Delhi High Court
Ministry Of Health & Family Welfare vs Nagarjuna Construction Ltd on 9 April, 2026
Author: Jasmeet Singh
Bench: Jasmeet Singh
$~J
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment reserved on: 16.12.2025
Judgment pronounced on: 09.04.2026
+ O.M.P. (COMM) 337/2017
MINISTRY OF HEALTH & FAMILY WELFARE
...Petitioner
Through: Ms. Pratima N Lakra(CGSC),
Ms. Kanchan Shakya, Mr. Shailendra
kumar Mishra, Mr. Chanakya Kene,
Ms. Mansi, Advs.
versus
NAGARJUNA CONSTRUCTION LTD. ...Respondent
Through: Dr. Amit George, Ms.
Rupam Jha, Mr. Adhishwar Suri, Ms.
Ibansara Syiemlieh, Mr. Dushyant
Kishan Kaul, Mr. Vaibhav Gandhi,
Ms. Medhavi Bhatia, Mr. Kartikay
Puneesh, Mr. Bhrighu Pamidighantam,
Advs.
CORAM:
HON'BLE MR. JUSTICE JASMEET SINGH
JUDGMENT
1. This is a petition filed under Section 34 of the Arbitration and
Conciliation Act, 1996, (“the Act”) seeking to challenge the Arbitral
Award dated 08.05.2017 (“Award”) passed by the learned Sole
Arbitrator in the matter of “M/s Nagarjuna Construction Ltd. v. Ministry
Of Health & Family Welfare”.
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FACTUAL BACKGROUND
2. The petitioner, namely Ministry of Health & Family Welfare (respondent
in the Arbitral Proceedings) invited bids for the execution of the works
of construction of medical college and hostel complex at AIIMS,
Bhopal.
3. The contract was awarded vide a letter of notification dated 13.04.2010,
to the respondent company namely NCC Limited, formerly known as
M/s Nagarjuna Construction Co. Ltd. (Claimant in the Arbitral
Proceedings) for the works including preparing designs and construction
of Medical College & Hostel Complex at AIIMS, Bhopal, Package-I.
4. Pursuant thereto, a contract with value of Rs. 147,89,73,233/- was
executed between the parties on 21.05.2010 (“Contract”), with
scheduled completion period of project being 15 months i.e., from
27.05.2010 to 26.08.2011.
5. During the execution of works under the Contract, some disputes arose
between the parties and the respondent company vide its letters dated
07.11.2014 and 13.12.2014 requested for appointment of Arbitrator by
invoking arbitration Clause and also filed a petition under Section 11 of
the Act on 07.04.2015 before this Court. However, during the pendency
of the proceedings, the Director (PMSSY), Ministry of Health and
Family Welfare PMSSY Division vide its order dated 29.05.2015
appointed Dr. Y.P.C. Dangay as the Sole Arbitrator to adjudicate
disputes between the parties.
6. The respondent filed its Statement of Claim (“SOC”) before the
Arbitrator on 06.07.2015, to which the petitioner filed its written
statement along with counter claim on 18.02.2016. Thereafter, on
04.04.2016, the respondent filed rejoinder to the written statement and
counter claim.
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7. During the Arbitral proceedings, the Arbitrator also visited the site for
assessment of the status of work on 27.08.2016, 28.08.2016, 26.11.2016,
27.11.2016 and 16.04.2017.
8. The Arbitrator passed an interim award dated 30.12.2016, directing the
release of amount of Rs. 2,95,79,465/- for the Claim No. 1 in favour of
the respondent and also, directing the respondent to complete the
remaining works by the end of the year.
9. Thereafter, the Arbitrator passed a final Award dated 08.05.2017,
allowing most of the claims as raised by the respondent except Claim No.
11, and rejecting all the counter claims filed by the petitioner. The
petitioner being aggrieved by the Award has filed the present petition.
SUBMISSIONS ON BEHALF OF THE PETITIONER
General Contentions
10. Ms. Lakra, learned CGSC for the petitioner, submits that the Award is in
violation of the public policy of India and is patently illegal for reasons
apparent on the face of record. The scope of public policy is wide in
nature and cannot be restricted in its interpretation. Reliance is placed on
DDA v. Manohar Lal1 and Oil & Natural Gas Corporation Ltd. v. SAW
pipes Ltd.2
11. It is submitted by the learned counsel that the Arbitrator has failed to take
into consideration, the deficiency/delays on part of the respondent by
failing to comply with the directions issued by the Arbitrator during
hearings. Despite this non-compliance by the respondent, the Arbitrator
failed to observe this fact in his Award that there existed wilful delays on
part of the respondent. These kinds of awards are not only perverse but
also against the public policy of India, and against the interest of
1
2006 SCC OnLine Del 46.
2
AIR 2003 SC 2629.
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Government of India as they will encourage contractors to raise fake
claims by quoting extremely low rates for getting government projects
and then attempt to get unfair advantage by placing reliance on such
awards.
12. The Arbitrator has exceeded the jurisdiction conferred to it, has acted in
violation of the terms of the Contract, and has not taken into
consideration vital evidence and contentions. Thus, it is liable to be set
aside under Section 34(2)(a)(iv) and Section 34(2)(b)(ii).
Attribution of Delays and associated claims for prolongation.
13. The Arbitrator has failed to correctly appreciate the issue of delay
attribution as it has not taken into consideration a vital report dated
21.04.2017 prepared by the superintending engineer, wherein the
incomplete status of work was clearly stated. The respondent was bound
by Section 37 of the Indian Contract Act, 1872 (“Contract Act“), to
perform its promise or to offer to perform the same, however in the view
of this report it is clear that the respondent violated section 37 of the
Contract act and the Arbitrator has failed to take into consideration this
material evidence. Reliance is placed on Aboobker Latif v. Reception
Committee of the 48th INC3.
14. It is also submitted that the Arbitrator failed to read the contract as a
whole, leading to an erroneous interpretation of the relationship between
the parties to the contract and the non-application of principle laid down
in Ramnath International Construction Pvt. Ltd. v. Union of India4
concerning employer-contractor agreements, wherein it was held that if
the contractor sought and obtained extensions for delay attributable to
either party, he would not be entitled to claim any compensation for such
3
AIR 1937 BOM 410.
4
(2007) 2 SCC 453.
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delay. Reliance is also placed on Unity Realty and Developers Ltd. v. BW
Highway Star Pvt. Ltd.5
15. The Arbitrator had awarded the claim Nos. 6, 7, 8, and 9 by exceeding
his jurisdiction and in ignorance of the terms of the Contract, which
clearly stipulated that compensation is not payable on account of delay.
Reliance is placed on Ramnath International Construction Pvt.
Ltd.(Supra). It is also submitted that the respondent filed inflated claims
as the respondent claimed Rs. 35.09 crores under this head, but only Rs.
3.2 crores were held admissible by the Arbitrator. Additionally, the delay
in project was attributable to the respondent only.
16. The Arbitrator awarded compensation under Claim Nos. 5, 6, 7, 8, 9, and
12 in ignorance of the terms of the Contract, i.e. Clause No. 6(a), 6(b),
40(h), 40(p)(ix) of the special conditions of the contract. Thus, the Award
is in clear violation of the statutory mandate as encapsulated under
Section 28(3) of the Act, whereby the Arbitrator is required to take into
consideration the terms of the contract and trade usages as well. The
Arbitrator has clearly acted beyond its jurisdiction conferred by the terms
of the Contract. Reliance is placed on Associated Engineering Co. vs.
Govt. of Andhra Pradesh6.
Claim No. 1: Release of wrongfully withheld amount from RA Bill-33
& 34.
17. Ms. Lakra, further states that the Arbitrator did not properly distinguish
between regular extension of time (“EOT”) and provisional EOT. In
construction contracts, as a regular trade practice provisional extensions
are given to keep the contract running and avoid major disruptions.
However these provisional EOT‟s do not imply that the delay is
5
2009 SCC Online Bom 1509.
6
(1991) 4 SCC 93.
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condoned/admitted. In the instant case, even after regular extensions up
to 12.10.2012, the petitioner issued provisional extensions to keep the
contract alive and explicitly reserved the petitioner‟s right to claim
compensation under Clause No. 2 of the GCC for the respondent‟s
delays. The Arbitrator while awarding this Claim No. 1 in the interim
Award ignored this standard practice of granting provisional EOT‟s and
acted in non-compliance of Section 28(3) of the Act.
18. Additionally, the rescheduling of milestones were not required as
rescheduling is only required up to the regular extension period i.e.
ending on 12.10.2012. However, the recovery of withheld amount was
made in March 2013 because the respondent defaulted in achieving
milestone Nos. 4 and 5. The Arbitrator substantiated his Award on the
ground that milestones were not rescheduled in accordance with the new
timeline after grating of EOT‟s, and overlooked the fact that delays
beyond 12.10.2012 were attributable to the respondent only.
Claim No. 2: Reimbursement of increase in taxes and duties under
Clause 38 of GCC of contract (VAT, Entry Tax and Central Excise).
19. With respect to Claim No. 2, it is submitted that the finding of the
Arbitrator is based on wrong interpretation of Clause No. 38 of the
General Conditions of Contract (“GCC”). The reasoning of the
Arbitrator is patently illegal as the Arbitrator held that non-compliance
with the provision for notice does not mean that the statutory increase in
taxes duly paid by the petitioner will not be reimbursed. When a
contractual term stipulated that a claim needed to be lodged within a
specific time, non-compliance should lead to an adverse inference. Thus,
the Arbitrator by allowing this claim despite non-compliance by the
respondent has favoured the respondent in an unjust manner.
Claim No. 3: Reimbursement of increase in taxes and duties under
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Clause 20 and 19B iv (b) of GCC of contract (Minimum Wages Act).
20. It is submitted that the Arbitrator erred in applying the provision
contained in Clause No. 38 of the GCC while adjudicating the Claim No.
3, as the respondent itself has not substantiated this claim under Clause
No. 38 of the GCC.
21. Further, the Arbitrator has erred in holding that the present contract is
similar to the CPWD contracts and that the respondent has rightly
quantified its claim as per Clause No. 10 CC of the CPWD contract in
which labour component for escalation is fixed at 25%. However, in the
present case Clause No. 10CC of the CPWD was inapplicable as the
stipulated completion period for the project was 15 months only, and
Schedule F provided that Clause No. 10CC is only applicable when the
stipulated period extends beyond 24 months.
Claim No. 4: Extra items of work claimed under Clause 12 of GCC
and Clause 22, 23 of SCC.
22. Learned Counsel, apropos the Claim No. 4 submits, that the Arbitrator
has not considered the contention of the petitioner that the dispute qua
Claim No. 4 i.e. extra items, survives only for ready mix concrete (RMC)
item, as the issue concerning grit plaster was already discussed during the
site visit on 26.11.2016 and was duly approved by the petitioner. Thus,
the Arbitrator has erred in again awarding the claimed amount without
discussing the detailed breakup and the basis of the rates claimed by the
petitioner.
23. She further submits that the Arbitrator has wrongly interpreted agreement
item No. 3.8 and DSR Item No. 5.33, wherein it was clear that the cost of
making and placing concrete were included in the quoted rates. The extra
claim raised by the respondent was false because in this project, the
concrete was made directly at the site and this fact was admitted by the
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respondent during arbitral proceedings. The Arbitrator still compared and
relied upon DSR Item No. 5.37 on the ground that the respondent also
executed the work having scope similar to DSR Item No. 5.37, which is
item for ready-mix concrete made in fully automatic plant somewhere
else and then transported to the site in transit mixture for a lead of about
10 kms. This “upto 10 km lead” is a substantial cost factor, it assumes
extra cost for making and transportation to the site. The same was not
applicable in the present case, as the concrete was made on site. Thus, the
finding of the Arbitrator had allowed undue benefits to the respondent on
the basis of this misinterpretation and has disregarded the scope of
agreement item No. 3.8 and DSR item No. 5.33.
24. Additionally, the Arbitrator has ignored the contention of the petitioner
that these specific claims for extra items were not raised in terms and
compliance of Clause No. 12 of the GCC during the execution of those
items.
Claim No. 5: Revised rates for individual items of work the quantities
of which had exceeded beyond limit.
25. She further contends that with respect to the Claim No. 5, the Arbitrator
has misinterpreted the terms of the contract and in an unjustified manner
awarded market rates for items deviating more than 30% of the BOQ
quantity because the respondent was well aware of the fact that Clause
Nos. 12.2 and 12.3 applies only after deviation exceeds the threshold of
30% of trade work or 100% of foundation work as the case may be, and
still the respondent did not claim this amount under Clause No. 12.4.
Thus, directly raising this claim before the Arbitrator is unjustified. Also,
there are inherent inconsistencies in findings of the Arbitrator as at one
specific section of the Award, the Arbitrator used the word “Trade” to
mean “building trade” and while allowing claim No. 5 he stated the same
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word to be vague and proceeded to award rates applicable to individual
BOQ items instead of BOQ subheads as contended by the petitioner
during the arbitral proceedings.
26. Schedule F (Package-I), provides for deviation limit of 30% of the trade
upto which the BOQ rates were payable and were already paid with
respect to several deviated items, yet the Arbitrator failed to consider
these contractual provisions and the petitioner‟s specific submissions.
The petitioner further submits that the respondent‟s quantification was
erroneous and unsupported by proper justification and did not even take
into consideration the Bhopal cost index. For the sake of argument, even
if any claim was maintainable, the Arbitrator did not scrutinise itemwise
rates or the petitioner‟s objections, thereby vitiating the entire
quantification process. In these circumstances, by effectively
disregarding and rewriting the terms of the contract beyond the scope of
reference, the Award is liable to be set aside in the interest of justice.
Claim No. 10: Loss on locked up deposits Bank Guarantees due to
Prolongation of Contract.
27. Ms. Lakra, submits that with respect to Claim No. 10, the Arbitrator has
acted in violation of Clause No. 1(ii) of the GCC which provides that the
petitioner is not liable to pay any interest/charge on account of the
performance guarantee.
Claim No. 12: Escalation Amount on material payable due to
prolongation ofcontract.
28. The Arbitrator with respect to Claim No. 12 has acted in violation of the
terms of the Contract as the respondent has preferred the claim because
of escalation of materials, being fully aware of the fact that contract does
not allow such escalation claims.
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29. It is also submitted that the Arbitrator in the Claim Nos. 13 and 14
awarded loss of interest on the amounts claimed under Claim Nos. 2, 3,
4, 5, 10 & 12 at the rate of 10% per annum, the same is in violation of
law as settled by the Hon‟ble Supreme Court in the case of Union of
India v. M/s Krafters Engineering & Leasing Pvt Ltd.7, and the terms of
the contract as the contract does not provide for grant of interest.
SUBMISSIONS ON BEHALF OF THE RESPONDENT
30. Dr. George, learned counsel for the respondent, submits that the delays in
execution of the Contract are not attributable to the respondent as the
Arbitrator has returned categorical findings by placing reliance on the
records i.e. hindrance register maintained and signed by the petitioner
itself. Reliance is placed on Delhi Agricultural Marketing Board v. HR
Builders.8
31. It is also submitted that the contents of the hindrance register were
neither challenged by the petitioner in the present petition nor in the
defence before the Arbitrator. It was only at the stage of oral arguments
that this objection was raised by the petitioner.
32. He further submits that the Claim No. 2 concerning the reimbursement of
Rs. 38,10,057/- towards increase in taxes and duties under Clause No. 38
of the GCC was rightly adjudicated by the Arbitrator. The petitioner
raised the identical contention of absence of notice in terms of Clause
No. 38 (iii) of the GCC before the Arbitrator as well and the same was
rejected by the Arbitrator on the ground that the clause provided for the
notice to be given but default of such notice is not in itself a ground to
attract adverse consequences so as to reject a claim otherwise due.
7
(2011) 7 SCC 279.
8
2019 SCC Online Del 8538.
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Reliance is placed on Mahesh Bansal v. Executive Engineer9 and Union
of India v. Associated Construction Co.10 to state that the decision of the
Arbitrator is in consonance with the settled position of law.
33. With respect to Claim No. 3, it is submitted that the challenge of the
petitioner is baseless as the Arbitrator had adjudicated the claim in
consonance with Clause Nos. 20 and 38 of the GCC. Clause No. 20 of
the GCC provided that the respondent was bound to comply with the
Minimum Wages Act, 1948 and Clause No. 38 states that any further tax
or levy imposed by the statute and duly paid by the respondent shall be
reimbursed to it. The Arbitrator rightly allowed this claim of the
respondent with respect to the additional expenditure towards payment of
minimum wages as amended from time to time. Reliance is placed on
Union of India v. Saraswat Trading Agency and Ors.11 and Associated
Construction Co. (Supra) to submit that the stand of the Arbitrator is in
consonance with the settled position of law.
34. Apropos the Claim Nos. 6, 7, 8, and 9, it is submitted that the Arbitrator
has awarded these claims with detailed reasoning on fact and law. The
petitioner has challenged these claims on the ground that the terms of the
contract does not provide for compensation, in fact the special conditions
of contract specifically preclude grant of compensation. However, as per
the provisions of the Contract Act more particularly Section 53, 54, 55
and 73, in case of failure of performance, promises, and breach, the party
at fault is liable for compensation for the losses suffered by the other
party. In a judgment of this Court titled Union of India v. Vishva Shanti
Builders (India) Pvt. Ltd.12, it was held that despite a clear condition
9
1995 SCC Online Del 333.
10
2016 SCC Online Del 4679.
11
(2009) 16 SCC 504.
12
(2024) SCC Online Del 5018.
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under the contract barring compensation, the compensation cannot be
said to be barred when the extensions were granted due to fault of the
other party. Reliance is also placed on K.N. Sathyapalan v. State Of
Kerala & Anr.13
ANALYSIS AND FINDINGS
35. I have heard the learned counsels for the parties and perused the material
and documents placed on record.
Scope of Interference Under Section 34 Of The Act
36. The scope of interference under Section 34 of the Act is now clearly
established. The Court is not required to sit in appeal as an Appellate
Court over the Award, and it can neither reappreciate the evidence nor
reinterpret the terms of the contract, when the view already taken by the
Arbitrator is a probable and possible one. Judicial intervention with the
Award is permissible only on limited and specific grounds, as
encapsulated under Section 34 of the Act. The Court is not
required/empowered to reappreciate evidence or substitute its own view
with that of the Arbitral Tribunal. It is a settled position of law that
Section 34 of the Act, embodies the principle of minimal judicial
interference, thereby preserving the foundational precept of the Act, the
finality and efficacy of Arbitral Awards. The Hon‟ble Supreme Court has
recently observed this scope of interference in the judgment of
Consolidated Construction Consortium Ltd. v. Software Technology
Parks of India14, the relevant paragraphs of which reads as under:
“46. Scope of Section 34 of the 1996 Act is now well
crystallised by a plethora of judgments of this Court.
Section 34 is not in the nature of an appellate provision. It13
(2007) 13 SCC 43.
14
(2025) 7 SCC 757.
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provides for setting aside an arbitral award that too only on
very limited grounds i.e. as those contained in sub-sections
(2) and (2-A) of Section 34. It is the only remedy for setting
aside an arbitral award. An arbitral award is not liable to
be interfered with only on the ground that the award is
illegal or is erroneous in law which would require re-
appraisal of the evidence adduced before the Arbitral
Tribunal. If two views are possible, there is no scope for the
court to re-appraise the evidence and to take the view other
than the one taken by the Arbitrator. The view taken by the
Arbitral Tribunal is ordinarily to be accepted and allowed
to prevail. Thus, the scope of interference in arbitral
matters is only confined to the extent envisaged under
Section 34 of the Act. The court exercising powers under
Section 34 has per force to limit its jurisdiction within the
four corners of Section 34. It cannot travel beyond Section
34. Thus, proceedings under Section 34 are summary in
nature and not like a full-fledged civil suit or a civil appeal.
The award as such cannot be touched unless it is contrary
to the substantive provisions of law or Section 34 of the
1996 Act or the terms of the agreement.”
37. At the outset, Dr. George, learned counsel for the respondent, states that
the present petition is sans merit as the petitioner has failed to plead or
establish any specific permissible ground under Section 34 of the Act.
The Award is a detailed Award substantiated by the evidence available
on record and the same does not suffer from any vices as enumerated
under Section 34 of the Act warranting interference by this Court. The
findings of the Arbitrator are plausible and therefore cannot be interfered
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with under the Section 34 jurisdiction. Reliance is placed on Associate
Builders v. DDA15and Delhi Airport Metro Express (P) Ltd. v. DMRC16.
38. With the above scope of Section 34 of the Act in mind, I shall now deal
with the rival contentions.
Attribution of Delays
39. The petitioner‟s challenge to the Award with regards to several claims
can be distilled into one core controversy i.e. the findings on attribution
of delays and prolongation of contract, which are pertinent for the entire
Award and especially for decisions on Claim Nos. 6, 7, 8, and 9.
40. It is the case of the petitioner that the Arbitrator has erred in attributing
the delays in execution of works under the contract to the petitioner. The
Arbitrator has failed to take into consideration the pertinent facts and
evidence which show that in fact the delays were attributable to the
respondent.
41. It is contended by the petitioner that despite recording the objection of
the petitioner in page No. 13 of the Award that the respondent had not
completed the work by December 2016 as directed by the interim Award,
the Arbitrator has ignored this contention and also a vital report dated
21.04.2017 of the superintending engineer, wherein the status of work
was shown as incomplete. The Arbitrator also visited the site on many
instances and directed the respondent to complete certain works before
31.12.2016. Despite, all these contentions and evidence pertaining to the
attribution of the delay on part of the respondent, the Arbitrator did not
give any findings on these arguments in the Award. It is also stated that
the Award is passed without taking terms of the contract into
consideration and these kind of awards confer undue benefits on
15
(2015) 3 SCC 49.
16
(2022) 1 SCC 131.
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contractors from government department and consequently the Award is
against public policy and the interest of the Country.
42. Per contra, the respondent contends that the Arbitrator has correctly
relied on hindrance registers in giving his findings on the issue of delay.
The specific delays mentioned in the hindrance register are attributable to
the petitioner for several reasons as stated therein including the delays
duly noted at Serial Nos. 20 and 21 of the Hindrance register on the
ground of delay in receipt of drawing for stone flooring over terrace and
works being carried out by other agencies engaged by the petitioner. The
respondent has also drawn my attention to the paragraph Nos. 17 and 18
of the judgment of the Hon‟ble Division Bench of this court in the case
of Delhi Agricultural Marketing Board (Supra), which read as under:
“17. The Hindrance Register is a document which is
maintained at the work site and is signed by the officers of
the employer and the contractor. It records the events which
occur contemporaneously in relation to the hindrances that
may be faced by the contractor from time to time in the
execution of the work. It is a document which is a log of the
communications which take place between the employer and
the contractor in relation to the events leading to hindrance
in the execution of the work.
18. The extension of time that may be considered by the
Engineer-in-Charge necessarily would have to rely upon
records, such as the hindrance register: In the present case,
the Arbitrator has found that the Hindrance Register
recorded hindrances for as many as 563 days, whereas the
actual delay in completion of the work was only 502 days.
That being the position, the finding returned by the learned
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Arbitrator fixing the responsibility for delay in completion
of work, in our view, is completely justified.”
(Emphasis Supplied)
43. The Arbitrator apropos this issue has critically examined the multiple
EOT‟s duly approved by the petitioner and also noted that many extra
items pending since 2013 were only settled after directions from the
Arbitrator, and because of many pending issues the time for contract was
delayed by almost three times of the scheduled completion time. The
Arbitrator duly considered the submissions of the petitioner and observed
that the petitioner was directed to produce the hindrance register despite
which the petitioner never disputed the entries in this register. The
Arbitrator went on to observe that the hindrance register is maintained at
site by the petitioner, duly signed by the engineers of the petitioner and
by the consultants engaged by the petitioner only. The relevant portions
of the Award reads as under:
“14.3.2 Many pending extra items were pending since 2013
which were settled and paid on the directions of this Tribunal
during the proceedings. As is ascertained barring two extra items
for rest of the items the rates were settled during the Arbitration
proceedings. Because of many pending issues, the project
execution, as it appears had lost the track for long. Though the
time stipulation of 15 months was made, with the prolongation of
the Contract by more than three times of the stipulated period,
the time has been set at large by various defaults of the
Respondent.
14.3.3 The written submissions made by the Respondent latest on
10-4-2017 were carefully examined. The Charts produced do not
have any material significance to the issue on delays since both
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the parties have argued and admitted that there are delays and
when the work is incomplete the value executed on comparison
with the original period will be less.
14.3.4 The Tribunal has asked the Respondent to produce the
hindrance register maintained at the site by the Respondent
which has been relied by the parties. The Respondent has not
made any allegation either in arguments or written submissions
of possibility of forging of the register which itself is produced by
Respondent during the proceedings.
14.3.5 The Respondent pointed out few discrepancies in the
written submissions made dt: 21.4.2017 in the hindrance
register. As can be seen the hindrance register is the record
maintained by the Respondent signed by the Respondent
Engineers and the Consultants engaged by the Respondent.
Neither during the pleadings nor during the arguments, the
discrepancies alleged are pointed out which appear an
afterthought. Moreover, the hindrance register is Respondent’s
document which is admitted by them.
14.3.6 The Claimant had in fact pointed out few factual
discrepancies in actual dates of removal of hindrances as
recorded in the Hindrance register produced by the Respondent
during the proceedings. This was by way of filing a written
statement submitted by the Claimant which was not challenged
by the Respondent.
14.3.7 Considering the material evidence on record, the Tribunal
is of the opinion that the delays are not attributable to the
Claimant and the reasons mentioned in various EOT
applications are legitimate as found from records.”
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(Emphasis Supplied)
44. I am of the view that the reliance placed by the Arbitrator on hindrance
register is well founded, and reasoned, as the petitioner has never
disputed the contents of the hindrance register before the Arbitrator or
even before this court until the stage of oral arguments. The petitioner
only pointed out few discrepancies before the Arbitrator which were
categorically dismissed by the Arbitrator by terming them as an
afterthought. Again raising such crucial objection at such a belated stage
of oral arguments of Section 34 proceedings is nothing but an
afterthought. A perusal of the hindrance register shows that it is a
contemporaneous record maintained at site and duly signed by the
representatives of the petitioner and the consultant engaged by them, thus
it can be said that the petitioner had knowledge of the delays, and its
causes and the same cannot be attributed to the respondent for no
reason/fault on its part. The relevant portions of the hindrance register
(Typed Copy) showing signature of consultant and engineers are
reproduced as under:-
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S. Nature of Item of work Date of start Date of Overlapping if Net Sign of Weightage Net Sign of Remarks
No. hindrance which could not of hindrance removal of any hindrance A.E. of this affected PM/EE of
be executed due hindrance in days hindrance days residing
to this hindrance officer
18 Details of cold Due to non- 07.12.2011 31.03.2012 114 days 114 days Nil
rooms and availability of and cont.
kitchens in the details of
hostels provisions to be
left in the dining
halls and
kitchens for the
services and
equipments,
these portions
cannot be
finished and so
the completion
of hostels is
affected
Affected areas -
all hostels
19 Extended Due to existence 07.12.2011 31.03.2012 114 days 114 days Nil
development of sewer pond and cont.
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and work of and non
services around channelization of
the building nallas passing
around the
building, the
work of
sewer/water
supply and other
services were in
the limits and
scope of
package-1
cannot be
completed and so
the progress is
affected.
Affected areas -
Medical college
and college of
Nursing
20 Delay in receipt Delay in water 23.11.2011 04.05.2012 163 days 163 days Nil
of drawing for proofing work.
kota stone
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flooring and Affected area
terrace water Medical College,
proofing College of
Nursing Ayush
block and
Library Building
21 Delay of civil Delay in 27.01.2012 30.09.2011 613 days 613 days
work due to complete work and cont.
work of other of block „A‟ of
agencies in main service building
service building as well as
& library. Ground floor and
terrace of library
Affected area :
Service building
and library
building
22 Delay of civil Delay in civil 14.03.2012 30.09.2013 565 days 565 days Nil
work due to work and and cont.
work of other finishing work
agencies near near hostel and
hostels and other buildings.
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other buildings
Affected area: -
Hostel and other
building
23 Details of cold Due to non 24.05.2012 30.09.2013 494 days 494 days Nil
rooms and availability of and cont.
kitchen in the details of
hostels provisions to be
left in the dining
halls and
kitchens for the
services and
equipments,
these portions
cannot be
finished and so
the completion
of hostels is
affected.
Affected area: all
hostels
24 Heavy rains Delay in civil 06.06.2012 24.09.12 88 days 88 days Nil
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during 2012 work and (Rain
finishing was effected
due to the heavy days only)
rains
Affected area:
hostels and other
buildings
25 Modifications Delay in final 01.07.2012 30.09.2013 456 days 456 days Nil
desired by the finishing work and cont.
Director in O.T in Ayush block
room Autoclave
room and
flooring in Affected area:
Ayush building. Ayush block.
26 Delay in receipt Finishing work 01.07.2012 30.09.2013 456 days 456 days Nil
GFC drawings of first floor and cont.
for work of elevation on
atrium and atrium side
mumty in Affected area:
nursing college Nursing college.
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45. The objections of the petitioner qua the non-consideration of report of
superintending engineer dated 21.04.2017, site visits and status of
incomplete work, were considered by the Arbitrator and were found
irrelevant in view of better evidence in the form of hindrance register.
The same is evident from the paragraph Nos. 14.3.2, 14.3.3 and 14.3.4 as
reproduced above.
46. The respondent has correctly relied on Delhi Agricultural Marketing
Board (Supra) highlighting the significance of hindrance registers. Also,
a Coordinate Bench of this Court in a recent judgment titled as Airport
Authority of India v. URC Construction17, reiterated the position that
hindrance registers hold substantial evidentiary value in construction
contract disputes. The relevant paragraph No. 89 of the aforesaid
judgment reads as under:
“89. It is a settled principle that site records i.e. Hindrance
Registers often hold greater evidentiary value regarding the
actual impact of weather on specific construction activities
like concreting or earthwork than general meteorological
data.”
(Emphasis Supplied)
47. Additionally, the Arbitrator is the master of quality and quantity of
evidence and his reasoning when substantiated by the material evidence
cannot be said to be perverse, patently illegal or against public policy,
just because another view is plausible.
48. Therefore, on the issue of attribution of delays, the reasoning and
findings of the Arbitrator rests on legitimate contemporaneous evidence
17
2026 SCC OnLine Del 534.
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and the said Award cannot be said to be vitiated on the grounds under
Section 34 of the act merely because a report or some contentions of the
petitioner are not discussed in detail in the Award. This court under
Section 34 of the act cannot weigh evidence or reappreciate the same.
Claim Nos. 6, 7, 8, AND 9: Additional expenses due to prolongation of
contract for various reasons.
49. Claim Nos. 6, 7, 8, and 9 pertain to the claims raised by the respondent
before the Arbitrator for compensation arising from prolongation of the
Contract period, covering idling of resources such as plant, machinery,
labour, etc. These claims collectively forms a substantial portion of the
relief sought by the respondent i.e. an amount of about Rs. 35.08 crore,
out of which an amount of about Rs. 3.2 crores was awarded vide the
Award. These claims are predicated on the arbitral finding that the delays
are primarily attributable to the petitioner, justifying damages.
50. The primary contention raised by the petitioner, apropos these claims is
that the Arbitrator exceeded its jurisdiction by granting compensation
despite clear bar contained in the terms and conditions of the Contract. It
is contended by the petitioner that the respondent in terms and conditions
of the Contract is only entitled to extensions and not compensation. The
petitioner has relied on Ramnath International Construction Pvt. Ltd.
(Supra) to support its contention that when there is a contractual
stipulation prohibiting compensation in case of extension of time, the
same cannot be awarded by the Arbitrator.
51. The Award of these claims is contended by the petitioner to be in
violation of Clause Nos. 6(a), (b) and 40(h), (p)(ix) of the Special
Conditions of the Contract, as they bar any claims for delays and only
allows remedy of extension of time. The relevant clauses read as under:
“Clause 6: Disruption of Progress
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(a) The Contractor shall give adequate but not less than 4
weeks written notice to the PC whenever planning or
progress of the works is likely to be delayed or disrupted
unless any further drawing or order, including a direction,
instruction or approval, is required to be issued by the PC.
The notice shall include details of the drawing or order
required explaining why and by when it is required and of
any delay or disruption likely to be suffered if it is late .
(b) If by any reason of any failure or inability of the PC to
issue within 4 weeks any drawing or instruction for which
notice has been given by the Contractor in accordance with
Sub-clause 1 and the Contractor suffers delay when the PC
shall after due consultation with the Contractor recommend
to the Client any extension of time under respective clause.
Notwithstanding anything stated above, the Contractor shall
not be eligible for any financial compensation arising out of
the above.
Clause 40 Miscellaneous
(h) Delay in starting the work
No compensation shall be allowed for any delay caused in
the starting of the work on account of acquisition of land,
encroachment or in the case of clearance of works, on
account of any delay in according sanction to estimates in
issue of drawings, decisions etc. however, the extension of
time shall be granted as per relevant conditions of Contract.
….
(p) Miscellaneous
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(ix) No idling charges or compensation shall be paid for
idling of the Contractor’s labour, staff or P&M etc. on any
ground or due to any reason whatsoever.”
52. The respondent contends that these claims awarded under several heads
for additional expenses during the period of prolongation, are based on
detailed reasoning and despite presence of the aforesaid clauses, where
the delays are attributable to one party i.e. the petitioner, the respondent
is entitled to compensation/damages under Section 53, 54, 55 and 73 of
the Contract Act. The respondent to support his contention has placed
reliance on Vishwa Shanti Builders (India) Pvt. Ltd. (Supra) and K.N.
Sathyapalan (Supra).
53. The Arbitrator in the Award has categorically observed that the
principles of compensation apply in case of prolongation of Contract
arising due to breach as the delays were attributable to the petitioner
only. The relevant portions of the Award read as under:
“6.1.6 The Claimant submitted that, as per section 53,54,55
and 73 of the Indian Contract Act, 1872, under
circumstances of failure in performance, promises and
breach on part of the Respondent, the Respondent is liable
for compensation for the losses suffered by Claimant as a
consequence of the said lapses of the Respondent. The
Claimant argued that as per sections of Indian Contract
Act, 1872 which clearly provides that when one party who
has been compelled to incur loss due to the failure of the
other party, such party is entitled for compensation.
6.1.7 The Claimant cited following case laws in support of
this claim:
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i. The Hon’ble Supreme Court in the case of K.N.
Sathyapalan (Dead) by LRs. Vs. State of Kerala and
Anr. (2007) 13 SCC 43
ii. The Hon’ble High Court of Delhi in National
Highways Authority of India Vs. Hindustan
Construction Company Ltd. 2016 (2) Arb. LR 1 (Delhi)
(DB).
6.1.8 The Claimant submitted that ordinarily parties would
be bound by the terms agreed upon in the Contract but in
the event of one of the parties is unable to fulfill its
obligations under the Contract which has direct bearing,
the Arbitrator is vested with the authority to compensate the
injured party for the extra cost incurred by him as a result
of failure of the other party. The Claimant has also
submitted that in the light of various Court Judgments, the
aggrieved party needs to be compensated on account of
delay in completion of work due to breaches committed by
the other party.
….
6.2.1 The Respondent referred Contract Clauses 6 of SCC,
Clause 40(a),(b),(h),(p) of SCC and submitted that various
reasons like delays due to rainfall, cold weather etc. for
which holding Respondent liable is beyond any logical
sense. The Respondent had argued that despite clearance of
the said hindrances, the Claimant has miserably failed to
complete the works within the justified extension granted to
it. This irresponsible act of the Claimant has resulted in
delay in creation of required infrastructure for this
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prestigious institute, as argued by Respondent. It is clarified
also that after considering all hindrances the competent
authority has decided to grant interim regular extension of
time for completion of work up to 18 th July 2012 only. The
Respondent argued that as the rest of the delay up to point
of consideration lies on part of the Claimant, the burden of
delay should also be borne by the Claimant only.
….
6.3.2 The Claimant has worked out the expenses on actual
audited account basis for showing the costs incurred as per
their books of accounts on machinery, manpower and
various overheads. These costs were claimed in the
prolonged period extending from contractual completion
from August 2011 to till May 2015 for nearly 60 months.
6.3.3 In Construction Contracts, the Courts have also
upheld the principles of compensation in case of
prolongation of contracts arising due to breach. For
quantification of overheads application of formula is also
recognized by Indian courts and Hudson’s formula is more
popular having judicial acceptability. This formula is based
on the practice that contractors do add the overheads as
percentage loaded to the direct costs to arrive at bid costs.
As per CPWD standard practice, 15% is allowed towards
Contractor’s profit & overheads on the analysis of rates for
the items. In building trade, the site, general office & other
overheads may be to the tune of at least 5 to 8% even as per
the CPWD practice. Generally the contractor recovers the
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costs incurred on resources deployed including overhead
costs from the turn over achieved.
Award:
Towards Claims No. 6, 7, 8 and 9, the claimant has totally
claimed of Rs. 35,08,71,374/- under various heads of
machinery hire charges, manpower costs, site overheads &
establishment costs and head office, regional office
expenses in the prolongation period.
The average monthly turnover which is lost due to
prolongation of work is assessed as Rs. 7.5 Cr. in above. An
under recovery of 1% expenses per month on lost turnover
summing up all types of overheads and expenses claimed
under Claims number 6,7,8 and 9 is judged genuine and
reasonable. Thus for 43 months prolongation from
Sept.2011 to up to March2015, a compensation of Rs. 7.5
Lakhs per month that is 1% of Rs. 7.5 Crores is awarded.
Thus a total of Rs. 3,22,50,000/-, is awarded towards claim
numbers 6, 7, 8 and 9.”
(Emphasis Supplied)
54. A perusal of the arbitral Award and written statement dated 18.02.2016
filed by the petitioner before the Arbitrator, makes it clear that the
petitioner raised this identical contention even before the Arbitrator as
well. Raising this contention again in a Section 34 jurisdiction is nothing
but reiteration of the same pleadings before this Court. The Award is well
reasoned, based on correct application of principle of law, and passed
after taking into consideration all the material evidence placed on record.
Thus, the Arbitrator has rightly adopted a plausible view by making a
categorical finding that in construction contracts the courts have applied
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principles of compensation in cases of breach of contract. The Arbitrator
has not awarded these claims in lump sum rather the Arbitrator has also
made categorical formula based technical finding.
55. The reliance placed by the petitioner on Ramnath International
Construction Pvt. Ltd. (Supra) is misconceived and unfounded, as that
decision was based on a very widely worded condition of the contract,
namely Clause No. 11, which reads as under:
“11. Clause 11 of the General Conditions of Contract
relates to time, delay and extension. We extract below the
portions of clause 11 relevant for our purpose:
11. Time, delay and extension.–(A) Time is of the essence
of the contract and is specified in the contract documents or
in each individual works order.
As soon as possible, after contract is let or any substantial
work order is placed and before work under it is begun, the
GE and the contractor shall agree upon the time and
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. It shall
include the forecast of the dates for commencement and
completion of the various trades, processes or sections of
the work, and shall be amended as may be required by
agreement between the GE and the contractor within the
limitation of time imposed in the contract documents or
works order. If the work be delayed:
(i) by force majeure, or
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(ii) by reason of abnormally bad weather, or
(iii) by reason of serious loss or damage by fire, or
(iv) by reason of civil commotion, local combination of
workmen, strike or lockout, affecting any of the tradesmen
employed on the work, or
(v) by reason of delay on part of nominated sub-contractors,
or nominated suppliers which the contractor has, in the
opinion of GE, taken all practicable steps to avoid, or
reduce, or
(vi) by reason of delay on the part of contractors or
tradesmen engaged by the Government in executing work
not forming part of the contract, or
***
(viii) by reason of any other cause, which in the absolute
discretion of the accepting officer is beyond the contractor’s
control;
then in any such case the officer hereinafter mentioned may
make fair and reasonable extension in the completion dates
of individual items or groups of items of works for which
separate periods of completion are mentioned in the
contract documents or works order, as applicable.
***
(B) If the works be delayed:
(a) by reason of non-availability of government stores in
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(b) by reason of non-availability or breakdown of
government tools and plant listed in Schedule C;
then, in any such event, notwithstanding the provisions
hereinbefore contained, the accepting officer may in his
discretion, grant such extension of time as may appear
reasonable to him and the same shall be communicated to
the contractor by the GE in writing. The decision so
communicated shall be final and binding and the contractor
shall be bound to complete the works within such extended
time.
(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.”
(Emphasis Supplied)
56. The Hon‟ble Supreme Court treated the above stated Clause as a specific
consent by the contractor to accept only extension of time in full
satisfaction of any delay claims. The relevant paragraph of the judgment
reads as under:
“18. In spite of having held that both were responsible for
the delay and having noticed the arguments based on clause
11(C) of the General Conditions of Contract, the Arbitrator
proceeded to award damages on the ground of delay on the
reasoning that the contractor is entitled to compensation,
unless the employer establishes that the contractor has
consented to accept the extension of time alone in
satisfaction of his claim for delay. As rightly held by theDigitally Signed
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High Court, which decision we have affirmed while
considering Question (i), clause 11(C) of the General
Conditions of Contract is a clear bar to any claim for
compensation for delays, in respect of which extensions
have been sought and obtained. Clause 11(C) amounts to a
specific consent by the contractor to accept extension of
time alone in satisfaction of his claims for delay and not
claim any compensation. In view of the clear bar against
award of damages on account of delay, the Arbitrator
clearly exceeded his jurisdiction, in awarding damages,
ignoring clause 11(C).”
(Emphasis Supplied)
57. However, in the present case, the Clause Nos. 6(a), (b), 40(h) and
40(p)(ix) are narrow in nature and are not structured as comprehensive
clauses covering all prolongations caused by breach of the either party
i.e. the petitioner or respondent, the Arbitrator here has found the delays
to be attributable to the petitioner alone on the basis of hindrance
registers, and has not disregarded the contractual clauses but has
consciously reconciled them with Sections 53, 55 and 73 of the Contract
Act while awarding damages.
58. Additionally, the judgment of Ramnath International Construction Pvt.
Ltd. (Supra) is distinguishable from the factual backdrop of the present
case as from a perusal of the paragraph No. 18 of the judgment as
reproduced above, the delays were attributable to both the parties, which
was not the case in the instant petition. A Coordinate Bench of this Court
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in Simplex Concrete Piles (India) Ltd. v. Union of India18, also made
the following observations:
“19. 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.”
18
2010 SCC OnLine Del 821.
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59. For the said reasons, the findings of the Arbitrator are sound, reasonable
and based on a plausible view. Hence, no interference with the same is
warranted under Section 34 of the Act.
Claim No. 1: Release of wrongfully withheld amount from RA Bill-33
& 34.
60. The Arbitrator vide interim award dated 30.12.2016 has awarded Rs.
2,95,79,465/- apropos the Claim No. 1 towards the amount withheld
from the respondent‟s running account bills, without interest which was
decided later by the Arbitrator at the time of final Award. The Award is
based on the finding that the withholding of amount for non-achievement
of milestone Nos. 4 and 5, was wrong as pursuant to the EOT‟S
milestone Nos. 4 and 5 also needed to be rescheduled. It was further held
by the Arbitrator that milestone Nos. 1, 2, and 3 were rescheduled
pursuant to the EOT‟s and hence there was no reason for not
rescheduling milestone Nos. 4 and 5.
61. Notably, the findings of the Arbitrator in award of Claim No. 1 in the
final Award is a reproduction of the findings made in the interim award
dated 30.12.2016 wherein the claim was adjudicated except the interest
component which was adjudicated to be paid in the final Award.
62. The petitioner raises two fold contentions with respect to Claim No. 1,
firstly that the Arbitrator failed to distinguish between a regular
extension and a provisional extension. In construction contracts,
provisional extensions, are granted merely to keep the contract alive and
does not mean that the delay of the contractor is condoned or admitted.
In the present case despite regular extensions, provisional extensions
were granted while explicitly reserving the right to levy compensation
for delays under Clause No. 2 of the GCC. Secondly, rescheduling of
milestone applied only upto regular EOT i.e. granted upto 12.10.2012
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and recovery in March 2013 for persistent non-achievement of milestone
Nos. 4 and 5 was valid, rendering this claim of the Award violative of
Section 28(3) of the Act.
63. The Arbitrator apropos this Claim observed that as per Clause No. 5 of
the GCC, Schedule F, the original milestones in the Contract were meant
to be mutually decided between the parties and as per Clause No. 5.4 of
the GCC, the milestones were required to be adjusted by the Engineer in
Charge when extensions of time were granted. However, in the instant
factual matrix, the petitioner granted several EOT‟s but never
rescheduled milestone Nos. 4 and 5 in accordance with the new
timelines. The Arbitrator categorically went on to hold that the amount
was withheld by the petitioner based on the originally agreed milestones,
which are irrelevant in light of the several EOT‟s granted by the
petitioner without rescheduling the said milestones. Additionally, the
Arbitrator held that the delays were attributable to the petitioner even
beyond the period of regular EOT. The relevant portions of the Award
read as under:
“Finding of the Tribunal:
1.6 I have carefully considered the above arguments of both
the parties, the documents and evidence produced before
me.
1.7 In clause 5 of GCC, Schedule ‘F’ Page 107 of the
Contract, (Page 85 of CV -1) it is stipulated that Mile
stone(s) will be mutually decided on award of work. Also as
per clause 5.4 of GCC Engineer-in-charge has to determine
the EOT and reschedule the Milestones for completion of
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granted EOT but had not rescheduled the milestones. From
the records placed before me it is seen that the Respondents
had withheld sum of amount Rs.2,95,79,465/- from the RA
Bills of 33 & 34 of the Claimants. Also it is evident from the
hindrance register filed by the Respondents that some of the
hindrances which were persisting beyond the period of
regular EOT i.e. 18.07.2012. Such hindrances were
continuing all along.
1.8 As can be seen from the records, withholding of above
referred amount was initiated based on originally agreed
mile stones stipulated in the agreement well before the
determination of EOT. It was imperative upon the parties to
agree on rescheduling the milestones on granting of EOT.
Because of this the original agreed schedule for milestones
have lost their relevance. Furthermore the dispute between
the parties is only regarding non achievement of 4 th, 5th
milestones. Since milestones 1st , 2nd, 3rd were achieved
within the extended period, which is not denied by the
Respondents. Hence, there is no dispute between the parties
on achieving the first three milestones.
AWARD:-
After deliberating in detail and considering all the
submissions of parties, documents and evidence filed, the
Tribunal awards that the withheld amount of Rs.
2,95,79,465/- on account of non achievement of milestones
from the Claimants bill shall be refunded to the Claimants.
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The Claimants have claimed interest @ 15 % P A for the
above claim amount separately under Claim no.13. From
the records placed before me I find that the amount was
withheld while releasing payments for 33,34th RA bills on
18-2-2014.
The Tribunal Awards the simple interest at a rate 12% per
annum on the above amount to be refunded from the date of
recovery i.e.l8.2.2014 to the date of the award.”
64. The relevant Clause No. 5 of the GCC reads as under:
“Clause No. 5.1 of GCC
As soon as possible after the contract is concluded, the
contractor shall submit a Time and Progress Chart for each
mile stone and get it approved by the Department. The
Chart shall be prepared in direct relation to the time stated
in the contract documents for completion of items of the
works. It shall indicate the forecast of the dates of
commencement and completion of agreement between the
Engineer-in-Charge and the Contractor within the
limitations of time imposed in the Contract documents, and
further to ensure good progress during the execution of the
work, the contract shall in all cases in which the time
allowed for any work, exceeds one month (Save for special
jobs for which a separate programme has been agreed
upon) complete the work as per mile stones given in
Schedule ‘F’.
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Sl. No. 13 amendment no 1 to tender document:
Five (5) Mile Stone(s) will be mutually decided on award of
work based on the work programme submitted by
contractor. The amount to be withheld for non-achievement
of each mile stone· will be 1% of the tendered value.
Clause No. 5.4 of GCC
In any such case the Engineer-In-charge may give a fair
and reasonable extension of time and reschedule the
milestones for completion of work. Such extension shall be
communicated to the Contractor by the Engineer-in-charge
in writing within 3 months of the date of receipt of such
request. Non application by the Contractor for Extension of
time shall not be a bar for giving a fair and reasonable
extension by the Engineer-in-charge and this shall be
binding on the contractor.”
65. I am in full agreement with the view of the Arbitrator that once extension
is granted in view of Clause No. 5, the originally fixed milestone
becomes irrelevant and any withholding cannot be allowed on the basis
of not achieving the earlier fixed milestones. The reasoning adopted by
the Arbitrator is cogent, correct and based on interpretation of Clause
No. 5 of the GCC, which mandates rescheduling of the milestones in
cases of grant of EOT. The view taken by the Arbitrator is not only a
plausible view but also a reasonable one which is substantiated by
contractual terms and evidence available on record.
66. The findings of the Arbitrator are based on plausible interpretation of
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Clause No. 5 of the GCC, which cannot be reinterpreted/reappreciated
by this Court under Section 34 of the Act. Thus, no ground warranting
interference by this Court is established.
Claim No. 2: Reimbursement of increase in taxes and duties under
Clause 38 of GCC of contract (VAT, Entry Tax and Central Excise).
67. Claim No. 2 pertains to reimbursement of a sum of Rs. 38,10,057/‑
towards increase in taxes and duties during the currency of the Contract,
claimed by the respondent under Clause No. 38 of the GCC. The
Arbitrator has allowed this claim, holding that once the statutory levies
were in fact increased and duly paid by the respondent (contractor) in
relation to the works, the petitioner (employer) was bound, under the
Contract, to reimburse the same.
68. The petitioner has challenged the findings of the Arbitrator apropos the
Claim No. 2 only on the ground that the respondent failed to lodge the
claim within 30 days time period as stipulated under Clause No. 38 of the
GCC. The same contention was also raised by the petitioner before the
Arbitrator. The findings of the Arbitrator in favour of the respondent on
this contention are stated to be patently illegal, perverse and unjust.
Clause No. 38 of the GCC reads as under:
“Clause 38: Conditions for reimbursement of levy/taxes if
levied after receipt of tenders
i. All tendered rate shall be inclusive of all taxes and levies
payable under respective statutes. However, pursuant to the
constitution (46th amendment Act, 1982), if any further tax
or levy is imposed by statute, after the last stipulated date
for the receipt of tender including extensions if any and the
contractor thereupon necessarily and properly pays such
taxes/levies, the contractor shall be reimbursed the amount
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so paid, provided such payments, if any, is not, in the
opinion of the superintending engineer (whose decision
shall be final and binding on the contractor) attributable to
delay in execution of work within the control of the
contractor.
ii. The contractor shall keep necessary books of accounts
and other documents for the purpose of this condition as
may be necessary and shall allow inspection of the same by
a duly authorized representative of the Government and/or
the Engineer-in-charge and further shall furnish such other
information/document as the Engineer-in-charge may
require from time to time.
iii. The contractor shall, within a period of 30 days of the
imposition of any such further tax or levy, pursuant to the
constitution (Forty Sixth Amendment) Act 1982, give a
written notice thereof to the Engineer-in-charge that the
same is given pursuant to this condition, together with all
necessary information relating thereto.”
(Emphasis Supplied)
69. Per contra, the respondent argues that the petitioner has only reiterated
the same contentions as raised before the Arbitrator, and the Arbitrator
has already in a detailed and reasoned manner adjudicated these
contentions of the petitioner. The respondent to substantiate the decision
of the Arbitrator has placed reliance on Mahesh Bansal (Supra) and
Associated Construction Co. (Supra), where courts have upheld
reimbursement of statutory levies despite procedural lapse of furnishing
notice, so long as the substantive liability under the contract stood
established.
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70. The Arbitrator with regards to the Claim No. 2 has noted that the
petitioner has neither disputed the admissibility of the claim nor the
quantification of it, but has only raised a defence limited to the ground
that the claim was not lodged within 30 days. The Arbitrator referred to
the Clause No. 38 of the GCC to hold that the said Clause provides for
the notice to be given, but it does not stipulate that if notice is not given,
the otherwise legitimate dues will not be reimbursed. Thus, in absence of
any specific bar, the amounts paid in accordance with revised taxes are
bound to be reimbursed. The relevant operative portions of the Award
read as under:
“2.3.1 In Clause 38 of GCC it is stipulated that pursuant to
the Constitution (46th Amendment Act, 1982), if any further
tax or levy is imposed by Statute, after the last stipulated
date of receipt of tender including extensions if any and the
contractor thereupon necessarily and properly pays such
taxes/levies, the contractor shall be reimbursed the amount
so paid. Further the contractor is required to keep the
necessary records for the purpose of seeking
reimbursement.
….
2.3.3 From the records placed before me it is seen that the
Claimant had paid such increase in taxes time to time
during execution of work and requested the Respondent for
reimbursement of the same as per the provisions of the
Contract and based on the supporting documents provided
to it.
2.3.4 As can be seen from the record, the Respondent
neither disputed the admissibility of claim under this clause
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nor the quantification of the reimbursement of the taxes
filed by the Claimant. But only submitted and argued in
their submissions that the claim was not lodged within 30
days. Furthermore, the dispute between the parties is only
regarding limitation of claim and the only objection taken
by the Respondent is that notice as required under Clause
38 of GCC had not been served on the Respondent before
making this claim. As can be seen the above Clause
provides that notice had to be given but that by itself is no
ground to reject the claim if otherwise found due. Clause 38
of GCC does not stipulate that if notice is not given then
statutory increase in taxes paid by the contractor would not
be reimbursed. However, the work is in progress and the
Claim is of progressive in nature. In the absence of any bar
that the Claimant having paid the revised taxes which is
calculated based on the actual paid challans, this claim
appears justified.
Award: An amount of Rs. 38,10,057/- is awarded to the
Claimant against this Claim towards reimbursement of
taxes and duties paid.”
(Emphasis Supplied)
71. In this view of the matter, the line of reasoning followed by the
Arbitrator cannot be characterised as perverse or patently illegal. Clause
No. 38 (iii) of the GCC as reproduced undoubtedly embodies a
stipulation regarding notice within a certain period, but the same Clause
does not in any possible way provide that failure to comply with the
provision concerning notice within 30 days shall result in nullifying that
right of reimbursement or the same will render the claim for otherwise
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legitimate dues as non-maintainable. Treating such a stipulation of notice
as directory rather than mandatory and in the absence of an express
stipulation, the interpretation of the Arbitrator is a plausible construction
of the Contract. It cannot, therefore, be said that the Arbitrator has
ignored the terms of the Contract or exceeded the jurisdiction. The
Arbitrator has interpreted Clause No. 38 and has made a finding which is
also in consonance of the judgments of this Court.
72. The respondent to substantiate the decision of the Arbitrator has correctly
placed reliance on Associated Construction Co. (Supra), wherein a
Coordinate Bench of this Court relied on Mahesh Bansal (Supra), to
hold that mere non-compliance with provision for notice is not in itself a
ground to invalidate a claim otherwise valid and when the Arbitrator
bases his decision on evidence based formula/methodology/admitted
amount, the same should not be interfered under Section 34 jurisdiction.
The relevant paragraphs of Associated Construction Co. (Supra) read as
under:
“31. It is not disputed by the petitioner that almost a similar
controversy has already been adjudicated upon by this
Court in the case titled as Mahesh Bansal v. Executive
Engineer (FCD. 1) (1995) 34 DRJ 249. Single Judge of this
Court in the said case was concerned with a similar claim
for labour escalation under a similar clause as in the
present case, and proceeded to deal with the objections to
the arbitral award in the said case as under:
“8. So far as Claim No. 3 is concerned, the claimant had
claimed increase in the cost of labor due to increase in
labor wages on account of Delhi AdministrationDigitally Signed
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Notification. Minimum labor rates were quoted at the time
the lenders were submitted. These rates were revised w.e.f.
1st June, 1984 by Delhi Administration. Hence the petitioner
was duly bound to pay the revised wages to his labor. The
only objection taken by the respondent is that notice as
required under Clause 10(c) had not been served on the
respondent before making this claim. Secondly record had
not been produced to substantiate the same. Both these
objections have been turned down by the Arbitrator
primarily on the ground that the respondent submitted a
statement showing the amount of work done after 1st June
1984 i.e. exhibit „R-11‟. He also look into consideration the
labor component from exhibit „R11‟ which worked out to be
23.5% as per the norms of C.P.W.D. Therefore, he
concluded that the petitioner would be justified to claim
escalation as worked out on the basis of exhibit „R-11‟ while
absorbing 10% and, therefore, concluded that award of Rs.
3,620.00 would be just as against the claim of Rs.
20,700.00. So far as serving of notice is concerned,
admittedly Clause 10(c) provides that notice had to be given
but that by itself is no ground to reject the claim if otherwise
found due. Clause 10(c) does not stipulate that if notice is
not given than statutory increase in labor wages paid by the
contractor would not be given. In the absence of any bar,
the Arbitrator was within his right to conclude that the
contractor having paid the revised wages which he
calculated on the assumed labor component of 23.5%; as
per the norms of the C.P.W.D. and therefore, relying on the
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document filed by the respondent exhibit „R-11″ he
calculated the escalation of the labor component and
awarded the amount. I see no reason to interfere in the
same.”
32. A reading of the aforesaid judgment would show that
similar objections to the award have been raised by the
petitioner in the present case have been repelled. The
approach taken by the Arbitrator in the present case is
similar to the approach that has been upheld by this Court
in the aforesaid case.
33. It appears from the record that the Arbitrator has
gone strictly by the admitted amount of work done in the
present contract by the petitioner and extracted the labor
component from the same. As already noted hereinabove,
the Arbitrator has thus based his formula/methodology only
on the relevant statutory notifications evidencing the
increase in minimum wages and RAR bills, to evidence the
work actually executed, which have admittedly been
certified by the petitioner itself at different stages of the
work.
34. It is not the case of the petitioner that the subject
contract provide for a different formula to be applied in
order to arrive at the quantification of the escalation due. It
is the petitioner who had appointed the Arbitrator, who is
not only a technical person but is also incidentally a serving
officer of the petitioner. The very purpose behind the
appointment of technical persons as Arbitrators is that they
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may use their expertise and experience in the field to be able
to resolve technical and trade-specific disputes between the
parties. Once such a technical and factual determination
has been carried out, it is not open to the petitioner to make
a grievance about the same merely because the said
determination was not to its liking. Single Judge of this
Court in the case of P.C. Sharma and Co. v. Delhi
Development Authority in CS(OS) No. 2057A/1996 decided
on 2nd July, 2010 in this regard has opined as under:
“…The respondent DDA had the choice to appoint an
Arbitrator and appointed a technical person rather than a
legal person. The sole purpose of appointment of a technical
rather than a legal person as an Arbitrator is to take benefit
of the special knowledge of the Arbitrator relating to the
matters in dispute.”
35. In light of the above, the challenge by the petitioner
to the findings of the Arbitrator under Claim No. 5 has no
force and this Court is not inclined to interfere with the said
findings.”
(Emphasis Supplied)
73. The Arbitrator‟s view is both possible and reasonable and interference is
unwarranted. Accordingly, the award on Claim No. 2, granting
reimbursement of increased taxes and duties under Clause No. 38 of the
GCC, rests on a tenable interpretation of the Contract.
Claim No. 3: Reimbursement of increase in taxes and duties under
Clause 20 and 19B iv (b) of GCC of Contract (Minimum Wages Act).
74. The Claim No. 3 pertains to reimbursement of additional expenditure
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incurred by the respondent on account of increases in statutory payments
of minimum wages and other statutory obligations. The respondent has
substantiated this claim by relying on Clause No. 20 of the GCC, which
obliges the respondent to comply with the Minimum Wages Act, 1948,
and other labour laws, read with Clause No. 19B(iv)(b) of the GCC. The
Arbitrator accepted the contentions of the respondent and allowed the
claim.
75. Apropos this Claim, the petitioner has raised two-fold contentions.
Firstly, the Arbitrator has committed grave error by basing his decision
on Clause No. 38 of the GCC, despite the fact that the respondent itself
has not claimed the amount under Clause No. 38 of the GCC. Secondly,
the respondent relied on Clause 10CC of CPWD contracts for
quantification and the same was treated as correct by the Arbitrator.
76. Additionally, the petitioner also relies upon paragraph No. 3, Volume IV
of “Preamble to Bill of Quantities” to contend that the rates quoted are
not amenable to change for any reason, the paragraph No. 3 reads as
under:
“3. Rates quoted shall be firm and shall not be subject to
any price variation due to increase in labour wages, cost of
material etc., or any other price variations due to any
reason whatsoever whether during the stipulated period of
execution or during the extended period of completion if
any.”
77. At this stage, it is pertinent to see Clause No. 20 and 19B(iv)(b) of the
GCC and the same read as under:
” Clause 19B Payment of wages:
Payment of wages:
…
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(iv.)…
(b). Under the provision of Minimum Wages (Central)
Rules, 1950, the contractor is bound to allow to the labours
directly or indirectly employed in the works one day rest for
6 days continuous work and pay wages at the same rate as
for duty. In the event of default, the Engineer-in-Charge
shall have the right to deduct the sum or sums not paid on
account of wages for weekly holidays to any labours and
pay the same to the persons entitled thereto from any money
due to the contractor by the Engineer-in-Charge
Concerned.
In the case of Union Territory of Delhi, however, as the all
inclusive minimum daily wages fixed under Notification of
the Delhi Administration No. F. 12(162) MWO/
DAB/43884-91, dated 31.12.1979 as amended from time to
time are inclusive of wages for the weekly day of rest, the
question of extra payment for weekly holiday would not
arise.
….
CLAUSE 20 Minimum Wages Act to be complied with
The Contractor Shall comply with all the provisions of the
Minimum Wages Act, 1948 and Contract Labour
(Regulation and Abolition) Act, 1970, amended from time to
time and rules framed thereunder and other labour laws
affecting contract labour that may be brought into force
from time to time.”
(Emphasis Supplied)
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78. From a perusal of the Clause Nos. 19B(iv)(b) and 20 of the GCC, it is
clear that together both of these clauses cast a mandatory and a
continuing obligation on the respondent to comply with the payment of
statutory wages as revised from time to time.
79. The Arbitrator while dealing with this claim has relied on the Clause No.
38 of the GCC, which provides that if any tax or levy is imposed after the
last stipulated date of receipt of tenders, and the respondent has duly paid
the same, the respondent shall be reimbursed the amount so paid.
80. The Arbitrator in this regard made a factual observation that the claimant
had in fact paid minimum wages increased from time to time to the
labour engaged, and had claimed reimbursement from the petitioner. The
respondent had produced supporting documents evidencing such
payments. He further noted that the claimant had quantified its claim by
adopting the labour component and formula analogous to Clause No.
10CC of the CPWD contract, treating the present Contract as similar in
structure. The Arbitrator granted actual expenditure incurred/actual
payments made to labour in this Claim. The relevant portions of the
Award read as under:
“3.3.1 In Clause 38 of GCC it is stipulated that pursuant to
the Constitution (46th amendment Act, 1982), if any further
tax or levy is imposed by Statute, after the last stipulated
date of receipt of tender including extensions if any and the
contractor thereupon necessarily and properly pays such
tax/levies, the contractor shall be reimbursed the amount so
paid. From the records placed before me it is seen that the
Claimant had paid properly such increase in Minimum
Wages to labour engaged from time to time during
execution of work and requested the Respondent for
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reimbursement of the same as per the provisions of the
Contract and based on the supporting documents provided
to it.
3.3.2 As can be seen from the record, the Claimant had
quantified its claim as per Clause 10 CC of the CPWD
contract as the present contract is also similar to CPWD
contracts in which the labour component for escalation is
adopted as 25%. The Claimant has submitted the actual
expenditure incurred/ actual payments made to labours in
support of above claim. These are the records maintained
during execution and certified. Further the subject contract
was also prolonged for reasons not attributable to the
Claimant and grant of extension of time by the Respondent
to this effect was also in place. In the light of above
judgments cited the court held that when the state has
agreed to reimburse the increased wages than those
prescribed or notified at the time of inviting tenders, it is
obligatory to reimburse such costs.
Award:
In view of the above findings, an amount of Rs.
1,44,71,999/- as against the claim of Rs. 6,98,63,141/- is
awarded on this Claim towards reimbursement of minimum
wages of labour, based on records produced .”
(Emphasis Supplied)
81. The first objection of the petitioner that the Arbitrator has substantiated
the Award on Clause No. 38 without jurisdiction is misconceived and
unfounded. The fact that the respondent, in its SOC, stressed on Clause
Nos. 20 and 19B(iv)(b) rather than Clause No. 38 does not mean that the
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Arbitrator was barred from referring to Clause No. 38 as the more
specific reimbursement provision while giving its findings. The
Arbitrator has not granted the claim by relying on something alien to the
Contract, it has merely located the correct clause that gives effect to the
same substantive right as the respondent claimed. Moreover, the
Arbitrator while noting the submissions of the respondent has also noted
a reference to Clause No. 38 of the GCC, the relevant portion of the
Award reads as under:
“3.1 Claimant’s Submissions:
3.1.1 The Claimant submitted that as per Clause 20 of GCC,
the Claimant should comply with all the provisions of the
Minimum Wages Act, 1948 and the Contract Labour Act,
1970 during execution of contract.
3.1.2 The Claimant submitted that as per Clause 38 (iii) of
GCC if any further tax or levy is imposed by statute after the
last stipulated date of receipt of tender including extensions
if any, and the Contractor thereupon necessarily and
properly pays such taxes/levies, the Contractor shall be
reimbursed the amount so paid.”
(Emphasis Supplied)
82. Be that as it may, the Arbitrator being the master of the quality and
quantity of the evidence, the appreciation of the terms of the contract is
the sole prerogative of the Arbitrator.
83. The second objection raised by the petitioner qua this claim is the
quantification of claim as per Clause No. 10CC of CPWD despite the
subject Contract not being same as CPWD contract. This objection is a
mere reiteration of the objection already raised before the Arbitrator and
duly adjudicated by him. The Arbitrator in the present case has only
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made a reference to the Clause 10CC of CPWD but has not relied on it,
the Arbitrator relied on the actual records for the purpose of allowing and
awarding the claim.
84. Third objection as regards to amenability of quoted rates to change in
view of paragraph 3 of the Preamble to BOQ, this particular objection
was also raised before the Arbitrator. I am of the view that this Clause
cannot be read in isolation and the same requires a comprehensive
reading along with other provisions of the Contract. Merely because
Arbitrator did not refer this particular Clause of the Contract in his
Award, the same cannot be used as a ground to assail the Award, when
the view taken by the Arbitrator is plausible view and based on cogent
reasons and evidence.
85. Moreover, the reliance placed by the respondent on the judgment of
Associated Construction Co. (Supra) is also well founded, as the dispute
adjudicated in that matter squarely substantiates the decision of the
Arbitrator in the present matter. The findings of the Arbitrator with
respect to quantum of the Claim are based on actual expenditure
incurred. Thus, the same does not warrant any interference by this Court.
The relevant paragraphs of the aforesaid judgment are already
reproduced in the paragraph No. 72 of this judgment.
86. To my mind, the view taken by the Arbitrator is a correct view based on
appreciation facts, which cannot be reappreciated by this Court under
Section 34 of the Act. Thus, there is no ground established by the
petitioner for warranting interference with the Award.
Claim No. 4: Extra items of work claimed under Clause 12 of GCC and
Clause 22, 23 of SCC.
87. The Claim No. 4 pertains to the additional items/substituted items
executed during the execution of works by the respondent, in accordance
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with the instructions of the petitioner. These extra items of work were
claimed under Clause No. 12 of the GCC and Clause Nos. 22 and 23 of
the Special Conditions of the Contract.
88. The Claim No. 4 majorly relates to the payment for two extra executed
items, the first one being washed stone grit plaster with marble chips and
the second one being laying in position the ready-mix concrete (RMC),
and the petitioner has assailed the Award on three broad grounds:
i. That the extra items must be claimed in strict compliance of
Clause 12, more specifically Clause No. 12.2 of the GCC.
ii. That the dispute survived only with respect to the RMC as the grit
plaster issue had already been approved during the site visit on
26.11.2016 and paid. The same fact had already been conveyed to
the Arbitrator vide petitioner‟s written arguments submitted during
the arbitral proceedings.
iii. That the RMC was already covered by agreement item No.
3.8/DSR item No. 5.33, and the Arbitrator has erred in relying
upon item No. 5.37 of the DSR.
89. From a bare perusal of the submissions and findings recorded by the
Arbitrator, it is clear that the petitioner has only reiterated its arguments
which were contended before the Arbitrator. The relevant portions of the
Award read as under:
“4.1 Claimant’s Submissions:
4.1.1 The Claimant submitted that during the execution of
works there were additional items/ substituted items which
were executed as per the directions/Instructions of the
Respondent. The Claimant submitted that for these extra
items of works it had submitted its rates along with detailed
rate analysis in accordance to contract clause 12 of GCC.
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The list of extra item for which the rates are not finalized by
the Respondent are listed at page 93 of SOC.
4.1.2 The Claimant submitted that during the proceedings
as per the directions of AT, the Respondent finalized the
rates for almost all aforesaid extra items except for only two
items pending/disputed. One such item is Washed stone grit
plaster at sl.no.6 of the list of extra items at page 93 of SOC
and the other is Providing and laying in position Ready Mix
Concrete (RMC) at Sl.no.7 of the list of extra items at same
page.
4.1.3 The Claimant submitted that the external plaster is to
be washed stone grit plaster with ordinary stone chips of 10
mm nominal size. But the Claimant has executed the work
as per the drawings/ details for finishing works issued by
the Respondent at a later date during execution of work,
which envisages that the grit plaster with marble chips
instead of ordinary stone chips. As the marble chips are
much costlier in comparison to ordinary stone chips the
Claimant has submitted the extra item along with rate
analysis for extra costs towards costlier marble chips,
which is a substituted item.
4.1.4 The Claimant pleaded that the difference in market
rates for ordinary-stone and marble is huge. The Claimant
also argued that the rate quoted at the time of submission of
bid was based on stone chips only as per item nomenclature
intender. The Claimant argued that during execution the
claimant was asked to execute the item with marble chips
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and hence it is legitimately entitled for above claim of extra
item of grit plastering using marble chips.
4.1.5 The Claimant during arguments on 21.11.2016
submitted a revised rate analysis as per then prevailing
market rate for the above extra item along with copy of
invoices to support the actual procurement rate of marble
chips and other materials for finalization of rates. The
Claimant submitted that the revised rate is Rs. 398.81 per
sqm. whereas it is being paid a rate of Rs. 266.66 per sqm.
And it is entitled for difference of rate of Rs.l32.15.
4.1.6 The Claimant submitted that another extra item
beyond the scope of work executed was of Ready Mixed
Concrete (RMC) which was not covered under BOQ item
provided in the contract. The Claimant argued that the
Respondent had wrongly incorporated the item from DSR
(Delhi Schedule of Rates) which does not cover the scope of
RMC. The DSR item under which the scope of work
executed for RMC is covered under DSR item no. 5.37.
4.1.7 The Claimant submitted that the Claimant has used
Ready Mixed Concrete manufactured in fully automatic
Batching plant and transported the same to job site by
transit mixers in accordance to contract clause 40, para
P(ii) of Special conditions of contract (SCC). For such an
item the rate is catered against item no.5.37 of DSR. The
Claimant argued that the item in BOQ under which this was
being paid which does not cover the scope of RMC.
4.1.8 The Claimant submitted that the scope of work for
RMC also includes transit mixer for transporting RMC to
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site of work, having continuous agitated mixer which was
not covered under the scope of BOQ item 3.8. The Claimant
submitted that as the work was executed by the Claimant in
accordance to contract clause 40(P)(ii) of SCC and with
similar description of work as per DSR item 5.37, the
Claimant has claimed the RMC as substituted item. Hence
the Claimant as rightly claimed the aforesaid substituted
item as per the terms of the agreement as pleaded by
Claimant. The Claimant has submitted the photographs as
evidence of deploying RMC plant and Transit mixers for
executing concrete by RMC against the Respondent’s
arguments that no RMC plant was deployed. The Claimant
submitted that it submitted a rate analysis for substituted
item of RMC for Rs. 4932.69 per Cu.m. and the payment
with BOQ rate of Rs. 4695.94 per Cu.m is being paid by the
Respondent. The Claimant argued that it is entitled for the
difference of these rates.
4.2 Respondent’s submissions:
4.2.1 The Respondent submitted that as per Clause 12 of
GCC the Contractor may seek extra rate within fifteen days
of receipt of order or occurrence of items claim rates,
supported by proper analysis for the work. But the Claimant
was neither serious in raising the claims or submitting the
required details within 15 days of occurrence as per
contract clause and taken his own arbitrary time in
submitting the claims in the arbitrary format.
4.2.2 The Respondent submitted that the valid claims are
being scrutinized and processed soon after receiving the
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desired supporting details from the Claimants and valid
claims are approved by the competent authority. But the
Claimant has unnecessarily pressurizing the Respondents by
claiming arbitrary claims in terms of extra items like using
RMC plants instead of BMC plants and extra payments of
sand stone cladding on DSR items against BOQ rates etc.
4.2.3 The Respondent submitted that the major part of the
claimed extra item consists of use of marble chips in Grit
plaster amounting to Rs.62.17 lac and use of RMC plants in
RCC work amounting to Rs. 84.17 lac. It is mentioned that
these claims were raised much after the occurrence of these
items at site and also without any supporting base.
4.2.4 The Respondent submitted that the item of grit plaster
is always done in a particular combination using various
type and colour of stone chippings in particular grading.
The work is being executed based on approved design and
colour combination of stone chippings which includes
marble chips also. The Claimants claim for additional
amount for using marble chips is denied as the same is also
covered under broad category of stone chips as per
agreement item no 11.13 which states “top layer 15mm
cement plaster 1:0.5:2 (1 cement : 0.5 coarse sand : 2 stone
chipping 10 mm nominal size)”.
4.2.5 On the extra rate for RMC, the Respondent submitted
that the concrete was actually prepared using automatic
Batch Mix Concrete Plants and shifted to various location
of work sites using transit mixers in lieu of direct pumping
as specified in agreement item. The Respondent argued that
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the Claimant used the transit mixer for his own convenience
and that was neither forced by the Respondents nor
beneficial for the progress of work. Also the Respondent
argued that the Claimant executed the RCC work using this
system and the Respondent allowed this to avoid any
hindrance in work. The extra claim is based on another
DSR item in which concrete is brought from fully automatic
RMC plants being owned by third party and approved for
construction by the Client.
4.2.6 The Respondent vide its written submissions of
arguments dt: 10-4-2017 sent few invoice copies of which
are already submitted by Claimant and on record.
4.2.7 The Respondent submitted that as there is no deviation
from agreement items there should not be any extra claim
permitted and hence the claim of the claimant is denied.
4.3 Findings of the AT:
4.3.1 This Arbitral Tribunal observes that the BOQ item
no.13. 72 for “washed stone grit plaster” consist of ordinary
stone chips of 10 mm nominal size and not with marble
stone chips. On being questioned it is ascertained that
nowhere in the tender documents usage of marble chips in
the grit plaster was mentioned. Obviously the bidders do
quote for this BOQ item is considering stone chips only. The
Respondent’s instruction to use marble chips in place of
stone chips on the later date of execution of work is a
deviation to this BOQ item and hence a new rate to be
decided as per the terms of the contract. The Claimant is
entitled for above claim of extra item of grit plastering using
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marble chips. The Claimant on 21.11.2016 submitted a
revised rate analysis based on the actual procurement of
marble chips and other materials. The copy of the same has
been received by the Respondent. The quantity is not
disputed as it is being paid under BOQ item.
4.3.2 With regards to other item of Ready Mix Concrete, the
Tribunal observers that in the given BOQ item of contract
the nomenclature of BOQ does not includes transit mixer
for transporting concrete to site of work, having continuous
agitated mixer. The Contract BOQ item stipulates as
follows:
“Providing and laying in position machine hatched,
machine mixed and machine vibrated design mix cement
concrete of specified grade for reinforced cement concrete
work including pumping of concrete to site of laying but
excluding the cost of centering…… as per IS: 9103 ……. as
per direction of Engineer-in-charge”.
4.3.3 The DSR item under which the scope of work executed
for RMC is covered under DSR item no. 5.37 which
stipulates as follows:
“DSR item no. 5.37 Providing and laying in position ready
mixed M-25 grade concrete for reinforced cement concrete
work, using cement content as per approved design mix,
manufactured in fully automatic hatching plant and
transported to site of work in transit mixer for all leads,
having continuous agitated mixer, manufactured as per mix
design of specified grade for reinforced cement concrete
work including pumping of R.MC. from transit mixer to site
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of laying, excluding the cost of centering…….. as per IS:
9103 …… . as per direction of Engineer-in-charge. ”
4.3.4 Since the Claimant executed the work of scope similar
to DSR item no. 5.37 using automatic batching plant and
transit mixer having continuous agitated mixer for
transporting the RMC to site , the Claimant is entitled for
the rate as per DSR item no. 5.37 as claimed . The quantity
is not disputed as it is being paid under BOQ item.
4.3.5 The quantification based on the revised rates is
presented in pages 9109 and 9110 of Claimant’s
submissions. This is amounting to total of Rs.1,18,89,226/-.
Award:
In the light of above findings the Claimant is entitled to
payment for these extra items. In the considered opinion of
Tribunal the Claim of the Claimant for payment ofthese
extra items is justified. Accordingly I award
Rs.1,18,89,226/- on this claim.”
(Emphasis Supplied)
90. The petitioner‟s challenge on the ground of non-compliance of Clause
No. 12.2 of the GCC stating the claims as “afterthought” is misplaced.
Most of the extra items were finalised during the proceedings, and that
only these two items were pending. For approval of grit plaster, the
respondent submitted revised analysis with invoices dated 21.11.2016.
For RMC, a detailed rate analysis for the substituted item was submitted
and considered but the same was disputed. Clause No. 12.2 of the GCC
prescribes that, for substituted/extra items exceeding the specified limits,
the contractor “may within fifteen days” claim revision of rates supported
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by proper analysis, whereafter the Engineer‑in‑Charge is to fix rates on
the basis of market rates. Clause No. 12.2 of the GCC reads as under:
“12.2 Deviation, Extra Items and Pricing
In the case of extra item (s), the contractor may within
fifteen days of receipt of order or occurrence of the item(s)
claim rates, supported by proper analysis, for the work and
the Engineer-in-Charge shall within one month of the
receipt of the claims supported by analysis, after giving
consideration to the analysis of the rates submitted by the
contractor, determine the rates on the basis of the market
rates and the contractor shall be paid in accordance with
the rates so determined…”
91. The Arbitrator has considered similar Clause of the Contract namely
Clause No. 38 of the GCC and held that these kind of Clauses are
directory as no consequences for non-compliance are prescribed.
Additionally, the invoices, were duly submitted by the respondent and
there were no dispute to their authenticity. Thus, such non-compliance of
a procedural requirement cannot render a valid claim wrong.
92. Apropos the second ground i.e. the issue with regards to the grit plaster
component already being approved and paid, is misconceived and cannot
be used to assail the Award.
93. The Arbitrator‟s reasoning qua the issue of grit plaster is that the
Contract rate for “washed stone grit plaster” covered plaster using
ordinary stone chips, and everyone bid on that basis, but later the
department asked the respondent to use much costlier marble chips
instead, which changed the item into a different, higher specification job.
Since this was a deviation ordered by the petitioner, the Contract required
a fresh rate to be fixed, and the respondent did submit a revised rate
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analysis on 21.11.2016 with invoices for marble chips, which the
department received, while the quantity of work itself was never
disputed, so the Arbitrator treated the marble chip work as an extra item
and granted the claim accordingly.
94. Therefore, the challenge of the petitioner does not shake the reasoning of
the Arbitrator, because what the Award has approved is the existence and
quantum of a substituted item (marble chips) with a documented rate
analysis, and not a second payment for work already compensated at
BOQ. Moreover, the petitioner failed to place on record any evidence
that the payment for the said item has been made twice. Hence, this Court
cannot reappreciate the cogent quantification and analysis which is
undertaken by the Arbitrator.
95. The petitioner‟s challenge with respect to the RMC is also unfounded,
misconceived and a mere reiteration of the contentions as raised before
the Arbitrator, the Arbitrator followed a clear, stepwise analysis for
adjudication, he first looked at the BOQ concrete item, which only covers
normal machine mixed concrete pumped to the site and says nothing
about using transit mixers. He then compared this with DSR 5.37, which
specifically covers ready mix concrete made in an automatic plant and
brought to site in transit mixers. Based on evidence such as photos and
the respondent‟s explanation, he held that the respondent had actually
used an RMC plant and transit mixers, so the work matched DSR 5.37
rather than the simpler BOQ item. On that basis, he applied the DSR 5.37
rate as a substituted rate but kept the quantity the same, as it was not in
dispute. Thus, the Arbitrator has relied on evidence placed on record to
conclude that the scope of work executed by the respondent is that which
is covered by DSR 5.37. The view of the Arbitrator is plausible and
based on reasons.
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96. In these circumstances, the Award on Claim No. 4 is reasoned and
evidence based. It does not disclose any perversity, patent illegality or
disregard of the contractual terms, and accordingly, no interference is
warranted under Section 34 of the Act.
Claim No. 5: Revised rates for individual items of work the quantities
of which had exceeded beyond limit.
97. The Claim No. 5 pertains to the payment at revised rates for certain items
where the executed quantities exceeded the contractual deviation limits
prescribed under Clause No. 12 of GCC, which is 30% of the trade, and
beyond this limit the respondent is entitled to seek revision of rates for
particular trade/items i.e. the prevailing market rates. Under this
mechanism, the original BOQ rate ceases to apply and the respondent can
seek revision of the rates (market rates) for that particular item/trade.
98. In this backdrop, the petitioner has challenged the Award of the
Arbitrator apropos this claim on the ground that revised rates apply only
for deviation of quantities beyond the deviation limit and the same needs
to be claimed strictly as per the Clause No. 12.4, which was not claimed
by the respondent despite being fully aware of the scheme of clause 12.
Further, the Award apropos this claim is also assailed on the ground that
the Arbitrator has inconsistently first used the word “trade” to mean
“building trade” and then stated the word to be vague, to proceed to
award the claim on flawed quantification without scrutinizing each item
or applying the Bhopal Cost Index. The petitioner has relied upon a
similar arbitral proceeding qua Package-1 of AIIMS Rishikesh to buttress
its submission that the term “trade” refers to the subhead for allowing the
market rate under clause 12 of the agreement. The relevant Clause No.
12.4 reads as under:
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“12.4 GCC: The Contractor shall send to the Engineer-in-
Charge once in every three months, an upto date account
giving complete details of all claims for additional payments
to which the contractor may consider himself entitled and of
all additional work ordered by the Engineer in Charge
which he has executed during the preceding quarter failing
which the contractor shall be deemed to have waived his
right. However, the Superintending Engineer may authorize
consideration of such claims on merits. ”
99. At this stage it is important to peruse the relevant portions of the Award
and findings, which read as under:
“5.3 Findings of the AT:
5.3.1 In the contract the Clause-12 is on
“Deviations/Variations Extent and Pricing “.Under this sub
Clause 12.2 is on “Deviation, Extra items and Pricing “. In
this the terms and conditions are stipulated in subhead
clause “Deviation, Deviated Quantities, Pricing”. This
clause stipulates that in case the contract items exceed the
limits laid down in Schedule – F, the contractor can claim
revision of rates supported by the proper analysis of rates
for the work in excess of the above mentioned limits. 5.3.2
The Arbitral Tribunal observers that the provisions in the
contract agreement for deviation limit under Clause -12 of
Schedule F which reads as below: Clause 12:
12.2 & 12.3
Deviation Limit beyond which clauses
12.2 & 12.3 shall apply for building work. 30% of
trade
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5.3.3 The word trade has a meaning based on the context of
usage. The Dictionary meaning of trade refers to
commercial activity. In general practice it relates to the
business. For instance, when a phrase like “trade practice”
is used, it refers to the practice prevailing in a particular
kind of industry or trade.
5.3.4 Looking from the said angle, the reference to “Trade”
can only be construed as a reference to the construction
work as a whole that is involved in the subject contract.
What it matters most is how the parties understood and
meant by the word “Trade” while entering in to contract
with respect to deviation limits specified in schedule-F for
operation of Clause -12. There is no definition of the word
‘Trade’ in the contract agreement or how it is structured for
deviation in quantities. The Claimant’s arguments are that
the deviation limit is on individual item quantities while the
Respondent during arguments stated that the limit is
applicable for group of subhead items in BOQ. It is clear
that the issue is of interpretation. When any word/phrase
built in any clause gives scope for multiple interpretations
there seems to be an ambiguity which needs to be
interpreted.
Award:
After carefully considering the facts, contractual provisions,
evidence on record and the legal principles, the Arbitral
Tribunal is of the view that deviation limit needs to be
applied on item quantities individually. Hence this Claim is
awarded in favour of the Claimant.
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The abstract quantification of claim presented is for Rs.
4,23,76,331/-in pages 863 to 875 of Claimant’s submissions
CV-6 . The item quantities are not disputed. As can be seen
from quantification details presented, for most of the
deviated items beyond the limits, the rates are claimed
based on DSR schedule rates pertaining to 2012, the period
of execution of work. For some items of deviated quantities,
market rates claimed for deviated quantities. Since there is
no evidence submitted for market rates (MR), the revised
rates cannot be considered for such items. Deleting such
MR items, the quantification works out to Rs.4,10,11,761 /-.
Hence an amount ofRs.4,10,11,761/- is awarded on this
Claim.”
(Emphasis Supplied)
100. The first ground to assail this claim of the Award i.e. non-compliance of
the Clause No. 12.4 of the GCC, is misconceived as the Arbitrator has
already held similar Clause No. 38 of the GCC to be directory, the Clause
No. 12.4 being similar in nature is also directory. Hence, the same cannot
be used as a ground to defeat an otherwise substantive and legitimate
claim.
101. In the second ground regarding the interpretation of the term “trade”, the
respondent argued that the term should be interpreted to mean individual
BOQ items, while the petitioner wanted it to be interpreted as broader
BOQ sub-heads. The Arbitrator categorically observed that the term is
not defined in the contract and is ambiguous and both interpretations are
tenable. However, the Arbitrator proceeded to apply it to individual item
quantities by relying on facts, contractual provisions, evidence on record
and the legal principles. The Arbitrator deduced this interpretation by
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relying on evidence and making a finding as to how the parties
understood the term before and during the execution of the Contract.
102. To my mind, this reasoning of the Arbitrator strongly rooted in
appreciation of evidence by the Arbitrator himself. The view of the
Arbitrator is a plausible one supported by evidence and the same cannot
be reappreciated by this court under Section 34 of the Act.
103. The findings of the Arbitrator qua the quantification of the Claim are also
cogent and reasonable. The respondent‟s computation was of Rs.
4,23,76,331/‑, supported by detailed tables, and importantly the item
quantities themselves were not disputed by the petitioner. For most of the
excess quantities beyond the 30% limit, the respondent had based its
revised rates on the DSR schedule for 2012. For some items it had
claimed market rates without submitting corroborating evidence. The
Arbitrator expressly refused to accept these unsupported market rates,
and removed those items from the computation and arrived at Rs.
4,10,11,761/‑, which it awarded.
104. In this view of the matter, the quantification of claim by the Arbitrator by
applying DSR 2012, is not merely approval of the claim as filed by the
petitioner but there is proper application of mind on part of the Arbitrator
thereby, rejecting the unsubstantiated market rates. The Arbitrator has
made categorical cogent findings and the petitioner by way of raising this
challenge to the Award more particularly this claim is trying to persuade
this court for reappreciation of its evidence, which is not permissible
under Section 34 of the Act.
Claim No. 10: Loss on locked up deposits Bank Guarantees due to
Prolongation of Contract.
105. Claim No. 10 pertains to the loss caused due to locked up performance
bank guarantee due to the prolongation of the Contract. The respondent
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claimed that since the delay in execution is not attributable to it, the loss
sustained by it like loss of interest, cost incurred on extension, etc. was
payable.
106. The petitioner‟s objection is that the Clause No. 1, specifically Clause
No. 1(ii) of the GCC provides that the performance bank guarantee
needed to be kept valid up to the stipulated date of completion plus 60
days and thereafter the same needed to be returned without any interest.
Thus, the petitioner is not liable to pay any interest/charges. The Clause
No. 1(ii) of the GCC reads as under:
“The Performance Guarantee shall be initially valid up to
the stipulated date of completion plus 60 days beyond that.
In case the time for completion of work gets enlarged the
contractor shall get the validity of Performance Guarantee
extended to cover such enlarged time for completion of
work. After recording of the completion certificate for the
work by the client, the Performance guarantee shall be
returned to the contractor, without any interest.”
107. The operative portions of the Award with respect to Claim No. 10 reads
as under:
“10.3 Findings of the AT
10.3.1 ….
10.3.2 As per the above provision in the contract the
Claimant has to keep the Performance Guarantee valid till
the completion of work plus 60days beyond that.
I0.3.3 Since the contract period got prolonged due to
reasons not attributable to Claimant against stipulated
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the additional expenditure incurred on account of extension
of BG in the extended period of contract as claimed.
Award:
After deliberating in detail and considering all the
submissions of the parties, I am of the view that the
Claimant is entitled for reimbursement of additional
expenditure incurred on account of commission charges for
extension of Performance BG in the extended period of
contract.”
108. The Award, notes that the bank guarantee was in fact kept alive beyond
the contractually contemplated period solely because of prolongation not
attributable to the respondent. In treating those additional charges as a
compensable component for the delay in execution, the Arbitrator has
only made a logical/reasonable/lawful conclusion. The same is supported
by the observations made in the above sections of this judgment that
compensation is not barred unless clearly prohibited by the contractual
term. Therefore, the reasoning of the Arbitrator is well founded and does
not disclose any patent illegality or any other ground warranting
interference under Section 34 of the Act.
Claim No. 12: Escalation Amount on material payable due to
prolongation of Contract.
109. This claim pertains to price escalation due to the prolonged period of the
Contract. The respondent claimed that it is entitled to such price
escalation because there is substantial increase in burden due to the
increased cost of construction material.
110. The petitioner assails the Award of this claim on the ground that the
claim is in violation of the terms of the Contract. Paragraph No. 3 of
“preamble to the bill of quantities” stipulates that the quoted rates shall
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not be subject to any variation whatsoever including the extended period,
the relevant paragraph reads as under:
“Rates quoted shall be firm and shall not be subject to any
price variation due to increase in labour wages, cost of
materials, etc., or any other price variations due to any
reason whatsoever whether during the stipulated period of
execution or during the extended period of completion if
any.”
111. The relevant portions of the Award with respect to Claim No. 12, read as
under:
“12.3 Findings of the AT :
12.3.1 I have carefully considered the above arguments of
both the parties, the documents and evidence produced
before me.
12.3.2 The date of commencement of the work was on
27.05.2010. The time for completion was 15months and the
schedule date of completion was 26.08.2011. In the Award
against Claim no. 1, it has been held that the delay causes
are not attributable to Claimant.
12.3.3 This claim is for escalation amount on material due
to prolongation of contract worked out in the prolonged
period up to 42nd RA bill submitted (March 2015). The
detail of claim has been given by the Claimant in CV -27 of
the Statement of Claims.
12.3.4 As can be seen from the records, as per terms of the
contract Schedule F Clause 10CC is not applicable since
the contract stipulated duration is 15 months. The Hon’ble
Supreme Court in the case of Union of India Vs. Saraswat
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Trading Agency and Ors. (2009) 16 SCC 504 has
categorically held that escalation is a normal incidence in a
prolonged contract and even in the absence of an escalation
clause, such escalation is payable. The Claimant has
worked out price escalation for materials following the
formulae based methodology as per Clause 10(CC) of
CPWD with base price and current indices of whole sale
price indices published.
12.3.5 It is a general industry practice that formula based
price escalation provisions are commonly adopted in
construction contracts to compensate for increase for rise in
prices in materials. Generally for building contracts CPWD
and such public departments provide formulae based price
adjustment provisions popularly referred as escalation
clauses. The formula based methodology do consist of
component wise weightage for materials, labour based on
the type of construction. For building works for the cement ,
steel the escalation is considered separately and for rest of
the construction materials under the head ‘other materials’
a component of 30% to 40% provided for and around 25%
considered as labour component.
But the Claimant has claimed 75% component stating that
for cement, steel he did not claim such escalation separately
and included in this weightage component. Considering the
facts on record 40% component for all materials portion put
together is found genuine and justified. The quantification
of formulae based escalation with 75% component
weightage is not disputed. Thus the amount payable with
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40% component weightage for materials can be calculated
proportionately.
Award:
After deliberating in detail and considering all the
submissions of the parties, I am of the view that the
Claimant is entitled for price escalation on materials due to
prolongation of contract. The Claim on escalation of
materials is awarded with a component of 40% weightage
in the formula exhibited. Thus the amount payable to
Claimant towards price escalation on materials works out
to Rs.6,21,69,860/-.”
112. The Arbitrator recorded that the causes of delay were not attributable to
the respondent, and that Claim No. 12 is confined to escalation in
material costs during the prolonged period up to the 42nd RA bill i.e.
March 2015. Thereafter, relying on the Hon‟ble Supreme Court‟s
decision in Saraswat Trading Agency (Supra), the Arbitrator noted that
escalation is a normal incident of a prolonged contract and that, even in
the absence of a formal escalation Clause, a respondent can in principle
be compensated where the contract period stands substantially extended
for reasons not attributable to it.
113. The petitioner‟s challenge to the quantification of claim by application of
10CC of CPWD, is also misconceived. Despite, the scheduled timeline
for execution of the Contract i.e. 15 months rendering Clause 10CC of
CPWD inapplicable, the Arbitrator used this relevant formula based
methodology as a fair quantification method for escalation for materials
during the prolonged period, wherein delays were not attributable to the
respondent. Additionally, the reduction of claimed 75% component to
40% reflects reasoned approach which is based on industry practice.
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Thus, no interference is warranted with this cogent reasoning of the
Arbitrator.
114. The reasoning of the Arbitrator is not in violation of the terms of the
Contract and is supported by law. The Award of this claim is not
suffering from any vice enumerated under Section 34 of the Act, thereby
warranting interference.
Claim No. 13 and 14: Interest on delay in payment of RA bills and
Claim Nos. 2 to 12.
115. The Claim No. 13 pertains to the interest on delayed payments of RA
bills and the same was adjudicated by the Arbitrator with Claim No. 1 in
the final Award. The relevant findings of the Arbitrator read as under:
“AWARD:-
After deliberating in detail and considering all the
submissions of parties, documents and evidence filed, the
Tribunal awards that the withheld amount of Rs.
2,95,79,465/- on account of non achievement of milestones
from the Claimants bill shall be refunded to the Claimants.
The Claimants have claimed interest @ 15 % P A for the
above claim amount separately under Claim no.13. From
the records placed before me I find that the amount was
withheld while releasing payments for 33,34 th RA bills on
18-2-2014. The Tribunal Awards the simple interest at a
rate 12% per annum on the above amount to be refunded
from the date of recovery i.e.l8.2.20 14 to the date of the
award.”
116. The Claim No. 14 pertains to the payment of pendente lite interest on
the claims raised by the claimant and adjudicated in the final Award
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i.e., from Claim Nos. 2 to 12 at the rate of 10% per annum. In this
regard the relevant portions of the Award read as under:
“Claim No. 14:
Loss of Interest on the Claimed amounts for Claims no.2
to 12@ 10% per annum:
14.1 Claimant’s Submissions: The Claimant submitted
that it had been deprived of legitimate entitlements which
were due to it at appropriate time. According to the law,
any party which is deprived of the use of money has a
right to be compensated for deprivation. The Claimant
submitted that the Section 31 (7) of the Arbitration act
empowers the Arbitrator to award past , pendent-lite and
future interest also. The Claimant cited the case law of
Indian Hume Pipe Co. Ltd Vs State of Rajasthan (2009),
10 SCC 187 on the issue. The Claimant submitted that it
claimed 10% interest on Claims no. 2 to I2 @ 10% PA
from cause of action and future interest 18% P A.
14.2 Respondent’s Submissions:
The Respondent submitted that this claim is not
admissible in view of the specific reference to the terms
and conditions of the contract which have been referred
by Respondent in refuting the Claims in SOD. Further the
Respondent submitted that the interest claim is not
justified and not agreed to.
Award:
I. A simple interest of 10% per annum, pendent-lite i.e.
from date of invocation of arbitration, 13.I2.20I4 to theDigitally Signed
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date of the Award is awarded on the awarded amounts for
Claims no. 2, 3,4,5, 10 and I2.”
(Emphasis Supplied)
117. The petitioner assails the award of pendente lite interest for Claim No. 2,
3, 4, 5, 10, and 12 under Claim No. 14 and interest awarded on delay in
payments of RA bills adjudicated under Claim No. 13, on the ground that
the same is in violation of the judgment delivered by the Hon‟ble
Supreme Court in the case of M/S Krafters Engineering & Leasing Pvt.
Ltd. (Supra), and also in violation of the conditions of the Contract. The
Contract does not contemplate award of interest and the same is liable to
be set aside.
118. It is pertinent to note that Section 31(7)(a) of the Act empowers an
arbitral tribunal, unless otherwise agreed by the parties, to award interest
at such rate as it deems reasonable, on the whole or any part of the
amounts due, for the whole or any part of the period between the date on
which the cause of action arose and the date of the award. Section
31(7)(b) then provides that, unless the award otherwise directs, the sum
directed to be paid by the award shall carry interest from the date of the
Award to the date of payment. The relevant portions of Section 31(7) of
the Act read as under:
“(7) (a) Unless otherwise agreed by the parties, where and
in so far as an arbitral award is for the payment of money,
the arbitral tribunal may include in the sum for which the
award is made interest, at such rate as it deems reasonable,
on the whole or any part of the money, for the whole or any
part of the period between the date on which the cause of
action arose and the date on which the award is made.
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(b) A sum directed to be paid by an arbitral award shall,
unless the award otherwise directs, carry interest at the
rate of two per cent. higher than the current rate of interest
prevalent on the date of award, from the date of award to
the date of payment.
Explanation.–The expression “current rate of interest
shall have the same meaning as assigned to it under clause
(b) of section 2 of the Interest Act, 1978 (14 of 1978).”
119. The decision of the Hon‟ble Supreme Court in UHL Power Company
Ltd. v. State of Himachal Pradesh19 reinforces the scope of arbitral
discretion on interest and the limited scope for judicial interference. The
arbitral tribunal there had granted pre-claim compound interest and future
interest on the awarded amount, which the Division Bench of the High
Court modified relying on State of Haryana v. S.L. Arora & Co20., the
Hon‟ble Supreme Court relied on Hyder Consulting (UK) Ltd. v. State of
Orissa21, to hold that the High Court‟s approach was erroneous and then
restored the Arbitrator‟s award on interest expressly recognising that,
unless prohibited by contract, an arbitral tribunal may grant compound
interest. It is a settled position of law that a court cannot substitute its
own view for that of the Arbitrator, so long as the Arbitrator‟s view is a
plausible one. Also, the Hon‟ble Supreme Court in the case of Ferro
Concrete Construction (India) (P) Ltd. v. State of Rajasthan22, traced
down the changes in the power of the Arbitrator to award interest from
the 1940 act and went on to summarise the current position of this power
in the following words:
19
(2022) 4 SCC 116.
20
(2010) 3 SCC 690.
21
(2015) 2 SCC 189.
22
2025 SCC OnLine SC 708.
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“13. From the above extracted paragraphs, the decision of
the 3-judge bench in the First Ambica case (supra) can be
stated as follows. The Arbitrator’s power to grant interest
would depend on the contractual clause in each case, and
whether it expressly takes away the Arbitrator’s power to
grant pendente lite interest. This would have to be
determined based on the phraseology of the agreement,
clauses conferring powers relating to arbitration, the nature
of claim and dispute referred to the Arbitrator, and on what
items the power to award interest is contractually barred
and for which period. Further, a bar on award of interest for
delayed payment would not be readily inferred as an express
bar to the award of pendente lite interest by the Arbitrator.
14. We find that the position of law laid down in paragraph
24 of Reliance Cellulose (supra) is in line with the position
of law laid down in the First Ambica case. Both decisions
emphasise the need for an express contractual bar on the
payment of pendente lite interest to create a bar on the
Arbitrator from awarding interest. They also emphasise that
a bar on the Arbitrator’s power would depend on the
phraseology of the contractual clause in that case….”
120. It is a settled position of law that the Arbitrator being a creation of an
agreement cannot exceed the limits of the agreement. Thus, if there is
any provision contained in the contract which prohibits the award of
interest then the Arbitrator cannot exceed its jurisdiction and go beyond
the terms of the contract to award interest.
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121. The petitioner however in the present case has challenged the Award of
this claim without specifying any contractual Clause which specifically
prohibits the award of interest by the Arbitrator.
122. Therefore, the award of interest by the Arbitrator under this claim is well
founded and in exercise of the statutory powers conferred upon the
Arbitrator by the Act itself.
Counter Claim Nos. 1 to 4
123. The petitioner‟s challenge to the adjudication of its counter claims by the
Arbitrator is bereft of reasoning and unsubstantiated by cogent evidence.
The petitioner has not made any submissions before this Court so as to
warrant interference on the limited grounds enumerated under Section 34
of the Act and has merely made a fleeting contention that the counter
claims were erroneously rejected by the Arbitrator. At this stage, it is
pertinent to note that the counter claims raised by the petitioner are of the
following description:
Counter Claim Establishment cost for prolonged execution of works:
No. 1 Rs. 19.32 Cr.
Counter Claim Cost due to Alternate accommodation for Nursing
No. 2 students due to non-completion of Nursing Hostel: Rs.
0.32 Cr.
Counter Claim Establishment cost for HVAC commissioning due to
No. 3 delay in Package-I works: Rs. 1.40 Cr.
Counter Claim Escalation being paid to other agencies due to delay in
No. 4 completion of Buildings Rs. 2.47 Cr.
124. Since, the delays leading to the prolongation of Contract were clearly
held attributable to the petitioner, these co-related counter claims flowing
from the same cause were rejected by the Arbitrator. This Court finds no
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reason to interfere with the findings of the Arbitrator regarding
attribution of delays in execution of works under the Contract and
consequently, the findings of the Arbitrator qua the aforesaid
counterclaims also deserves to be upheld. Moreover, the Arbitrator in its
Award has recorded the submissions of both the parties with respect to
counter claims and then made relevant findings. Additionally the
Arbitrator also held that none of the counter claims were supported by
any documentary evidence. Thus, no interference by this court is
warranted.
CONCLUSION
125. For all the aforesaid reasons, and having found no ground within the
confines of Section 34 of the Act to set aside the reasoned findings of the
Learned Sole Arbitrator, I hold that the impugned Award does not suffer
from perversity, patent illegality or any other recognised vice warranting
interference.
126. The petition is dismissed in the aforesaid terms, along with pending
applications, if any.
JASMEET SINGH, J
APRIL 09th, 2026/SS
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