Delhi High Court
Mahanagar Telephone Nigam Ltd vs M/S Rukma Decor And Construction Co on 16 July, 2026
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on: 22.04.2026
Judgment pronounced on: 16.07.2026
Judgment uploaded on:16.07.2026
+ FAO (COMM) 190/2024 & CM APPL. 55443/2024
MAHANAGAR TELEPHONE NIGAM LTD .....Appellant
Through: Mr. Chandan Kumar & Mr.
Vikram Sharma, Advs.
versus
M/S RUKMA DECOR AND CONSTRUCTION CO
.....Respondent
Through: Mr. O.P. Gupta, Adv.
CORAM:
HON'BLE MR. JUSTICE ANIL KSHETARPAL
HON'BLE MR. JUSTICE AMIT MAHAJAN
JUDGMENT
ANIL KSHETARPAL, J.:
INTRODUCTION:
1. The present appeal under Section 37 of the Arbitration and
Conciliation Act, 1996 has been preferred by the Appellant –
Mahanagar Telephone Nigam Limited (MTNL), assailing the
judgment dated 06.08.2024 passed by the learned District Judge
(Commercial Court-06), Central District, Tis Hazari Courts, Delhi in
ARB. A. (Comm.) No. 20/2019, whereby the petition filed by the
Appellant under Section 34 of the Arbitration and Conciliation Act
seeking setting aside of the arbitral award dated 27.11.2018 came to
be dismissed. By the said arbitral award, the learned Sole Arbitrator
partly allowed the claims raised by the Respondent-M/s Rukma Decor
&
Signature Not Verified Construction Co. arising out of Agreement No. EE(P)C-
Signed By:JAI
NARAYAN
Signing Date:16.07.2026
FAO(COMM) 190/2024 Page 1 of 29
16:14:38
I/MTNL/2010-11 pertaining to balance and left-out construction work
relating to 240 Type-III quarters at GH-17, Paschim Vihar, New
Delhi.
2. The principal controversy raised in the present Appeal pertains
to the validity and enforceability of Clause 53 of the agreement, which
prescribed a period of 90 days for invocation of arbitration from the
date of intimation regarding readiness of the final bill and stipulated
extinguishment of claims upon expiry of the said period. The
appellant contends that the claims of the Respondent stood
contractually barred and extinguished owing to delayed invocation of
arbitration, whereas the Respondent asserts that such a stipulation is
void and unenforceable in view of Section 28 of the Indian Contract
Act, 1872 as amended with effect from 08.01.1997. The dispute also
involves examination of the findings rendered by the learned
Arbitrator on attribution of delay, levy of compensation under Clause
15 of the contract, and award of various monetary claims in favour of
the Respondent.
3. Before adverting to the rival submissions and the issues arising
for determination, it would be apposite to briefly notice the factual
background giving rise to the present proceedings.
FACTUAL MATRIX:
4. The Petitioner, Mahanagar Telephone Nigam Ltd., through its
Executive Engineer, invited a tender for the balance and left out work
in relation to the construction of 240 numbers of Type III Quarters at
GH-17, Paschim Vihar, New Delhi in the year 2010 for an amount of
Rs. 19,82,392. It is to be noted that this was not a fresh construction
Signature Not Verified
Signed By:JAI
NARAYAN
Signing Date:16.07.2026
FAO(COMM) 190/2024 Page 2 of 29
16:14:38
project but was balance work left out from a rescinded earlier contract
bearing Agreement No. 02/EE(P)C-I/MTNL/05-06.
5. The Respondent, M/s Rukma Decor and Construction Company
through its proprietor Shanti Prakash Goenka, participated in the bid
and was awarded the tender vide letter dated 15.11.2010 for a value of
Rs. 40,55,046. The stipulated date of start of work was 25.11.2010
and the time allowed for completion was four months, making the
stipulated date of completion 24.03.2011.
6. The work could not be completed within the stipulated period.
The Petitioner granted provisional extensions of time from time to
time, with the last provisional extension granted up to 15.05.2012. The
work was actually completed on 03.05.2012, resulting in a delay of
406 days from the original stipulated date of completion.
7. The Petitioner’s case was that this delay was entirely
attributable to the Respondent on account of its casual approach, slow
progress, failure to mobilise sufficient men, material, T&P and
machinery, and failure to submit a bar chart or work program despite
being directed vide letter dated 13.12.2010.
8. The Respondent’s case, on the other hand, was that the delay
was caused entirely due to hindrances and breaches on the part of the
Petitioner, including non-taking of measurements of work executed by
the earlier agency, non-decision on removal of malba and building
rubbish left by the earlier agency, non-decision on the existing
G.L./C.I. pipe work which was choked and incomplete, delay in
sanction of deviated quantities of concerned items, delay in decision
on substitute items of stainless steel cramps, and most significantly,
Signature Not Verified
Signed By:JAI
NARAYAN
Signing Date:16.07.2026
FAO(COMM) 190/2024 Page 3 of 29
16:14:38
the failure of the electrical agency deployed by the Petitioner to
complete the alignment of lift opening gates till 31.10.2011, which
held up the cladding, grinding and fitting work at the lift lobby area.
9. After completion of the work, the Petitioner called upon the
Respondent to submit the Extension of Time proforma in July 2012,
November 2012 and finally in January 2013, informing the
Respondent that in case the Extension of Time proforma was not
submitted, the final bill would be sent for payment and the Extension
of Time case would be settled ex-parte.
10. The Respondent submitted the Extension of Time format only
on 05.03.2013. The Respondent signed the final bill on 15.03.2013
without any protest. The final bill was intimated as ready on
21.11.2012. Payment as per the final bill was made to the Respondent
on 30.05.2013, which was accepted by the respondent without any
protest as to there being any arbitrary deductions, short or part
payments.
11. In June 2013, the Petitioner issued a show cause notice under
Clause 15 of the General Conditions of Contract for delay in
completion of the work beyond the stipulated time. Since the same
was not replied to, second show cause notice was issued on
11.03.2015. Even in reply thereto, the Respondent did not raise any
issue of arbitrary deduction or short payments. It was only on
04.04.2015 that the Respondent raised certain claims with the
Executive Engineer, which were denied by the Petitioner.
12. The Respondent thereupon invoked the arbitration clause vide
its letter dated 26.09.2015, requesting the Chief Engineer, MTNL,
Signature Not Verified
Signed By:JAI
NARAYAN
Signing Date:16.07.2026
FAO(COMM) 190/2024 Page 4 of 29
16:14:38
New Delhi to appoint an arbitrator in terms of Clause 53 of the
agreement. The Petitioner denied appointment by means of its
communication dated 29.10.2015, treating the claims as barred by
Clause 53. On 05.11.2015, the Petitioner imposed a compensation
amount of Rs. 92,942 towards delay in terms of Clause 15 of the
GCC, which the Respondent protested vide letter dated 13.11.2015.
PROCEEDINGS BEFORE ARBITRAL TRIBUNAL:
13. The Petitioner, MTNL, refused to appoint an arbitrator due to
which the Respondent preferred a petition under Section 11 of the
Arbitration and Conciliation Act, 1996 before the Delhi High Court
for appointment of an arbitrator. The Delhi High Court appointed S.R.
Pandey, Retired Additional Director General (CPWD) as Sole
Arbitrator vide its order dated 20.09.2016, to conduct proceedings
under the rules of the Delhi International Arbitration Centre, and the
case was registered as DAC Case No.1306/09-16.
14. The claimant filed 13 claims. There was no counter-claim by
the Petitioner. However, the Petitioner raised a preliminary objection
before the arbitrator that all the claims are time barred under Clause
53 of the agreement, which provided that if the contractor does not
make any demand for arbitration in respect of any claim in writing
within 90 days of receiving the intimation from MTNL that the final
bill is ready for payment, the claim of the contractor will be deemed to
have been waived and absolutely barred and MTNL shall be
discharged and released of all liabilities under the contract in respect
of these claims.
Signature Not Verified
Signed By:JAI
NARAYAN
Signing Date:16.07.2026
FAO(COMM) 190/2024 Page 5 of 29
16:14:38
15. The Petitioner contended that the claimant did not invoke
arbitration within 90 days of receiving intimation regarding the final
bill on 21.11.2012, not even within 90 days of payment of the final
bill on 30.05.2013, and that the claimant invoked arbitration only on
26.09.2015 after an unexplained delay of more than two years .
16. The claimant rebutted this contention and stated that the
stipulation of 90 days in Clause 53 is void in terms of Section 28 of
the Indian Contract Act 1872 as amended on 08.01.1997, and that
even reckoning limitation from 30.05.2013, the arbitration was
invoked on 26.09.2015 which was within the three-year limitation
period.
17. The arbitrator held the 90-day stipulation in Clause 53 as void
under the amended Section 28, held the arbitration to be within the
three-year limitation period under Article 137 of the Limitation Act
reckoned from 21.11.2012, and rejected all preliminary objections,
admitting all claims for adjudication on merits.
18. On the question of delay, the arbitrator found from the
Hindrance Register maintained by MTNL itself that from the very
beginning the claimant suffered numerous hindrances solely
attributable to the Respondent which continued up to 27.09.2011,
nearly seven months beyond the stipulated date of completion. The
most significant hindrance recorded was that the work of granite tile
veneering and stone work in lift lobby and lift jamb remained held up
from 01.12.2010 to 07.09.2011, for more than nine months due to
non-completion of alignment and level of lift doors by the electrical
wing, as against a stipulated completion period of just four months.
Signature Not Verified
Signed By:JAI
NARAYAN
Signing Date:16.07.2026
FAO(COMM) 190/2024 Page 6 of 29
16:14:38
19. The arbitrator held that the Respondent fell far short of
performing its reciprocal promise as obligated under Section 46 of the
Contract Act, and that the delay in performance of the fundamental
reciprocal promise by the Respondent was the governing delay in
terms of Sections 51 and 52 of the Contract Act. The Respondent was
accordingly held in breach and responsible for the entire delay in
completion of the work. As a direct consequence, the levy of
compensation of Rs. 92,942/- under Clause 15 was held wrongful and
illegal both on merits and on the ground of limitation, since the cause
of action for levy of compensation arose on 03.05.2012 and the levy
was communicated only on 05.11.2015, beyond three years.
20. The arbitrator proceeded to adjudicate the individual claims. On
Claim No. 1 for balance payment, a sum of Rs. 3,88,484/- was
awarded based on the Local Commissioner’s verified measurements.
On Claim No. 2 for refund of the withheld amount of Rs. 4,05,505/-,
the full amount was awarded since the levy of compensation was held
wrongful and the set-off of Rs. 3,12,563/- under Clause 52.2 against
another contract was held wrongful as that claim had not been
adjudicated.
21. On Claims No. 4 and 6 for insurance charges, Rs. 41,537 was
awarded since no show cause notice was issued before making the
recovery and the basis of quantification was not on record. Claims No.
5 and 7 on service tax were rejected as the deduction under the
Reverse Charge Mechanism was contractually justified. Claim No. 3
resulted in a declaratory award.
Signature Not Verified
Signed By:JAI
NARAYAN
Signing Date:16.07.2026
FAO(COMM) 190/2024 Page 7 of 29
16:14:38
22. Claim No. 8 on minus extra items was rejected since the
contractor had accepted the deductions without protest. On Claim No.
9 for overheads during the extended period, Rs. 3,86,767/- was
awarded computed using CPWD guidelines on 3.75% overhead factor
applied to an effective prolongation of 13 months with 10% deduction
for mitigation.
23. On Claim No. 10 for price escalation, Rs. 4,25,445/- was
awarded computed using the CPWD Clause 10 CC formula. On Claim
No. 11 for delayed release of security deposit, Rs. 12,831/- was
awarded. Pre-award interest at 10% per annum simple interest
amounting to Rs. 7,22,656/- was awarded under Claim No. 12 under
Section 31(7)(a) of the Act. Rs. 90,000/- was awarded as arbitration
costs under Claim No. 13 and Rs. 50,000/- was awarded under Section
38(2) towards MTNL’s share of the Local Commissioner’s fee paid by
the claimant.
24. The total award was Rs. 25,23,225/- with future interest at 12%
per annum from 28.11.2018 till the date of payment, with no future
interest payable if the award amount was paid within three months of
the date of award.
PROCEEDINGS BEFORE THE DISTRICT COURT:
25. The Petitioner filed the petition under Section 34 of the
Arbitration and Conciliation Act, 1996 before the District Judge,
Commercial Court-06, Central District, Tis Hazari, Delhi on
27.02.2019, challenging the award dated 27.11.2018. The Petitioner
initially challenged all claims so allowed by the arbitrator but, during
the arguments, restricted the scope of its challenge to the grounds and
Signature Not Verified
Signed By:JAI
NARAYAN
Signing Date:16.07.2026
FAO(COMM) 190/2024 Page 8 of 29
16:14:38
contentions recorded in the written submissions dated 31.10.2023.
Final arguments were heard on 03.08.2024 and the order was
pronounced on 06.08.2024.
26. The petitioner further contended that Section 43(3) of the
Arbitration and Conciliation Act itself carves out an exception to the
general law of limitation and validates contractual time limit clauses
for initiation of arbitration, and hence the arbitrator’s interpretation
nullifying Clause 53 runs foul of Section 43(3).
27. The Petitioner relied upon the Supreme Court judgments in
Wildlife Institute of India v. Vijay Kumar Garg1 and P. Manohar
Reddy v. Maharashtra Krishna Valley Dev. Corp2. in support of its
contention that clauses providing limitation so as to enable a party to
lodge a claim are not invalid. The Respondent contended that the view
taken by the arbitrator is a plausible legal view which cannot be
interfered with under Section 34, and that Clause 53 is void under the
amended Section 28 of the Contract Act.
28. The District Court held that after the 1997 amendment to
Section 28 of the Indian Contract Act, the distinction previously
carved out by the Supreme Court between clauses merely limiting the
period to sue and clauses providing for forfeiture or waiver of rights
no longer survives. The court held that the 1997 amendment
introduced Clause (b) to Section 28 which additionally renders void
any agreement that extinguishes the rights of any party or discharges
any party from liability on the expiry of a specified period.
1 (1997) 10 SCC 528 Signature Not Verified 2 Signed By:JAI (2009) 2 SCC 494 NARAYAN Signing Date:16.07.2026 FAO(COMM) 190/2024 Page 9 of 29 16:14:38
29. The court relied upon the consistent line of Delhi High Court
judgments in Punj Lloyd v. NHAI3, Chander Kant v. DDA4, Union of
India v. Pt. Munshi Ram & Associates Pvt. Ltd.5, Silicon Graphics
Systems (India) Pvt. Ltd. v. Sterling and Wilson Electricals Pvt. Ltd6,
and B.L. Kashyap AP & Sons Ltd. v. Airport Authority of India7, all
of which had held identical 90-day clauses void after the 1997
amendment, and noted that the Supreme Court judgments in Wildlife
Institute (supra) and P. Manohar Reddy (supra) were distinguished
by the Delhi High Court on the ground that those judgments were
rendered in the context of the unamended Section 28 and the cause of
action in those cases had arisen before the amendment.
30. On the Section 43(3) argument, the court held that this had
already been addressed by the Delhi High Court in Punj Lloyd’s case
(supra) and the amended Section 28 of the Contract Act prevails
notwithstanding Section 43(3). The court accordingly held that the
arbitrator committed no error of jurisdiction in holding Clause 53 void
and no patent illegality was made out. The petition under Section 34
was dismissed and parties were directed to bear their own costs.
APPELANT’S CONTENTIONS:
31. The principal contentions advanced by the Appellant are
summarised as follows:
i. The Arbitral Tribunal committed a jurisdictional error in excess
of jurisdiction by entertaining and deciding upon claims of the3
MANU/DE/1321/2009
4
2025:DHC:7654-DB
5
(2006) 4 SCC 538
6
2015 SCC OnLine Del 9741
Signature Not Verified
7
Signed By:JAI 2016 SCC OnLine Del 5258
NARAYAN
Signing Date:16.07.2026
FAO(COMM) 190/2024 Page 10 of 29
16:14:38
Respondent-Contractor which had stood barred and were deemed to
have been waived, consequent to the Contractor having failed to
invoke arbitration within 90 days of receiving intimation from MTNL
that the final bill was ready for payment, in terms of Clause 53 of the
GCC. Since the claims were waived and extinguished by operation of
the contractual clause, the Arbitrator had no jurisdiction to entertain
the same.
ii. Clause 53 of the GCC, being a material condition of the
contract, was binding and decisive as to limitation and remedy. The
Arbitrator, being a creature of the Agreement and deriving authority
solely therefrom, could neither traverse beyond its terms nor re-write
the Agreement. By ignoring Clause 53, the Arbitrator exceeded his
jurisdiction and committed a patent illegality.
iii. The cut-off date of 90 days constituted a material condition
which went to the very right to arbitrate, and the Respondent’s failure
to invoke arbitration within the said period had the direct consequence
of waiving the claims, as unambiguously stated in the clause itself.
Clause 53 should therefore be construed not merely as a limitation
clause, but as an antecedent condition precedent to invoking
arbitration.
iv. The Arbitrator proceeded erroneously to calculate the limitation
period of 90 days from the date of actual payment (30.05.2013) rather
than from the date of intimation that the final bill was ready
(21.11.2012). This constituted a patent illegality and an error of
jurisdiction.
Signature Not Verified
Signed By:JAI
NARAYAN
Signing Date:16.07.2026
FAO(COMM) 190/2024 Page 11 of 29
16:14:38
v. Exception 1 to Section 28 of the Indian Contract Act, 1872 (‘the
Contract Act‘), as it stood before the 1997 amendment, expressly
saved clauses restricting parties to pursuing remedies within a
contracted time. Even after the 1997 amendment, Exception 1
continues to survive, and therefore clauses providing for limitation for
the purposes of lodging a claim remain valid. The Appellant relied
upon the Supreme Court’s judgments in M/s P. Manohar Reddy
(supra) and Wildlife Institute of India, Dehradun (supra).
vi. Section 43(3) of the Act itself carves out a specific exception
which expressly recognises and validates contractual time limit
provisions for initiating arbitration proceedings. It empowers courts to
extend time only in cases of undue hardship, thereby presupposing the
validity of such clauses. On this basis, it was contended that the
Arbitrator’s interpretation nullifying Clause 53 runs foul of the express
mandate of Section 43(3) and cannot be sustained.
vii. The Appellant further relied upon the judgment of the Supreme
Court in the matter of Interplay Between Arbitration Agreements
under A&C Act, 1996 & Stamp Act, 1899, In re, [(2024) 6 SCC 1],
wherein the Seven-Judge Bench affirmed that the Arbitration Act,
being a special legislation, enjoys primacy over the Contract Act
which is a general law, in accordance with the principle of
generaliaspecialibus non derogant. On this basis, the Appellant urged
that Section 43(3) of the Act, as a provision of the special law, should
prevail over Section 28 of the Contract Act.
viii. The levy of compensation amounting to Rs. 92,942/- under
Clause 15 of the GCC was a matter exclusively within the competence
of the
Signature Not Verified competent authority under the contract, namely the Chief
Signed By:JAI
NARAYAN
Signing Date:16.07.2026
FAO(COMM) 190/2024 Page 12 of 29
16:14:38
Engineer (CEBW), MTNL, whose decision in writing was final and
binding in terms of the contract. The Arbitrator, by proceeding to
examine and set aside this levy, exceeded his jurisdiction and acted in
excess of the terms of the reference.
RESPONDENT’S CONTENTIONS:
32. The Respondent has opposed the appeal and sought dismissal
thereof on the following grounds:
i. The view taken by the learned Arbitrator on the validity of
Clause 53 is a plausible legal view based on a well-reasoned analysis
of the applicable legal provisions. Under the limited scope of Section
34 of the Act, the Court cannot sit in appeal over the Arbitrator’s
findings on merits or on questions of legal interpretation. So long as
the interpretation adopted is a possible view, the Award cannot be
interfered with.
ii. The Award contains adequate reasoning for all decisions taken
by the learned Arbitrator, including on the threshold question of
limitation. The Arbitrator has independently and correctly applied
Section 28 of the Indian Contract Act as amended by the Amendment
Act 1 of 1997, and has reached a well-founded conclusion that the 90-
day stipulation in Clause 53 is void.
iii. The learned Arbitrator was correct in holding that the claims are
within limitation, being within three years from the date of cause of
action, i.e., the date of payment of the final bill on 30.05.2013, having
regard to the established position that the period of limitation under
Article 137 of the Limitation Act, 1963 is three years. The Respondent
also contended that the so-called final bill dated 30.05.2013 could not
Signature Not Verified
Signed By:JAI
NARAYAN
Signing Date:16.07.2026
FAO(COMM) 190/2024 Page 13 of 29
16:14:38
be treated as the final bill since certain amounts were withheld and
deductions were made unilaterally; thus, the cause of action was
continuing.
iv. Clause 53 is void under the law as has been clearly discussed by
the learned Arbitrator. The 1997 amendment to Section 28 of the
Contract Act is sweeping in its effect. Post-amendment, not only are
clauses merely curtailing the time to bring a suit void, but also clauses
which extinguish the rights of any party or discharge any party from
liability on the expiry of a specified period are void. Clause 53, in
providing that upon non-invocation within 90 days the claims ‘will be
deemed to have been waived and absolutely barred and the MTNL
shall be discharged and released of all liabilities under the contract’, is
squarely hit by the amended Section 28(b) of the Contract Act.
v. The Respondent relied upon the judgment of the Supreme Court
in Bharat Sanchar Nigam Limited v. M/s Nortel Networks India
Limited (Civil Appeal Nos. 843 and 844 of 2021 decided on
10.03.2021) to contend that the limitation for initiating arbitration
must be in accordance with Article 137 of the Schedule to the
Limitation Act, 1963 and the request for appointment of an arbitrator
made within three years cannot be treated as barred.
vi. The consistent line of judgments of the Delhi High Court-in
Punj Lloyd Ltd. (supra), Chander Kant & Co. (supra), Union of
India (supra), Silicon Graphics Systems (India) P. Ltd. (supra), and
B.L. Kashyap AP & Sons Ltd. (supra)-have uniformly held that
contractual clauses identical to Clause 53 are void after the 1997
amendment to Section 28 of the Contract Act, and have also
distinguished the Supreme Court judgments in
Signature Not Verified Wildlife Institute of
Signed By:JAI
NARAYAN
Signing Date:16.07.2026
FAO(COMM) 190/2024 Page 14 of 29
16:14:38
India (supra) and P. Manohar Reddy (supra) on the ground that those
were rendered in the context of the unamended Section 28.
II. ANALYSIS:
SCOPE AND AMBIT OF APPELLATE REVIEW:
33. Before entering into the merits of the contest, it is necessary to
briefly delineate the parameters within which this Court exercises
jurisdiction under Section 37(1)(b) of the Act. Section 37 confers a
right of appeal only against orders under Section 34 allowing or
refusing to set aside an arbitral award. The jurisdiction of the Court
under Section 34 is itself tightly circumscribed by the grounds
enumerated in sub-sections (2) and (2A). The legislature’s design
reflects a conscious policy choice in favour of minimal curial
interference with arbitral awards, so as to preserve the efficacy of
arbitration as an alternative dispute resolution mechanism.
34. The Supreme Court has, through an unbroken line of
authorities, repeatedly affirmed that courts exercising jurisdiction
under Section 34 and Section 37 do not sit as courts of appeal on the
merits of the award and cannot re-appreciate evidence or substitute
their own view for that of the Arbitrator. The permissible grounds of
challenge-public policy of India including the sub-ground of patent
illegality under Section 34(2A), and jurisdictional excess-must be
examined with this framework firmly in view. The test is whether the
Arbitrator has acted within jurisdiction and within the four corners of
the agreement, and not whether the court would have reached a
different conclusion.
Signature Not Verified
Signed By:JAI
NARAYAN
Signing Date:16.07.2026
FAO(COMM) 190/2024 Page 15 of 29
16:14:38
35. The challenge pressed before this Court by the Appellant is not
a re-appreciation of factual findings but raises a pure and important
question of law regarding the interplay of Clause 53 of the GCC,
Section 28 of the Indian Contract Act as amended in 1997, and
Section 43(3) of the Act. This question goes to the root of the
Arbitrator’s jurisdiction and is therefore amenable to examination.
NATURE AND EFFECT OF CLAUSE 53 OF GCC:
36. Clause 53 of the General Conditions of Contract executed
between the parties stipulates, in relevant part, that if the contractor
does not make any demand for arbitration in respect of any claim in
writing within 90 days of receiving the intimation from MTNL that
the bill is ready for payment, the claim of the contractor will be
deemed to have been waived and absolutely barred, and MTNL shall
be discharged and released of all liabilities under the contract in
respect of those claims.
37. The central question is whether this clause constitutes a valid
and enforceable contractual term that was binding upon the learned
Arbitrator, or whether it is rendered void by the operation of Section
28 of the Indian Contract Act, 1872. The proper characterisation of the
clause is therefore essential.
38. The clause operates in two distinct ways: first, it circumscribes
the period within which a demand for arbitration must be made;
second, and more significantly, it attaches a draconian consequence to
non-compliance-the contractor’s claims are deemed to have been
‘waived and absolutely barred’ and MTNL is ‘discharged and released
of all liabilities under the contract’. It is this second limb-the
Signature Not Verified
Signed By:JAI
NARAYAN
Signing Date:16.07.2026
FAO(COMM) 190/2024 Page 16 of 29
16:14:38
extinguishment of the Respondent’s contractual rights and the
discharge of the Appellant from all liability-that is legally decisive.
The clause does not merely restrict the time to approach a forum; it
extinguishes the very right of the contractor to claim. It is squarely a
clause of the kind contemplated by Section 28(b) of the Contract Act
as amended.
1997 AMENDMENT AND ITS EFFECT:
39. Section 28 of the Indian Contract Act, 1872 was substantially
amended by Act 1 of 1997 with effect from 08.01.1997. The pre-
amendment Section 28 rendered void every agreement by which any
party was restricted absolutely from enforcing his rights under or in
respect of any contract by the usual legal proceedings in the ordinary
tribunals. Exception 1 to the unamended Section 28 saved from this
prohibition clauses which merely limited the time within which a
party could enforce his rights (as opposed to absolute restrictions on
enforcement).
40. The 1997 amendment significantly expanded the scope of
Section 28 by adding clause (b), which additionally renders void every
agreement by which any party thereto is restricted from enforcing his
rights under or in respect of any contract, whether by extinguishing
the rights of any party thereto or by discharging any party from any
liability under or in respect of any contract on the expiry of a specified
period so as to restrict any party from enforcing his rights. The section
before and after the amendment has been reproduced as under:-
Section 28 of the Indian Contract Act, 1872
1. Pre-1997 (Original, Unamended) Text
Signature Not Verified
“Every agreement, by which any party thereto is restricted absolutely
Signed By:JAI
NARAYAN
Signing Date:16.07.2026
FAO(COMM) 190/2024 Page 17 of 29
16:14:38
from enforcing his rights under or in respect of any contract, by the
usual legal proceedings in the ordinary tribunals, or which limits the
time within which he may thus enforce his rights, is void to that extent.
Exception 1. This section shall not render illegal a contract, by which
two or more persons agree that any dispute which may arise between
them in respect of any subject or class of subjects shall be referred to
arbitration, and that only the amount awarded in such arbitration
shall be recoverable in respect of the dispute so referred.”
2. Post-1997 (As Amended by the Indian Contract (Amendment) Act,
1996 / Act 1 of 1997, in force from 8 January 1997)
“Every agreement
(a) by which any party thereto is restricted absolutely from enforcing
his rights under or in respect of any contract, by the usual legal
proceedings in the ordinary tribunals, or which limits the time within
which he may thus enforce his rights; or
(b) which extinguishes the rights of any party thereto, or discharges
any party thereto from any liability, under or in respect of any
contract on the expiry of a specified period so as to restrict any party
from enforcing his rights, is void to that extent.
Exception 1. Saving of contract to refer to arbitration dispute that
may arise. This section shall not render illegal a contract, by which
two or more persons agree that any dispute which may arise between
them in respect of any subject or class of subjects shall be referred to
arbitration, and that only the amount awarded in such arbitration
shall be recoverable in respect of the dispute so referred.
Exception 2. Saving of contract to refer questions that have already
arisen. Nor shall this section render illegal any contract in writing, by
which two or more persons agree to refer to arbitration any question
between them which has already arisen, or affect any provision of any
law in force for the time being as to references to arbitration.”
41. The post-amendment position of law, as authoritatively and
consistently stated by the High Court of Delhi in a series of
judgments, may be thus summarised: whereas the pre-1997 Section 28
merely rendered void agreements that were absolute restrictions on the
right to sue, the post-1997 amendment additionally renders void
clauses which, upon the expiry of a specified period, extinguish the
contractual rights of any party or discharge any party from liability.
Signature Not Verified
Signed By:JAI
NARAYAN
Signing Date:16.07.2026
FAO(COMM) 190/2024 Page 18 of 29
16:14:38
This is the precise function performed by the offending limb of Clause
53. By deeming the claims ‘waived and absolutely barred’ and by
discharging MTNL from ‘all liabilities under the contract’, Clause 53
goes well beyond a mere procedural time-bar; it extinguishes
substantive contractual rights and is therefore clearly and
unambiguously struck down by the amended Section 28(b).
42. The consistent judicial consensus on this question – expressed in
Hindustan Construction Company v. DDA8, Kalyan Chand Goyal v.
DDA9, Explore Computers Pvt. Ltd. v. Cals Ltd10, Punj Lloyd Ltd.
(supra), M/s Chander Kant & Co. (supra), Union of India (supra),
Silicon Graphics Systems (India) P. Ltd. (supra), and B.L. Kashyap
& Sons Ltd. (supra) – is that clauses identical or analogous to Clause
53 are void by reason of the amended Section 28(b) of the Contract
Act.
43. The Appellant has placed reliance upon the judgments of the
Supreme Court in Wildlife Institute of India, Dehradun (supra) and
P. Manohar Reddy & Bros. (supra), wherein contractual limitation
clauses were upheld. This reliance is misplaced. Both judgments have
been authoritatively distinguished by the Delhi High Court on the
ground that the cause of action in those cases arose before the 1997
amendment to Section 28 came into force, and the courts accordingly
considered the question in the light of the pre-amendment provision.
As the High Court observed in M/s Chander Kant & Co. (supra), in P.
Manohar Reddy‘s case, the Supreme Court had no occasion to
consider the effect of the insertion of Clause (b) in Section 28 by the
8
77 (1999) DLT 165
9
1998 47 DRJ 772
Signature Not Verified
10
Signed By:JAI 131 (2006) DLT 477
NARAYAN
Signing Date:16.07.2026
FAO(COMM) 190/2024 Page 19 of 29
16:14:38
Amending Act of 1997. The distinction is not a matter of mere
technicality; it is legally substantive. The law in force at the relevant
time governs, and since all material events in the present case-the final
bill, the payment, the claims and the invocation of arbitration-occurred
after 08.01.1997, the amended provision of Section 28 is fully
applicable.
ARGUMENT ON CLAUSE 43(3) ARBITRATION ACT:
44. The Appellant’s more adventurous submission is that Section
43(3) of the Act itself provides an independent source of validity for
contractual time-bar clauses like Clause 53, and that the Arbitrator’s
nullification of Clause 53 therefore violates the statutory mandate of
Section 43(3). This argument, though ingeniously framed, does not
withstand scrutiny. Section 43(3) provides that where an arbitration
agreement to submit future disputes to arbitration provides that any
claim to which the agreement applies shall be barred unless some step
to commence arbitral proceedings is taken within a time fixed by the
agreement, and a dispute arises to which the agreement applies, the
Court, if it is of opinion that in the circumstances of the case undue
hardship would otherwise be caused, and notwithstanding that the
time so fixed has expired, may on such terms, if any, as the justice of
the case may require, extend the time for such period as it thinks
proper.
45. The Appellant urges that this provision presupposes the validity
of contractual time-bar clauses for initiation of arbitration, and that the
legislature, by enacting Section 43(3), has expressly recognised their
enforceability. On this basis, it is contended that the Arbitration Act,
Signature Not Verified
being a special law, must prevail over the general law of the Contract
Signed By:JAI
NARAYAN
Signing Date:16.07.2026
FAO(COMM) 190/2024 Page 20 of 29
16:14:38
Act by virtue of the doctrine of generaliaspecialibus non derogant, as
recognised by the Seven-Judge Bench of the Supreme Court in the
Interplay case11.
46. This argument proceeds on a fundamental misreading of
Section 43(3). The provision does not validate or positively enact the
enforceability of contractual time-bar clauses. It addresses only the
limited question of whether a court may grant an extension of time in
cases of undue hardship where the contractual time limit has expired.
The precondition for the exercise of this power is that there exists a
valid time-bar clause; Section 43(3) does not, by its own force, render
otherwise void clauses valid. Whether a particular clause is void under
Section 28 of the Contract Act-a question antecedent to and
independent of Section 43(3) – falls to be determined by the Contract
Act itself.
47. As the learned District Court has correctly noted, relying upon
the reasoning in Punj Lloyd (supra), Section 43(3) of the Act and the
amended Section 28 of the Contract Act operate in different fields and
are not in genuine conflict. Section 43(3) addresses the power of the
court to extend time in cases of undue hardship. It does not address-
and cannot override-the statutory mandate of Section 28(b) of the
Contract Act which renders void certain classes of clauses as a matter
of substantive contract law.
48. The Interplay judgment (supra) lends no assistance to the
Appellant’s case on this point. The Seven-Judge Bench was concerned
with the relationship between the Arbitration Act and the Stamp Act
Signature Not Verified
11
Signed By:JAI [(2024) 6 SCC 1]
NARAYAN
Signing Date:16.07.2026
FAO(COMM) 190/2024 Page 21 of 29
16:14:38
in the specific context of arbitration agreements and not with the
relationship between the Arbitration Act and the Contract Act in the
context of limitation clauses within contracts. The principle of
generaliaspecialibus non derogant operates to resolve conflicts
between a special law and a general law in the specific domain in
which the special law operates. The question of the validity of a
contractual provision that extinguishes a party’s substantive rights is
governed by the Contract Act as the primary legislation on the law of
contract. This is a different domain from the procedural or institutional
law of arbitration. To the extent there is any conflict between Section
43(3) of the Arbitration Act and Section 28(b) of the Contract Act, it
is resolved not by giving blanket primacy to the Arbitration Act over
the Contract Act but by recognising that Section 28(b) of the Contract
Act addresses the anterior question of contractual validity, which must
be answered first, before Section 43(3) can even be invoked.
ARBITRATOR'S JURISDICTION AND VALIDITY OF
CLAUSE 53:
49. The Appellant’s submission that the Arbitrator exceeded his
jurisdiction by entertaining claims barred by Clause 53 is founded on
the proposition that Clause 53 was valid and binding. This premise has
been shown above to be legally unsustainable. Once Clause 53-to the
extent it purports to extinguish the Respondent’s claims-is void by
operation of Section 28(b) of the Contract Act, the Arbitrator was not
only entitled but bound to proceed with the claims on their merits.
50. The principle that an Arbitrator is a creature of the contract and
cannot traverse beyond its terms is well-established-see M/s Alopi
Signature Not Verified
Signed By:JAI
NARAYAN
Signing Date:16.07.2026
FAO(COMM) 190/2024 Page 22 of 29
16:14:38
Parshad v. Union of India12; Associate Engineering Company v.
Govt. of Andhra Pradesh13; PSA Sical Terminals Pvt. Ltd. v. Board
of Trustees of V.O. Chidambranar Port Trust Tuticorin and
Others14. However, this principle operates within the domain of valid
contractual terms. The Arbitrator’s jurisdiction does not require him to
give effect to a contractual clause which is void ab initio under
statutory law. A void clause is no clause at all in the eyes of the law.
To hold otherwise would be to give effect to a provision which the
legislature has expressly declared to be of no force or effect – a result
that neither the law of contract nor the law of arbitration can sanction.
51. In the present case, the Arbitrator’s conclusion that the 90-day
stipulation in Clause 53 was void under the amended Section 28
reflects precisely the legal position as it has been consistently and
repeatedly affirmed by the Delhi High Court over a period of more
than two decades. The Arbitrator, in reaching this conclusion, not only
exercised his jurisdiction correctly but also applied a coherent and
well-grounded line of legal authority. There is no error of jurisdiction,
no excess of jurisdiction, and no patent illegality in this conclusion.
LIMITATION: RECKONING OF THE PERIOD
52. Even assuming, for the sake of argument, that Clause 53 was
not void-which this Court has found not to be the case-the Appellant’s
submission that the 90-day period commenced from the date of
intimation that the final bill was ready (21.11.2012) rather than from
the date of payment (30.05.2013) deserves examination.
12
(1960) 2 SCR 793
13
(1991) 4 SCC 93
Signature Not Verified
14
Signed By:JAI (Civil Appeal No. 3699-3700 of 2018)
NARAYAN
Signing Date:16.07.2026
FAO(COMM) 190/2024 Page 23 of 29
16:14:38
53. The Arbitrator found, on the facts, that the so-called ‘final bill’
paid on 30.05.2013 could not be treated as the final bill in the true
sense since certain amounts were withheld in the running bills and
remained withheld even at the time of payment of the final bill. The
Arbitrator also found that the Respondent did not sign an unqualified
certificate of acceptance of the final bill as full and final settlement.
On this basis, the Arbitrator concluded that the cause of action had not
crystallised in the manner assumed by the Appellant.
54. This is a factual finding supported by evidence. Even on the
question of limitation independent of the void nature of Clause 53, the
Respondent’s invocation of arbitration on 26.09.2015 falls within three
years of both the date of intimation of the final bill (21.11.2012) and
the date of payment of the final bill (30.05.2013), calculated under
Article 137 of the Limitation Act, 1963. The claims were therefore
within limitation in any event.
CHALLENGE TO INDIVIDUAL CLAIMS AND FINDING ON
MERITS:
55. It is necessary to note that during the course of arguments
before the District Court, the Appellant restricted the scope of its
challenge to the grounds and contentions set out in its written
submissions dated 31.10.2023, which primarily addressed the
threshold question of limitation and jurisdiction. The Appellant did
not, before the District Court, press challenges to each individual
claim on its merits with the specificity that would be required to make
out a case of patent illegality, perversity or jurisdictional excess in
relation to the individual heads of award.
Signature Not Verified
Signed By:JAI
NARAYAN
Signing Date:16.07.2026
FAO(COMM) 190/2024 Page 24 of 29
16:14:38
56. The learned Arbitrator made detailed and reasoned findings on
each claim, supported by the Hindrance Register maintained by
MTNL itself, the report of the Local Commissioner appointed to
verify measurements, and the contractual provisions governing each
claim. The finding that the entire delay was attributable to MTNL on
account of, most significantly, the failure of its electrical wing to
complete the alignment of lift opening gates-which held up the
cladding and finishing work in the lift lobby area for over nine
months, well beyond even the original stipulated period of four
months-is a factual finding on evidence. It cannot be disturbed under
Section 34 or Section 37 of the Act unless it rises to the level of
perversity amounting to no evidence at all, or unless there is a patent
illegality apparent on the face of the award.
57. Similarly, the levy of compensation under Clause 15 of the
GCC was held wrongful on two independent grounds: on merits,
because the delay was attributable to MTNL, not the Contractor; and
on limitation, because the cause of action for levy arose on 03.05.2012
but the levy was communicated only on 05.11.2015, beyond three
years. These are well-reasoned conclusions supported by the evidence
on record. The Appellant’s submission that the levy of compensation
was a matter exclusively within the competence of the Chief Engineer
(CEBW) and was not amenable to arbitral review does not hold, for it
is well-settled that the scope of the arbitration clause extends to all
disputes arising out of or in relation to the contract, including disputes
about the levy of liquidated damages and compensation.
58. On the question of the individual claims including overheads
during the extended period (Claim No. 9), price escalation (Claim No.
Signature Not Verified
Signed By:JAI
NARAYAN
Signing Date:16.07.2026
FAO(COMM) 190/2024 Page 25 of 29
16:14:38
10), delayed release of security deposit (Claim No. 11), pre-award
interest (Claim No. 12) and arbitration costs (Claim No. 13), the
Arbitrator has applied the applicable legal and contractual provisions
and CPWD guidelines in a detailed and structured manner. No patent
illegality or perversity is discernible from the face of the award in
respect of any of these heads.
APPLICATION OF THE PRINCIPLE OF MINIMAL
INTERFERENCE:
59. The scheme of the Arbitration and Conciliation Act, 1996
embodies the principle of minimal curial interference with arbitral
awards, which is foundational to the pro-arbitration policy of Indian
law. This legislative intent has been consistently recognised and
affirmed by the Supreme Court in a series of judgments including
Associate Builders v. DDA15 and Ssangyong Engineering and
Construction Co. Ltd. v. NHAI16. Under this scheme, an award can be
set aside only if it falls within the limited categories of challenge
specified in Section 34, and even within those categories, the power to
set aside is not a power to correct errors of law or fact which do not
rise to the specified threshold.
60. The challenge in the present case, when examined against this
standard, falls substantially short of the threshold required to set aside
an award. The core question of law-whether Clause 53 of the GCC is
void under Section 28(b) of the Contract Act as amended in 1997-has
been answered by the Arbitrator in a manner which is consistent with
a long, unbroken and authoritative line of judicial decisions. The
conclusion is not merely plausible; it is correct. The Arbitrator has
15
(2015) 3 SCC 49
Signature Not Verified
16
Signed By:JAI (2019) 15 SCC 131
NARAYAN
Signing Date:16.07.2026
FAO(COMM) 190/2024 Page 26 of 29
16:14:38
exercised jurisdiction properly, has remained within the four corners
of the legal framework applicable to the dispute, and has rendered an
award that is grounded in a sound appreciation of the law and of the
evidence.
61. The Appellant’s invocation of the Interplay judgment (supra) as
a new ground of challenge at the appellate stage does not advance its
case for the reasons set out above. The Interplay judgment, which was
rendered on 17.12.2023 and is therefore subsequent to the Award
dated 27.11.2018, was cited before the District Court as forming the
basis of a new legal argument. The District Court, while taking note of
the submission, correctly concluded that the amended Section 28 of
the Contract Act prevails in the present context. This Court affirms
that conclusion.
CONCLUSION:
62. For the foregoing reasons, this Court is of the opinion that:
i. Clause 53 of the GCC, to the extent it provides for the
extinguishment of the Respondent-Contractor’s claims upon non-
invocation of arbitration within 90 days and discharges MTNL from
all liability thereunder, is void under Section 28(b) of the Indian
Contract Act, 1872 as amended by Act 1 of 1997 with effect from
08.01.1997.
ii. The learned Arbitrator committed no error of jurisdiction in
holding Clause 53 void and in proceeding to adjudicate the claims of
the Respondent on their merits. The Arbitrator correctly applied the
settled post-amendment legal position as affirmed by a consistent line
Signature Not Verified
of Delhi High Court judgments.
Signed By:JAI
NARAYAN
Signing Date:16.07.2026
FAO(COMM) 190/2024 Page 27 of 29
16:14:38
iii. The argument based on Section 43(3) of the Arbitration and
Conciliation Act, 1996 is legally untenable. Section 43(3) does not
override the statutory mandate of Section 28(b) of the Contract Act
and does not lend independent validity to a clause that is otherwise
void under the Contract Act.
iv. The reliance placed upon the judgments in Wildlife Institute of
India (supra) and P. Manohar Reddy (supra) is misplaced, as those
judgments were rendered in the context of the pre-amendment Section
28 of the Contract Act and are not applicable to the facts of the present
case where all material events occurred post-amendment.
v. The invocation of the principle of lex specialison the basis of
the Interplay judgment does not assist the Appellant. The Arbitration
Act‘s primacy over the Stamp Act in respect of arbitration agreements,
as affirmed in Interplay, has no bearing on the validity of a contractual
term under the Contract Act.
vi. No patent illegality, perversity, or jurisdictional excess is made
out in relation to the individual claims adjudicated by the Arbitrator.
The factual findings are supported by evidence and are insulated from
challenge under Section 34 and Section 37 of the Act.
vii. The learned District Court was correct in dismissing the petition
under Section 34 of the Act. The impugned order dated 06.08.2024
calls for no interference.
63. Accordingly, the present Appeal is dismissed. The award dated
27.11.2018 is affirmed in full. The order of the learned District Judge
(Commercial Court-06) dated 06.08.2024 is upheld.
Signature Not Verified
Signed By:JAI
NARAYAN
Signing Date:16.07.2026
FAO(COMM) 190/2024 Page 28 of 29
16:14:38
64. The pending application stand closed.
ANIL KSHETARPAL, J.
AMIT MAHAJAN, J.
JULY16, 2026
sp/kb
Signature Not Verified
Signed By:JAI
NARAYAN
Signing Date:16.07.2026
FAO(COMM) 190/2024 Page 29 of 29
16:14:38
