent-state is hereby directed to accordingly pay the dues
within 8 weeks from the date of this judgment."
99. Moreover in the judgment of Union of India v. Alcon Builders & Engineer (P) Ltd
MANU/DE/0192/2023, the following observations were made :
"On partial setting aside of an award
18. In the course of hearing the parties, a preliminary query was raised as to
whether, in exercise of its jurisdiction under Section 34 of the A&C Act, this

Court can partly set aside an arbitral award. Learned counsel for the parties
answered the query in the affirmative, to say that in any case, the challenge
was only to the arbitrator's decision on two aspects; and the parties have
accepted and acted upon the rest of the award. That being said however, this
Court finds it necessary to refer to the decision of the Supreme Court in NHAI v.
M. Hakeem [NHAI v. M. Hakeem, MANU/SC/0461/2021 : 2021:INSC:344 :
(2021) 9 SCC 1], in which case it was held that the court's power under Section
34 of the A&C Act does not include the power to "modify" an award. The
question then arises whether partial setting aside of an award would amount to
"modification" thereof. It would be beneficial at this point to extract para 42 of
M. Hakeem case [NHAI v. M. Hakeem, MANU/SC/0461/2021 : 2021:INSC:344 :
(2021) 9 SCC 1] which reads as under : (SCC p. 28, para 42)
"42. It can therefore be said that this question has now been settled
finally by at least 3 decisions McDermott International Inc. v. Burn
Standard Co. Ltd. [McDermott International Inc. v. Burn Standard Co.
Ltd., MANU/SC/8177/2006 : (2006) 11 SCC 181], Kinnari Mullick v.
Ghanshyam Das Damani [Kinnari Mullick v. Ghanshyam Das Damani,
MANU/SC/0514/2017 : (2018) 11 SCC 328 : (2018) 5 SCC (Civ) 106],
Dakshin Haryana Bijli Vitran Nigam Ltd. v. Navigant Technologies (P)
Ltd. [Dakshin Haryana Bijli Vitran Nigam Ltd. v. Navigant Technologies
(P) Ltd., MANU/SC/0135/2021 : 2021:INSC:140 : (2021) 7 SCC 657 :
(2021) 4 SCC (Civ) 157] of this Court. Even otherwise, to state that the
judicial trend appears to favour an interpretation that would read into
Section 34 a power to modify, revise or vary the award would be to
ignore the previous law contained in the 1940 Act; as also to ignore the
fact that the 1996 Act was enacted based on the Uncitral Model Law on
International Commercial Arbitration, 1985 which, as has been pointed
out in Redfern and Hunter on International Arbitration, makes it clear
that, given the limited judicial interference on extremely limited
grounds not dealing with the merits of an award, the 'limited remedy'
under Section 34 is coterminous with the 'limited right', namely, either
to set aside an award or remand the matter under the circumstances
mentioned in Section 34 of the Arbitration Act, 1996."
1 9 . Upon a closer reading of M. Hakeem case [NHAI v. M. Hakeem,
MANU/SC/0461/2021 : 2021:INSC:344 : (2021) 9 SCC 1] however, it
transpires that the said case concerned a claim for payment of compensation for
land acquisition and the District Court, in exercise of its powers under Section
34 of the A&C Act, had increased the quantum of compensation awarded by the
competent authority. M. Hakeem case [NHAI v. M. Hakeem,
MANU/SC/0461/2021 : 2021:INSC:344 : (2021) 9 SCC 1] therefore, was not a
case where some of several claims made before the Arbitral Tribunal were set
aside.
2 0 . In order to better appreciate and apply M. Hakeem case [NHAI v. M.
Hakeem, MANU/SC/0461/2021 : 2021:INSC:344 : (2021) 9 SCC 1], and to
understand the correct meaning of what amounts to "modification" of an
arbitral award, it is necessary to refer to the following decisions:
2 1 . In J.G. Engineers (P) Ltd. v. Union of India [J.G. Engineers (P) Ltd. v.
Union of India, MANU/SC/0527/2011 : (2011) 5 SCC 758 : (2011) 3 SCC (Civ)
128] which involved multiple claims dealt with and decided by the arbitrator,

this is what the Supreme Court had to say : (SCC p. 775, para 25)
"25. It is now well settled that if an award deals with and decides
several claims separately and distinctly, even if the court finds that the
award in regard to some items is bad, the court will segregate the
award on items which did not suffer from any infirmity and uphold the
award to that extent...."
22. Then again, in R.S. Jiwani v. Ircon International Ltd. [R.S. Jiwani v. Ircon
International Ltd., MANU/MH/1492/2009] a Full Bench of the Bombay High
Court has dealt with the concept of severability of the decisions on various
claims/counterclaims comprised in an award and has held as follows....
23. The judgment in R.S. Jiwani case [R.S. Jiwani v. Ircon International Ltd.,
MANU/MH/1492/2009] has been relied upon recently in a judgment of the
Bombay High Court in NHAI v. Commr. [NHAI v. Commr.,
MANU/MH/2773/2022]
*****
28. Upon a combined and meaningful reading of the provisions of the A&C Act
and the aforesaid judicial precedents, in the opinion of this Court, the following
position emerges:
29. A court exercising power under Section 34 of the A&C Act cannot "modify"
an arbitral award;
3 0 . The arbitrator's decision on each claim and counterclaim, taken
individually, is final. "Modification" means to substitute the court's own
decision for the decision made by the arbitrator on any given claim or
counterclaim; which the court cannot do.
31. If objections are filed under Section 34, impugning the arbitrator's decision
only on some of the claims or counterclaims, it is not necessary for the court to
set aside the entire arbitral award viz. the decision on all claims and
counterclaims. This follows from the limited ambit of the court's powers under
Section 34. Besides, the decision on a Section 34 petition cannot go beyond the
scope of the challenge itself.
32. When the arbitrator's decisions on multiple claims and counterclaims are
severable and not interdependent, the court is empowered under Section 34 to
set aside or uphold the arbitrator's decisions on individual and severable claims
or counterclaims; without having to set aside the entire arbitral award. That
would not amount to modification of the arbitral award.
33. The above is also in line with the overarching principle that the scope of
interference by the court under the A&C Act in arbitral proceedings and arbitral
awards, is to be minimal. The statute does not command the court to go for the
overkill. To adapt a phrase famously used by Justice Felix Frankfurter, while
exercising power under Section 34, it is not necessary to burn the house to
roast the pig."
100. The Coordinate Bench of this Court in the judgment of NHAI v. Trichy Thanjavur
Expressway Ltd. MANU/DE/5469/2023 has summarized the law pertaining to setting

aside of the Award under Section 34 as follows:
101.
"87. The Court thus records its conclusions as follows:-
A. While attempting to answer the issues flagged above, we must at the
outset, acknowledge the shift in legislative policy which underlies the
Act and which mandates intervention by courts to be minimal. This
flows from the recognition of the theory that once parties have agreed
to the resolution of their disputes by an alternative adjudicatory forum,
courts must, as a matter of first principle, refrain from interfering with
the same except on the limited grounds that the statute recognises.
Courts are thus obliged to bear in mind the principle of minimalist
intervention insofar as awards are concerned.
B. However, at the same time while courts are enjoined to follow the
minimalist intervention route, it would clearly be a travesty of justice if
courts were to fail to intervene where circumstances warrant and
demand corrective measures being adopted. It is these compulsions
which have led to courts evolving the serious irregularity or the patent
illegality grounds to interfere with an award. Section 34 is a clear and
unequivocal embodiment of the Legislature's intent to balance these
competing facets of arbitration.
C. Undisputedly, Section 34(2)(a)(iii) speaks of a part of an award
being exorcised from the rest. The Court finds no justification to confer
too much credence on Article 34 of the Model Law ultimately failing to
allude to a partial setting aside power even though that was
provisioned for in explicit terms in draft Articles 29, 30, 40 and 41.
This since neither the Working Group Reports nor the contemporaneous
material that we have noticed hereinbefore seem to suggest a
conscious deletion of that power. The considerable material, on the
aspects surrounding partial setting aside that we have had an occasion
to review, does not evidence any deliberation or discussion which may
have predicated or actuated its deletion. The said material is also not
indicative of any principled decision that may have been taken by
member nations for deletion of the partial setting aside power. Its
absence from Article 34 which came to be ultimately adopted stands
lost in a mist of conjecture.
D. We find that the key to understanding the intent underlying the
placement of the Proviso in sub-clause (iii) of Section 34(2)(a) is in the
nature of the grounds for setting aside which are spoken of in clause
(a). As would be manifest from a reading of the five sub- clauses which
are positioned in Section 34(2)(a), those constitute grounds which
would strike at the very heart of the arbitral proceedings. The grounds
for setting aside which are set forth in clause (a) strike at the very
foundation of validity of arbitration proceedings. Sub-Clauses (i) to (v)
thus principally constitute grounds which would render the arbitration
proceedings void ab initio. Although the Section 34(2)(a)(iv) ground
for setting aside also falls in the same genre of a fundamental
invalidity, the Legislature has sought to temper the potential fallout of

the award being set aside in toto on that score.
E. The Proviso to sub-clause (iv) seeks to address a comprehensibly
conceivable situation where while some parts of the award may have
dealt with non-arbitrable issues or disputes falling outside the scope of
the reference, its other components or parts constitute an adjudication
which could have been validly undertaken by the AT. The Proviso thus
seeks to address such a situation and redeems as well as rescues the
valid parts of an award. This saves the parties from the spectre of
commencing arbitral proceedings all over and from scratch in respect of
all issues including those which could have validly formed part of the
arbitration.
F. The grounds for setting aside encapsulated in Section 34(2)(b) on
the other hand relate to the merits of the challenge that may be raised
in respect of an award and really do not deal with fundamental
invalidity. However, the mere fact that the Proviso found in sub- clause
(iv) of Section 34(2)(a) is not replicated or reiterated in clause (b) of
that provision does not lead one to an inevitable conclusion that partial
setting aside is considered alien when a court is considering a
challenging to an award on a ground referable to that clause. In fact,
the Proviso itself provides a befitting answer to any interpretation to
the contrary. The Proviso placed in Section 34(2)(a)(iv) is not only an
acknowledgment of partial setting aside not being a concept foreign to
the setting aside power but also of parts of the award being
legitimately viewed as separate and distinct. The Proviso itself
envisages parts of an award being severable, capable of segregation
and being carved out. The Proviso is, in fact, the clearest manifestation
of both an award being set aside in part as well as an award
comprising of distinct components and parts.
G. Undoubtedly, an award may comprise a decision rendered on
multiple claims. Each claim though arising out of a composite contract
or transaction may be founded on distinct facts and flowing from
separate identifiable obligations. Just as claims may come to be
preferred resting on a particular contractual right and corresponding
obligation, the decision which an AT may render on a particular claim
could also be based on a construction of a particular covenant and thus
stand independently without drawing sustenance on a decision
rendered in the context of another. If such claims be separate,
complete and self-contained in themselves, any decision rendered
thereon would hypothetically be able to stand and survive irrespective
of an invalidity which may taint a decision on others. As long as a
claim is not subordinate, in the sense of being entwined or
interdependent upon another, a decision rendered on the same by the
AT would constitute an award in itself.
H. While awards as conventionally drawn, arranged and prepared may
represent an amalgam of decisions rendered by the AT on each claim,
every part thereof is, in fact, a manifestation of the decision rendered
by it on each claim that may be laid before it. The award rendered on
each such claim rules on the entitlement of the claimant and the right
asserted in that regard. One could, therefore, validly, subject of course

to the facts of a particular case, be entitled to view and acknowledge
them as binding decisions rendered by the AT on separate and distinct
claims.
I. Once an award is understood as consisting of separate components,
each standing separately and independent of the other, there appears
to be no hurdle in the way of courts adopting the doctrine of
severability and invoking a power to set aside an award partly. The
power so wielded would continue to remain one confined to "setting
aside" as the provision bids one to do and would thus constitute a valid
exercise of jurisdiction under Section 34 of the Act.
J. The Supreme Court in M. Hakeem, has enunciated the setting aside
power as being equivalent to a power to annul or setting at knot an
Arbitral Award. It has essentially held that bearing in mind the plain
language of Section 34 coupled with the Act having desisted from
adopting powers of modification or remission that existed in the
erstwhile 1940 Act, a court while considering a challenge under Section
34 would not have the power to modify.
K. The expression "modify" would clearly mean a variation or
modulation of the ultimate relief that may be accorded by an AT.
However, when a Section 34 Court were to consider exercising a power
to partially set aside, it would clearly not amount to a modification or
variation of the award. It would be confined to an offending part of the
award coming to be annulled and set aside. It is this distinction
between a modification of an award and its partial setting aside that
must be borne in mind.
L. The power to partially sever an offending part of the award would
ultimately depend on whether the said decision is independent and
distinct and whether an annulment of that part would not disturb or
impact any other finding or declaration that may have been returned by
the AT. The question of severability would have to be decided bearing
in mind whether the claims are interconnected or so intertwined that
one cannot be segregated from the other. This for the obvious reason
that if the part which is sought to be set aside is not found to stand
independently, it would be legally impermissible to partially set aside
the award. A partial setting aside should not lead to a component of the
award being rendered vulnerable or unsustainable. It is only when the
award relates to a claim which is found to stand on its own and its
setting aside would not have a cascading impact that the Court could
consider adopting the aforesaid mode.
M. The Court is thus of the firm opinion that the power to set aside an
award in part would have to abide by the considerations aforenoted
mindful of the imperatives of walking a line which would not dislodge
or disturb another part of the award. However as long as the part which
is proposed to be annulled is independent and stands unattached to any
other part of the award and it could be validly incised without affecting
the other components of the award, the recourse to partial setting aside
would be valid and justified".

102. In view of the law laid down in the aforesaid judgments, this Court is of the view
that the under section 34 of the Act, the Court is vested with the jurisdiction to set aside
certain problematic portion of the Award which are patently illegal and shocks the
conscience of this Court.
103. However, the setting aside of the Award is subjected to the condition that the
portion of the Award which has been upheld shall have due effect and cause no such
cascading impact.
104. In the instant petition, therefore, this Court in case sets aside claim no. 3 and
claim no. 4 then, the other claims shall nor be impacted by it neither have any perverse
consequences.
CONCLUSION
105. In view of the aforesaid discussion, this Court discerns substantial material to
establish the propositions put forth by the petitioner. Moreover, the Impugned Award
passed in respect of Claim 3 and 4 is ex-facie erroneous and warrants interference of
this Court.
106. The view taken by the learned Tribunal is perverse to the law since, the damages
are not awarded to the petitioner despite the fact that the learned Tribunal has itself
held that there is a delay on the part of respondent in completion of the project and the
termination of the contract done by the respondent is wrongful. It has wrongfully held
that as per the clauses of the Contract the petitioner is only liable to the extension of
time, however the Tribunal failed to consider as per peculiar facts of the case the
contract instead of being extended has been wrongfully terminated by the respondent.
107. The Impugned Award suffers from patent illegality since, the Tribunal despite
holding that there has been delay on the part of the respondent in Claim no. 1, did not
award damages to the petitioner.
108. Such situations warrants that the petitioner who suffered damages on account of
delay committed by the respondent shall be compensated by the respondent. Hence, the
petitioner is entitled to recover damages from respondent on the grounds of breach of
contract by the respondent.
109. In view of the foregoing discussion, the petitioner has been able to make out a
claim of intervention of this Court with regard to Claim no. 3 and 4 under Section 34 of
the Act.
110. In terms of the Claim no. 6, 7 and 8 this Court is of the opinion that the petitioner
has failed to make out such a case and was unable to show that the Award needs
interference under Section 34 of the Act. This Court is of the view that the learned
tribunal was well within its jurisdiction and capacity to award the claim/compensation in
favor of the respondent in terms of the aforesaid claims.
111. A perusal of the impugned Award dated 6th March 2020 makes it evident on the
face of the record requires interference under Section 34 of the Act in terms of Claim
no. 3 and Claim no. 4 which deals with the claim pertaining to damages on Account of
Idling of Machines and loss of overheads and loss of profits respectively.
112. This Court directs that the aforesaid claims are being remitted back to the Tribunal
to decide a fresh, taking into consideration the settled principles of law and adjudicate

the Claim no. 3 and Claim no. 4 afresh.
113. In view of the aforesaid findings, the impugned Award is liable to be partially set
aside.
114. The petition is partially allowed in the aforesaid terms.
115. Pending applications also stand disposed.
116. The judgment be uploaded on the website forthwith.
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MANU/DE/8454/2023

Equivalent/Neutral Citation: 2023:DHC :9067

IN THE HIGH COURT OF DELHI

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