Delhi High Court
Uem India Pvt. Ltd vs Ongc Ltd on 28 March, 2026
* IN THE HIGH COURTOF DELHI AT NEW DELHI
% Judgment reserved on: 19.03.2026
Judgment pronounced on: 28.03.2026
+ O.M.P. (COMM) 393/2018, I.A. 12438/2018, I.A. 9666/2020 &
I.A. 2738/2022
UEM INDIA PVT. LTD. .....Petitioner
Through: Mr. Gaurav Pachnanda, Sr.
Adv. with Mr. Samir Malik,
Ms. Snehal Kaila, Ms. Yachana
Gupta, Mr. Udbhav Gady &
Mr. Krishan Kumar, Advs.
versus
ONGC LIMITED .....Respondent
Through: Mr. Abhishek Puri, Ms. Surbhi
Gupta & Mr. Sahil Grewal,
Advs.
CORAM:
HON'BLE MR. JUSTICE AVNEESH JHINGAN
JUDGMENT
1. This petition is filed under Section 34 of the Arbitration and
Conciliation Act, 1996 (for short „the Act‟) for setting aside of the
award dated 14.12.2017.
2. The brief facts are that the petitioner M/s UEM India Private
Limited, a registered company was the successful bidder in a tender
invited by Oil and Natural Gas Corporation („ONGC‟) for installation
of one Effluent Treatment Plant (for short „ETP‟) and three ETP-cum
Water Injection Plants at four sites in Assam along with maintenance
for seven years. The parties entered into contract on lump sum turnkey
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basis. The work was awarded on 30.03.2011 for a lump sum amount
of Rs.119,34,58,347/-. The project was to be completed within thirty
four months from the date of issuance of the Notification of Award
(for short „NOA‟) i.e. by 29.01.2014.
2.1 Clause 27 of the General Conditions of Contract (for short
„GCC‟) provided for dispute resolution through arbitration and the
petitioner invoked arbitration. The petitioner claimed prolongation
costs aggregating to Rs.10,30,00,000/-; losses to the tune of
Rs.7,23,55,402/- due to breach of contract; losses amounting to
Rs.105,60,00,000/- on account of being placed on a holiday list and
amounts towards resources committed/consumed, damages, interest
on capital cost and illegal invocation of the advance bank guarantee
(for short „ABG‟) and performance bank guarantee (for short „PBG‟).
2.2 The respondent filed counter claims claiming:
(i) Compensation amount of Rs.86,54,26,860.44/- towards
restitution of loss and damages on account of payments
made to third party vendors;
(ii) Rs.15,19,72,222.33/- for production and revenue loss due to
non-performance of various acts by the petitioner;
(iii) Rs.5,70,84,812/- incurred towards establishment costs for
various acts of omission by the petitioner;
(iv) Cost of re-tendering to the tune of Rs.130,65,41,652/-;
(v) Rs.7,35,82,647/- as Liquidated damages (for short „LD‟);
(vi) Refund of Rs.2,95,00,483.61/- for provisional progressive
payments;
(vii) Rs.11,93,45,835/- towards PBG;
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(viii) Rs.53,93,047/- for interest on non-utilization of advances
given by the respondent to the petitioner; and
(ix) Lastly Rs.23,86,91,669/- towards compensation of the loss
and damages suffered due to wilful non-performance of the
contract by the petitioner.
2.3 The claim of the petitioner of Rs.13,56,376/- for services
rendered for soil investigation was accepted, the invocation of ABG of
Rs.2,95,00,484/- was held to be illegal and the respondent was
directed to refund it along with interest @ 12%, from the date of
encashment till filing of the statement of claim. Interest pendente lite
was awarded @ 9% per annum.
2.4 The counter claim for LD of Rs.7,35,82,647/- was accepted,
interest @12% was granted from the date of termination of the
contract till filing of the counter claim and pendente lite interest @ 9%
per annum. The amount of PBG was determined as the quantum of
damages over and above the LD. Both parties filed applications under
Section 33 of the Act for correction of the errors. The application of
the respondent was accepted and the typographical error in
mentioning the LD in paragraph 474 of the award as Rs.73,58,264/-
instead of Rs.7,35,82,647/- was corrected. Consequently, the interest
awarded on the amount was modified. The application filed by the
petitioner was rejected by the majority decision, being time-barred but
the minority held that once the rectification application of one of the
party was entertained, the errors pointed out by the other party should
also be corrected.
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2.5 The only dispute pressed in the present petition is with regard to
damages awarded over and above the LD, quantified equivalent to the
PBG and the grant of interest thereon.
2.6 During the pendency of the petition vide order dated
30.04.2019, this court while exercising power under Section 34(4) of
the Act considered the argument of the petitioner that the tribunal had
not awarded damages to the tune of Rs.11,93,45,835/- as was evident
from paragraph 474 of the award. The submission on behalf of the
petitioner was that there was no grievance with regard to the other
findings in the award. The respondent relied upon paragraphs 460 and
461 of the award to contend that the damages were awarded. This
Court vide order dated 08.02.2019 exercised the power under Section
34(4) of the Act and the operative portion of the order is reproduced
below:
“8. The above quoted findings of the Arbitral Tribunal
leave a doubt as to whether the Arbitral Tribunal has
allowed the amount of Performance Bank Guarantee in
favour of the respondent over and above the liquidated
damages allowed under Counter Claim No.5. This is
more so because in the Award the Arbitral Tribunal has
observed that no damages over and above as prescribed
in Clause 6.6 of the Agreement can be allowed in
favour of the respondent, however, at the same time in
paragraph 460 the Arbitral Tribunal has held that
amount of the Performance Bank Guarantee furnished
by the claimant cannot be said to be wholly
unreasonable and in paragraph 461 it has held that the
amount of the Performance Bank Guarantee furnished
by the claimant is also treated as quantum of reasonable
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held that the respondent is entitled to damages in
addition to the liquidated damages.
9. In view of the above, the present proceedings deserve
to be adjourned, enabling the Arbitral Tribunal to
consider the observations made hereinabove and act in
terms of Section 34(4) of the Act, if so advised.”
2.7 During the pendency of the proceedings pursuant to Section
34(4) of the Act, one of the members of the tribunal Justice (Retd.)
S.B. Sinha expired and with the consent of the parties Justice (Retd.)
Rameshwar Singh Malik was appointed as an arbitrator. The majority
of the tribunal decided that damages to the extent of the PBG were
awarded over and above the LD. The minority view was that the
counter claim no. 7 claiming the amount of PBG was rejected and the
direction for the refund of the PBG amount was inadvertently not
given by the tribunal.
3. Learned counsel for the petitioner argued that from a reading of
the award dated 14.12.2017 it is evident that no amount in excess of
LD was awarded. Albeit, the PBG was held to be validly invoked but
there was no quantification of damages. It was contended that the
tribunal rejected the counter claim nos. 1 to 3 for failure of the
respondent to prove damages and yet illegally awarded damages under
Section 73 of the Indian Contract Act, 1872 (for short „CA‟). Reliance
is placed on the decisions of the Supreme Court in Kailash Nath
Associates v. DDA, (2015) 4 SCC 136 and Fateh Chand v.
Balkishan Dass, 1963 SCC OnLine SC 49.
3.1 It is emphasised that the award is contradictory as on the one
hand counter claim no. 7 claiming the amount towards PBG was
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rejected and on the other hand by the order passed pursuant to Section
34(4) the majority held that damages equivalent to the PBG were
awarded. It is argued that while rejecting counter claim nos. 6 and 9, it
was stated that the respondent was entitled only to LD. The decision
in Union of India & Anr. v. Sanghu Chakra Hotels (P) Ltd., 2008
SCC OnLine Del 912 is relied upon to fortify the contention that a
contradictary award deserves to be set aside. The decision in Vishnu
Aggarwal v. Hindustan Petroleum Corpn. Ltd., 2019 SCC OnLine
Del 9300 is relied upon to submit that a vague award is liable to be set
aside being violative of Section 31(3) of the Act.
4. Per contra, the PBG was furnished as per clause 3.3 of the GCC
and could be invoked upon failure of the petitioner to honour the
contractual obligations. The LD under clause 6.3.2 pertains to delay in
completion of work. Both the clauses operate in distinct fields. It is
argued that the upholding of invocation of the PBG by the tribunal is
not under challenge and there were no pleadings for refund of the
PBG amount. The impugned award and the order passed under
Section 34(4) is defended by stating that a reasoned decision was
rendered holding respondent to be entitled to damages of
Rs.11,93,45,835/- over and above the LD. Reliance is on the decision
of the Supreme Court in SAIL v. Gupta Brother Steel Tubes Ltd.,
(2009) 10 SCC 63 and the decision of the Calcutta High Court in
MBL Infrastructures Ltd. v. Ircon International Ltd., 2017 SCC
OnLine Cal 21457 to buttress the argument that damages under heads
not covered by the LD can be awarded.
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5. Heard learned counsel for the parties at length. Even though
written submissions have been filed, learned counsel for the parties
while arguing the matter at length have pressed only the contentions
noted above.
6. The bone of controversy is limited to awarding of damages of
Rs.11,93,45,835/-. The issue arises in two parts: first, as to whether
damages were awarded in the original award despite not being
reflected in the concluding paragraph and second, whether the
damages if awarded are legally sustainable?
7. In paragraph 454 of award, the tribunal considered that the
petitioner had performed only 5.86% of the contract and held that the
respondent was entitled to encash the PBG. Referring to the decision
of the Supreme Court in Kailash Nath Associates (supra) the tribunal
in paragraph 461 held that in view of the miniscule fraction of the
total work done by the petitioner, the economic viability of the project
and the abandonment of the contract by the petitioner, the amount of
PBG furnished is to be treated as the quantum of reasonable damages.
The decision of the Calcutta High Court in MBL Infrastructures
Ltd. (supra) was relied upon for upholding the invocation of the PBG
and awarding damages. In paragraph 466 it was observed that 10% of
the contract value cannot be said to be unreasonable as damages.
Paragraphs 454, 460, 461,465 and 466 of the award are reproduced
below:
“454. The materials brought on record by the parties so
far as breaches of contract on the part of the Claimant is
concerned show that the Claimant has performed only
5.86% of the total Contract, in that view of the matter theSignature Not Verified
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Claimant was entitled to encash the Performance Bank
Guarantee to the extent of Rs.11,93,45,835/-.
460. Even if the Respondent has not been able to quantify
the actual direct losses suffered by it, in the opinion of
the Tribunal the amount of Performance Bank Guarantee
furnished by the Claimant cannot be said to be wholly
unreasonable.
461. The Tribunal is therefore of the opinion that taking
into consideration the peculiar facts and circumstances of
the case, interest of justice will be served if the amount of
Performance Bank Guarantee furnished by the Claimant
is also treated to be the quantum of reasonable damages.
465. In view of the aforementioned authoritative
pronouncement the Tribunal is of the opinion that the
counter Claimant cannot be said to have acted illegally in
invoking the Performance Bank Guarantee.
466. In the aforementioned fact situation the Tribunal is
of the opinion that 10% of the contract value cannot be
said to be unreasonable and in that view of the matter the
Counter Claimant is entitled thereto.”
8. While the matter was being considered pursuant to Section
34(4) of the Act, one of the members of the tribunal expired and a new
member was substituted. The proceedings were decided by majority
and one of the original members dissented and recorded that damages
over and above the LD were not awarded but the majority held that
the damages were awarded. Without entering into the validity of the
decision pursuant to Section 34(4) of the Act and in view of the settled
position that an award has to be read as a whole, it is evident that 10%
of the contract value was awarded as damages albeit, the figure was
not mentioned in the concluding portion of the award. From the
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extracted paragraphs of the award, it is clear that the tribunal not only
upheld the invocation of the PBG but also recorded a finding that the
respondent was entitled to reasonable damages over and above the
LD, quantified damages equivalent to the PBG amount.
9. Before dealing with the second limb that as to whether the
damages awarded over and above the LD are legally sustainable, it
would be relevant to quote the following decisions:
9.1 The Supreme Court in Unibros vs. All India Radio, 2023 SCC
OnLine SC 1366 while dealing with a claim for redressal of loss of
profit made under Section 73 of the CA arising from prolongation of
the contract held:
“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.”
9.2 The Supreme Court in Kailash Nath Associates (supra) held:
“43.6. The expression “whether or not actual damage or
loss is proved to have been caused thereby” means that
where it is possible to prove actual damage or loss, such
proof is not dispensed with. It is only in cases where
damage or loss is difficult or impossible to prove that the
liquidated amount named in the contract, if a genuine
pre-estimate of damage or loss, can be awarded.”
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9.3 The Supreme Court in State of Rajasthan v. Ferro Concrete
Construction (P) Ltd., (2009) 12 SCC 1 held:
“55.While the quantum of evidence required to accept a
claim may be a matter within the exclusive jurisdiction of
the arbitrator to decide, if there was no evidence at all
and if the arbitrator makes an award of the amount
claimed in the claim statement, merely on the basis of the
claim statement without anything more, it has to be held
that the award on that account would be invalid. Suffice
it to say that the entire award under this head is wholly
illegal and beyond the jurisdiction of the arbitrator, and
wholly unsustainable.”
9.4 The Division Bench of this court in Tower Vision India (P)
Ltd. v. Procall (P) Ltd.,2012 SCC OnLine Del 4396 held:
“16. Consequence for breach of the contract are provided
in Chapter VI of the Indian Contract Act, 1872, which
contains three sections, namely, section 73 to section 75.
As per section 73 of the Indian Contract Act, the party
who suffers by the breach of contract is entitled to
receive from the defaulting party, compensation for any
loss or damage caused to him by such breach, which
naturally arose in usual course of things from such
breach, or which the two parties knew when they make
the contract to be likely the result of the breach of
contract. This provision makes it clear that such
compensation is not to be given for any remote or
indirect loss or damage sustained by reason of the breach.
The underlying principle enshrined in this section is that
a mere breach of contract by a defaulting party would not
entitle the other side to claim damages unless the said
party has in fact suffered damages because of such
breach. Loss or damage which is actually suffered as aSignature Not Verified
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result of breach has to be proved and the plaintiff is to be
compensated to the extent of actual loss or damage
suffered. When there is a breach of contract, the party
who commits the breach does not eo instanti, i.e., at the
instant incur any pecuniary obligation, nor does the party
complaining of the breach becomes entitled to a debt due
from the other party. The only right which the party
aggrieved by the breach of the contract has is the right to
sue for damages. No pecuniary liability thus arises till the
court has determined that the party complaining of the
breach is entitled to damages. The court in the first place
must decide that the defendant is liable and then it should
proceed to assess what the liability is. But, till that
determination, there is no liability at all upon the
defendant. The courts will give damages for breach of
contract only by way of compensation for loss suffered
and not by way of punishment. The rule applicable for
determining the amount of damages for the breach of
contract to perform a specified work is that the damages
are to be assessed at the pecuniary amount of difference
between the state of the plaintiff upon the breach of the
contract and what it would have been if the contract had
been performed and not the sum which it would cost to
perform the contract, though in particular cases the result
of either mode of calculation may be the same. The
measure of compensation depends upon the
circumstances of the case. The complained loss or
claimed damage must be fairly attributed to the breach as
a natural result or consequence of the same. The loss
must be a real loss or actual damage and not merely a
probable or a possible one. When it is not possible to
calculate accurately or in a reasonable manner, the actual
amount of loss incurred or when the plaintiff has not been
able to prove the actual loss suffered, he will be, all the
same, entitled to recover nominal damages for breach of
contract. Where nominal damages only are to be
awarded, the extent of the same should be estimated with
reference to the facts and circumstances involved. TheSignature Not Verified
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general principle to be borne in mind is that the injured
party may be put in the same position as that he would
have been if he had not sustained the wrong.”
(emphasis supplied)
10. Clause 3.3 of the GCC deals with the PBG. Under clause 3.3.1
the contractor within two weeks from the date of issue of the NOA
had to furnish an unconditional and irrecoverable bank guarantee
equivalent to 10% of the contract price for due performance of the
contract. As per clause 3.3.3 the respondent was entitled to invoke the
PBG on failure of the petitioner to honour the contractual obligations.
Clause 3.3.5 provides that in case of a delay in completion of the
project beyond the scheduled date of completion, the respondent
without prejudice to other rights and remedies could operate the PBG
for recovery of LD. Clause 6.3.2 deals with LD for non-completion of
work within scheduled time and provides that the respondent may
recover LD at the rate of 0.5% per week subject to maximum of 10%
of the total contract price. The clause provides that upon partial
completion and acceptance of part of the work the LD shall apply only
to the balance work. A conjoint reading of clause 3.3 and clause 6.3.2
indicates that they operate in different fields. Clause 3.3 pertains to
securing due performance of the contract and enabling invocation of
the PBG in case of breach whereas clause 6.3.2 governs the levy of
LD for delay in completion of the work.
11. There is no challenge to the LD awarded for delay in
completion of the project. It is undisputed that only 5.86% of the
project was completed by the petitioner and consequently the PBG
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was invoked. The challenge is to the quantification of damages inspite
of the failure of the respondent to prove actual loss. Clause 3.3
provides for furnishing and invocation of the PBG but does not
stipulate the quantification of damages. In counter claim nos. 1 to 3,
the respondent claimed damages under various heads including
payments to third-party vendor, production and revenue losses on
account of non-performance, compensation towards establishment
costs and for re-tendering of the project however, the claims were
rejected for lack of proof. For claiming damages under Section 73 of
the CA the claimant has to prove the loss suffered and in case it is not
possible to prove the actual damages, a reasonable amount of damages
is to be assessed. It was neither the case set up before the tribunal nor
it was held that in the facts of present case the actual damages cannot
be proved. Rather the respondent failed to prove the counter claims
nos. 1 to 3 claiming damages under various heads. In absence of a
proof of actual damages and without recording a finding that actual
damages could not be proved the tribunal proceeded to conclude that
10% of the contract value shall be a reasonable damages to be
awarded over and above the LD. The basis for quantification is
missing and the awarding of damages is vitiated for violating Section
31(3) of the Act whereby a reasoned award is to be passed.
12. The Supreme Court in Dyna Technologies Private Limited v.
Crompton Greaves Limited, (2019) 20 SCC 1:
“34. The mandate under Section 31(3) of the Arbitration Act
is to have reasoning which is intelligible and adequate and,
which can in appropriate cases be even implied by the courts
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thereunder, if the need be. The aforesaid provision does not
require an elaborate judgment to be passed by the arbitrators
having regard to the speedy resolution of dispute. 35. When
we consider the requirement of a reasoned order, three
characteristics of a reasoned order can be fathomed. They
are: proper, intelligible and adequate. If the reasonings in the
order are improper, they reveal a flaw in the decision-making
process. If the challenge to an award is based on impropriety
or perversity in the reasoning, then it can be challenged
strictly on the grounds provided under Section 34 of the
Arbitration Act. If the challenge to an award is based on the
ground that the same is unintelligible, the same would be
equivalent of providing no reasons at all. Coming to the last
aspect concerning the challenge on adequacy ofreasons, the
Court while exercising jurisdiction under Section 34 has to
adjudicate the validity of such an award based on the degree
of particularity of reasoning required having regard to the
nature of issues falling for consideration. The degree of
particularity cannot be stated in a precise manner as the same
would depend on the complexity of the issue. Even if the
Court comes to a conclusion that there were gaps in the
reasoning for the conclusions reached by the Tribunal, the
Court needs to have regard to the documents submitted by
the parties and the contentions raised before the Tribunal so
that awards with inadequate reasons are not set aside in
casual and cavalier manner. On the other hand, ordinarily
unintelligible awards are to be set aside, subject to party
autonomy to do away with the reasoned award. Therefore,
the courts are required to be careful while distinguishing
between inadequacy of reasons in an award and unintelligible
awards.”
(emphasis supplied)
13. Another aspect is that for want of evidence three different heads
in counter claim nos. 1 to 3 were rejected by the tribunal but damages
were quantified without discussing the heads under which the
damages were being awarded. This renders the award self-
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contradictory, on one hand the tribunal rejects the counter claims
under specific heads for want of proof and on the other hand awards
damages over and above the LD without identifying the heads of loss
suffered. Further while deciding the counter claims for compensation
and damages arising from wilful abandonment of the contract it was
held that the respondent was only entitled to the LD and no other
claims. The award of damages is contrary to public policy being
against the law laid down by the Supreme Court and is in violation of
Section 73 of the CA.
14. The contention that there were no pleadings for refund of the
PBG is rejected. Suffice it to say that the petitioner is not aggrieved by
the invocation of the PBG but by the appropriation of the PBG
amount. From a perusal of the pleadings, it is evident that the reliefs
claimed included the amount of the PBG.
15. There is no quarrel with the proposition that damages for
breaches not covered by a clause of LD can be awarded over and
above the cap provided for which SAIL (supra) is relied upon.
16. The decision of the Calcutta High Court in MBL
Infrastructures Ltd. (supra) is not applicable to the facts of the
present case. In that case, the court held that damages for lack of
performance of the contract cannot be denied for the reason that the
claim for additional expenses was disallowed and there was no nexus
between the two claims.
17. The Supreme Court in Gayatri Balasamy v. ISG Novasoft
Technologies Ltd., (2025) 7 SCC 1 held that while an arbitral award
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cannot be modified under Section 34 of the Act, a severable part of the
award may be set aside. The relevant paragraphs are quoted below:
“32. In the present controversy, the proviso to Section
34(2)(a)(iv) is particularly relevant. It states that if the
decisions on matters submitted to arbitration can be
separated from those not submitted, only that part of the
arbitral award which contains decisions on matters non-
submitted may be set aside. The proviso, therefore, permits
courts to sever the non-arbitrable portions of an award from
arbitrable ones. This serves a twofold purpose. First, it
aligns with Section 16 of the 1996 Act, which affirms the
principle of kompetenz-kompetenz, that is, the arbitrators’
competence to determine their own jurisdiction. Secondly, it
enables the Court to sever and preserve the “valid” part(s) of
the award while setting aside the “invalid” ones. [ The
“validity” and “invalidity”, as used here, does not refer to
legal validity or merits examination, but validity in terms of
the proviso to Section 34(2)(a)(iv) of the 1996 Act.] Indeed,
before us, none of the parties have argued that the Court is
not empowered to undertake such a segregation.
33. We hold that the power conferred under the proviso to
Section 34(2)(a)(iv) is clarificatory in nature. The authority
to sever the “invalid” portion of an arbitral award from the
“valid” portion, while remaining within the narrow confines
of Section 34, is inherent in the Court’s jurisdiction when
setting aside an award.
34. To this extent, the doctrine of omne majus continet in se
minus–the greater power includes the lesser–applies
squarely. The authority to set aside an arbitral award
necessarily encompasses the power to set it aside in part,
rather than in its entirety. This interpretation is practical and
pragmatic. It would be incongruous to hold that power to set
aside would only mean power to set aside the award in its
entirety and not in part. A contrary interpretation would not
only be inconsistent with the statutory framework but may
also result in valid determinations being unnecessarily
nullified.
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(emphasis supplied)
18. In the case in hand, the claims of the petitioner for rendering
services, refund of ABG and the counter claim of LD are separable
and not inter-connected and shall not be affected by the setting aside
of damages of Rs. Rs.11,93,45,835/- awarded to the respondent over
and above the LD.
19. The award to the extent of allowing the counter claim of the
respondent awarding damages to the tune of PBG over and above the
LD is set aside. The petition is allowed. All pending applications are
also disposed of.
AVNEESH JHINGAN, J.
MARCH 28, 2026/Pa
Reportable:-Yes
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