Delhi High Court
Delhi Jal Board vs M/S Metrro Waste Handling Private … on 20 April, 2026
* IN THE HIGH COURTOF DELHI AT NEW DELHI
% Judgment reserved on: 02.04.2026
Judgment pronounced on: 20.04.2026
+ O.M.P. (COMM) 277/2025 & I.A. 17526/2025
DELHI JAL BOARD .....Petitioner
Through: Mr. Jayant Mehta, Sr. Adv.
with Mr. Tushar Sannu, Mr.
Malvi Balyan, Mr. Fajallu
Rehman & Mr. Pallav Arora,
Advs.
versus
M/S METRRO WASTE HANDLING PRIVATE
LIMITED .....Respondent
Through: Mr. Akshay Makhija, Sr. Adv.
with Mr. Tarang Gupta & Ms.
Shreya Sharma, Advs.
CORAM:
HON'BLE MR. JUSTICE AVNEESH JHINGAN
JUDGMENT
1. The petition under section 34 of the Arbitration and
Conciliation Act, 1996 (for short ‗the Act’) is filed challenging the
arbitral award dated 08.04.2025.
Brief Facts
2. The brief facts are that on 26.04.2012, the petitioner/Delhi Jal
Board (for short ‗DJB’) issued a Notice Inviting Tender (for short
‗NIT’) for hiring and O&M of jetting-cum-suction-cum-recycling
sewer cleaning machines. The respondent, M/S Metrro Waste
Handling Private Limited (for short ‗MWHPL’) along with M/s City
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Signed By:CHANCHAL
Signing Date:20.04.2026
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Lifeline Travels Private Limited entered into a Joint Venture
Agreement dated 30.10.2012 and bidded as a consortium. DJB on
11.04.2013 issued a Letter of Intent (for short ‗LOI’). On 27.05.2013,
the project was awarded for five machines as per the terms and
conditions of the Work Order dated 06.05.2013, at the rate of
Rs.7101/- per hour plus taxes and for a period of seven years with
additional six months for supply of machines. The cost of the work
was Rs.59,64,84,000/-.
2.1 On 24.08.2017, MWHPL proposed deployment of five
additional machines. DJB issued a LOI dated 09.10.2017 and
MWHPL on 12.10.2017 gave a Letter of Acceptance (for short
‗LOA’). Work Order dated 30.10.2017 was issued and a contract
dated 17.11.2017 was executed, adopting the earlier contractual terms.
2.2 MWHPL on 11.05.2022 requested the DJB for enhancement of
the budget as the amount stipulated was likely to be exhausted by
August-September, 2022. Vide communication dated 01.11.2022,
DJB advised MWHPL that the agreed contract price was fully utilized
and work be carried out only within the cap. MWHPL suspended
operations on 02.11.2022 and requested that the pending dues be
cleared.
2.3 On 23.01.2023, MWHPL aggrieved of delay in revision of the
allocated budget filed writ petition (W.P. (C) No. 985 of 2023). On
20.02.2023, DJB closed the contract stating that the scope of work
was completed and requested for bill. The writ petition was dismissed
as withdrawn and the parties were relegated to the Dispute
Adjudication Board for amicable resolution. MWHPL issued a notice
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Signed By:CHANCHAL
Signing Date:20.04.2026
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dated 24.02.2023 invoking arbitration. Petition filed by MWHPL
under Section 9 of the Act was disposed of on 29.03.2023. The
conciliation proceedings failed and were closed on 20.04.2023. On
reference, the main issue before the arbitrator was whether the
contract was an item rate contract operative for a period of seven years
or it was till the exhaustion of the contract price of Rs.59,64,84,000.
In view of fact that the tenure of contract had expired during pendency
of arbitration proceedings, the declaratory reliefs (Claims No. I – VI
(ii)) seeking declaration against DJB were not pressed by MWHPL.
DJB aggrieved of the award dated 08.04.2025 allowing the following
claims of MWHPL filed the present petition:
Claim Amount Awarded
Alternative Claim VI Rs. 18,46,26,000/- (with
Claim towards Damages interest at 10% per annum from
calculated as per minimum 01.05.2025 till payment)
assurance from Feb, 2022 to
April, 2025
Claim VII Rs.2,83,79,759/-
Claim towards interest
applicable for delayed
payments.
Claim VIII Rs.3,49,37,191/- (with interest
Claim towards escalation/ at 10% per annum from
price variation 28.07.2023 till payment.)
Claim IX Rs.2,36,70,000/- (with interest
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Signed By:CHANCHAL
Signing Date:20.04.2026
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Claim towards minimum at 10% per annum from
assured payment for the 20.02.2023 till payment)
months of Nov,2022 to
Feb,2023
Claim X Rs.1,74,47,808/- (with interest
Claim towards additional at 10% per annum from April
labour deployed 2018 till payment)
Claim XII Arbitral fee paid to DIAC along
Litigation Cost with legal fee of Rs.10,00,000/-
Submissions of the Petitioner
3. Learned senior counsel for DJB contended that the contract
documents, work order, LOI and related records reflect the total
contract value of Rs.59,64,84,000/- which was to be paid over seven
years and the expression ‗minimum’ was not in relation to the contract
value in the documents. The contention is that clause II of the Special
Conditions of the Contract (for short ‗SCC’) stipulates that the
vehicles shall be available for at least twenty five days a month and
will be hired for a minimum two hundred hours per month but the
condition was not absolute and in case of deployment of the machines
for less than eight hours a day the payment on pro-rata basis has to be
made. MWHPL received the assured amount in four years and seven
months instead of seven years. MWHPL suspended the work on being
informed on 01.11.2022 that the total contract value stood exhausted
and the work was to be done within the upper cap. The work was
closed vide order dated 20.02.2023. The contention is that the tribunal
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Signing Date:20.04.2026
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erred in concluding that the contract was an item rate and not a lump
sum contract. It is emphasised that internal departmental
communications have no sanctity. Reliance is placed upon Konkan
Railway Corporation Ltd. v. SRC Company Infra Pvt. Ltd., 2025
SCC OnLine Bombay 4438.
3.1 Clause 11.3 of the General Conditions of Contract (for short
‗GCC’) is relied upon to contend that DJB had the power to cancel the
contract wholly or in part.
3.2 The damages awarded of Rs.18,46,26,000/- are challenged
being contrary to Sections 73 and 74 of the Indian Contract Act, 1872
(for short ‗Contract Act‘) having been awarded solely on the basis of
calculations furnished by MWHPL and not substantiated by evidence
of actual loss or injury. Reliance is placed upon the decisions of the
Supreme Court in Kailash Nath Associates v. Delhi Development
Authority & Anr., (2015) 4 SCC 136, Unibros v. All India Radio,
2023 SCC OnLine SC 1366 and Batliboi Environmental Engineers
Limited v. Hindustan Petroleum Corporation Limited & Anr.,
2023 SCC OnLine SC 1208. It is canvassed that there is no discussion
of nature and quantum of loss. Moreover, the turnover was awarded as
damages without deducting operating costs. The findings that the
machines used were tailor made are refuted relying upon the cross-
examination of CW-1 wherein it was stated that the machines were
deployed elsewhere post-termination. The grievance is that the
evidence of GPS tracking charts to support the plea that the machines
were being used elsewhere was brushed aside by the tribunal. It is
submitted that MWHPL had changed the password of GPS and DJB
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was curtailed from having access to the subsequent movement.
MWHPL continued to submit monthly bills after February, 2023 but
withheld the GPS data or proof of zero movement of the vehicles.
3.3 The submission is that the damages awarded for the period of
suspension i.e. November, 2022 to February, 2023 along with interest
at the rate of ten percent per annum are on the same pedestal as the
damages awarded for the post-termination period.
3.4 The amount awarded for deployment of additional labour along
with interest at the rate of ten percent per annum is stated to be
contrary to Section 73 of the Contract Act. MWHPL failed to prove
actual expenditure and the tribunal relied upon self-serving extracts of
ledger produced by MWHPL. Clause III of the SCC is relied upon to
contend that labour in abnormal circumstances was to be provided by
DJB. It is argued that grant of interest on the delayed payments from
ninety-first day of issuance of invoice is contrary to the clause 12.2.2
of the GCC wherein it is provided for interest after ninety days from
the date of pay order. Reliance is placed upon the decision of the
Supreme Court in Union of India & Ors. v. Larsen & Tubro Ltd.,
2026 SCC OnLine SC 327 to contend that awards contrary to the
terms of the contract are patently illegal.
3.5 It is submitted that the escalation charges were ordered to be
released without MWHPL proving the escalation of prices and interest
awarded thereon is beyond the terms of the contract. Lastly, the
litigation costs awarded are unsupported by evidence and contrary to
the contract.
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Signed By:CHANCHAL
Signing Date:20.04.2026
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Submissions of the Respondent
4. Per contra the arbitrator rightly held the contract to be an item
rate and not a lump sum contract. The tender notice invited item rate
bids; the additional terms of the contract provided that the contract
was for seven years and could be extended; there was a provision for
increasing deployment of machines and the rate quoted was on per
hour basis; the SCC stipulated that the contract period was for seven
years from the deployment of machines; the nature of the work was
such that there could not be prior calculation of the lump sum contract
price; DJB assured in contract that machines would be hired for two
hundred hours per month and the amount calculated on that basis was
a mutually agreed genuine pre-estimated loss and damage; the
contract mandated pro-rata payments based on the total number of
actual working hours each month; the invoices were to be raised on an
hourly basis; there was a clause providing for payment towards
escalation charges of fuel, labour and material as per fluctuations in
cost; and clause 12.6 of the GCC declared that the contract was not a
lump sum contract.
4.1 The conduct of the petitioner in enhancing the budgetary
allocation of the initial contract and forwarding proposals to higher
authorities for enhancement of the budget of the contract in hand is
relied upon to emphasise that contract was an item rate and not a lump
sum contract. The decisions of this court dated 29.03.2023 disposing
of application under Section 9 of the Act is relied upon to substantiate
that the contract was an item rate contract. The decision of the
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Signed By:CHANCHAL
Signing Date:20.04.2026
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Supreme Court in Godhra Electricity Co. Ltd. & Anr. v. State of
Gujarat & Anr., (1975) 1 SCC 199 and Transmission Corporation
of Andhra Pradesh Ltd. & Ors. v. GMR Vemagiri Power
Generation Ltd. & Anr., (2018) 3 SCC 716 are relied to submit that
assistance in interpreting the contract can be taken from the conduct of
the parties and their understanding of the terms. The decision of the
Supreme Court in Haris Marine Products v. Export Credit
Guarantee Corporation (ECGC) Limited, (2022) 20 SCC 776 is
relied upon to buttress the argument that ambiguity in the terms of the
contract is to be construed against the drafter.
4.2 The decision of the Supreme Court in Prakash Atlanta (JV) v.
National Highways Authority of India, 2026 SCC OnLine SC 98 is
relied upon to argue that interpretation of the clauses of contract lies
within the domain of the arbitrator and no interference is warranted
unless the conclusion arrived at is perverse.
4.3 The reliance on clause 11.3 of the GCC to contend that there
was a power to wholly or partly terminate the contract is refuted
stating that termination could have been effected only for the reasons
mentioned in clause 11.1 of the GCC which are not applicable to the
facts of this case.
4.4 It is submitted that damages of Rs.18,46,26,000/- were based on
a genuine pre-estimate of loss agreed between the parties based upon
assurance of hiring each machine for two hundred hours per month
and considering that machines were tailor made. Submission is that
the vehicles compliant with BS-IV norms were procured after
obtaining special permission from the National Green tribunal but
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Signed By:CHANCHAL
Signing Date:20.04.2026
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w.e.f. 01.04.2020 the emission norms were revised to BS-VI rendering
the vehicles unfit for use. DJB failed to prove that the machines could
be deployed elsewhere in Delhi. The argument is damages were
rightly awarded by tribunal. Reliance is placed upon the decisions in
Desh Raj & Ors. v. Rohtash Singh, 2023 (3) SCC 714, M/s Pawan
Hans Helicopters Ltd. v. M/s Maritime Energy Heli Air Services
Pvt. Ltd., 2017 (164) DRJ 703 and XL Energy Limited v.
Mahanagar Telehpone Nigam Limited, 2018 SCC Online Del 9109
in support of the proposition that in case of an agreed pre-estimate loss
the actual damages need not be proved. The award of the damages for
the suspension period is defended by similar arguments.
4.5 Clause III of the SCC is pressed into service to contend that
MWHPL was to deploy a driver, helper and supervisor and DJB had
to provide staff for other activities such as removing the manholes,
desilting of the manholes (in abnormal circumstances). The
submission is that conclusion of the tribunal allowing claim for
additional deployment of labour is reasonable and calls for no
interference. It is canvassed that the deployment of additional labour
was supported by log sheets counter-signed by the parties though the
tribunal inadvertently recorded them as undisputed invoices. The
contention is that the ledger along with the certificate dated
30.07.2024 issued by the Chartered Accountant (for short ‗CA’)
proved payment of salaries yet the tribunal allowed the claim relying
onminimum wages and not on the amount claimed.
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Signed By:CHANCHAL
Signing Date:20.04.2026
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4.6 Clause 12.2.2 of the GCC providing interest at the rate of ten
percent per annum payable from ninety first day of the pay order is
relied upon to defend the award of interest.
4.7 The submission is that the principal amount of escalation bills
was not challenged before the tribunal and only the award of interest
at the rate of ten percent per annum was contested. It is submitted that
clause 12.2.2 of the GCC provides for ten percent interest on running
monthly invoices and that very rate has been applied by the tribunal.
Reliance is on Section 31A (2) of the Act to defend the award of costs.
5. Heard learned counsel for the parties. Albeit, the written
submissions were filed but the matter was argued at length and no
issue other than those noted above was pressed.
Issues for Consideration
i. Whether the contract between the parties was an item rate
contract for a period of seven years or was limited to the total
contract value of Rs.59,64,84,000/-.
ii. Whether the termination of the contract by the petitioner was in
accordance with the terms of the contract.
iii. Whether the respondent was entitled to damages for the period
of suspension and for the remaining tenure of the contract.
iv. Whether the claims for deployment of additional labour and
interest awarded thereon and also on delayed payments and
escalation charges call for interference under Section 34 of the
Act.
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Signed By:CHANCHAL
Signing Date:20.04.2026
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Analysis
6. MWHPL after termination of the contract invoked the
arbitration. Apart from the issues now raised declaratory reliefs were
sought however, at the time of final arguments considering that the
tenure of the contract had expired the declaratory reliefs were not
pressed and only alternative reliefs were prayed for. The tribunal
decided that the contract was an item rate contract and not a lump sum
contract. The termination of the contract was held to be illegal.
7. Before proceeding further, it would be relevant to note the
clauses and relevant portions of the documents relied upon by both
sides.
7.1 Work orders dated 06.05.2013 and 30.10.2017 are reproduced
below:
―The earlier work order dated 06.05.2013 reads as under:
M/s Metrro Waste Handling Pvt. Ltd. & M/S City Life
Line Travels Pvt. Ltd. (JV) 8551/2, Roshanara Road,
Delhi- 110007
Sub: Hiring and O & M of 5 Nos. jetting cum suction
recycling sewer cleaning machines to operate in the streets
including narrow lanes of Delhi
Amount put the tender
O/o Age Item Rate
Above/below/item rate
Total Cost Rs. 59,64,84,000/-
Completion Period 6 months for supply of
machines plus 7 Yrs. For
hiring of machine
Head f Account Trunk Peripheral Sewer &
Gravity duct.
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Signed By:CHANCHAL
Signing Date:20.04.2026
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With reference to your letter dated 30.10.12 and
negotiation held on 20.03.13 for the above said work. Your
rates has been accepted by the Competent Authority. You
are therefore requested to start the work under the
instructions of Assistant Engineer (E&M)- III incharge of
this work and complete the same as per completion period
stated above. The date of start of work shall be reckoned
from 7 day of issue of work order.
It should be noted that as and when orders are given for the
execution of extra items, such orders be got confirmed in
writing subsequently, so that extra items and rates be got
settled & approved by the Competent Authority.‖
xxx xxx xxx
―The work order of the instant case is dated 30.10.2017. The
relevant extract of this document reads as under:
―NO: /DJB/2017-18//EE (West)-l/680 to 93
Dated 30.10.2017
Ms. Metrro Waste Handling Pvt. Ltd.
& M/S City Life Line Travels Pvt. Ltd. (JV) 8551/2,
Roshanara Road, Delhi-110007
Name of work: Hiring and O&M of 5 Nos. jetting cum
suction recycling sewer cleaning
machines to operate in the streets
including narrow lanes of Delhi
Amount put together: Item rate
Awarded Rate: Item rate
Total contractual cost: Rs. 59,64,84,000/- plus GST as
applicableSignature Not Verified
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Signed By:CHANCHAL
Signing Date:20.04.2026
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Completion period: 06 Month for supply of machine
Plus 7 years for hiring of
machine
Budget Head: Trunk Peripheral Sewer &
Gravity DuctPerformance Bank
Guarantee @ 5%: Bearing B.G. 0301-BG-0017-17
amounting to Rs. 85,21,200/-
Dated 12.10.2017 validity Dt.
30.09.2018
Punjab & Sind Bank Roshanara
Road, Delhi 110007.
Sir
With reference to your letter dated 24.08.2017 for the
above said work. Your rate has been accepted by the
Competent Authority. You are therefore requested to start
the work under the instructions of Zonal Engineer VIII
West in charge of this work and complete the same as per
completion period stated above The date of start of work
shall be reckoned from 30.04.2018 or date of actual supply
of machine, whichever earlier.
It should he noted that and when orders are given for the
execution of extra items, such orders be got confirmed in
writing subsequently, so that extra item and rates be got
settled & approved by the competent Authority‖
xxx xxx xxx
7.2 Clauses 12.2.1, 12.2.2, 12.6 and 14.1 of the GCC are
reproduced as follows:-
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Signing Date:20.04.2026
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―12.2.1 The payment of the monthly running bill for the
Works shall be released in 90 days from the date of
recording of pay order. No excuse for delay in completion
of work/prolongation of the Contract shall however be
entertained on account of the reason of delay in payment.
The bidder therefore, must take into consideration of its
financial capability to carry out and to continue the work
without any hindrances.‖
―12.2.2 In the event of the failure of Employer to release
payment as per clause 12.2.1, the Employer shall be liable
to pay interest @ 10% per annum computed for period
beyond 90 days. Provided always, that no interest shall be
payable on any amount disallowed or disputed by the
Engineer-in- Charge or the Employer, even if such amount
is later on determined to be payable to the Contractor, as a
result of any process resorted to for the settlement of the
dispute as per Contract.‖
―12.6 Lump sum provisions in a composite tender
This Clause is not Applicable.‖
―14.0 Changes in Contract Price
14.1 Payments due to variation in prices of material, POL
and labour after receipt of tender
If during the operative period of the Contract, there shall
be any variation in the prices of material (not being the
material supplied by Employer as under clause 9.1 and/or
services rendered at fixed prices as under clause 9.5 and
the material for which the price variation is being
calculated for actual quantities used as under clause
14.1.3) and/or in the wages of labour required for
execution of.
Works and/or in POL (fuel); the Contract Price shall be
adjusted as per the provisions detailed below‖
7.3 Clauses II, III and VI of the SCC are reproduced below:-
―II. Functional Duties:
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xxx xxx xxx
The vehicle shall be available and fit for work for minimum
25 days in a month. Delhi Jal Board will hire each machine
for minimum total 200 hours per month (and minimum total
8 hours per day normally) for the duration of the contract.
200 hours includes time towards transportation & setting up
and actual operation. Lunch hours (1-2 PM) will not be
included in 200 hours. The time of operation will be decided
by the Engineer-in-charge. However if due to any
extraordinary requirement of Delhi Jal Board, a machine is
deployed for less than 8 hours, the payment will still be
done on pro-rata basis.‖
―III. Staff:
The firm will engage the required staff for operation
and maintenance of each machine. The vehicle Driver
operator should be well trained, well behaved, free
from intoxication and have proper driving licence (as
per RTA requirement).
DJB will provide the labour/staff for other activities
e.g. removal of the manhole, de-siliting of manhole
(for abnormal circumstances e.g. if filled-up with
heavy construction material which can’t be removed by
the machine) if required. The location of the site will
be decided by the DJB staff. The tenderer shall depute
the machines at various zones as per the directions of
the Engineer-in-charge.
Minimum Manpower deployment are as follows:
Operation Crew:
Trained Driver 1 Nos./Machine
Operator 1 Nos./Machine
1 Supervisor for entire fleet‖
―VI. Payment:
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xxx xxx xxx
o The payment will be made as per actual hours (transport
hours + operation hours) obtained from log sheets. The
working hours will also be confirmed by the GPS system/
tele-metering record (hour meter) / log-sheet etc. The
decision of the concerned EE (Civil) will be final.
xxx xxx xxx
o The payment will be made on pro-rata basis based on the
total no. or working hours (or fraction of hour upto minutes)
of machine @ per hour rate quoted/accepted by the
contractor/department.‖
Nature Of Contract
8. The tribunal noted that the contract was executed on 17.11.2017
but the LOI and the work order were integral parts of it. The
‗completion date’ mentioned in the Work Order stipulated a period of
seven years. The terms and conditions of the present contract were
verbatim with the earlier Work Order dated 06.05.2013 and that
contract was an ‗item rate’. The work detailed in the NIT indicated the
contract period to be seven years after actual deployment of machines.
Clause 12.6 of the GCC states that lump sum provisions were not
applicable. Clause 14 of the GCC provides for payment of escalation
in prices. The definitions of ‗stipulated date of completion’ and
‗contract price’ were relied upon to conclude that the contract was an
item rate contract for a period of seven years.
9. The minutes of meetings dated 29.09.2012, 19.03.2012,
20.03.2013, 01.04.2013 and 11.04.2013 and communications
exchanged inter se the officials of DJB were relied upon that as per
the understanding of the petitioner the contract was an item rate. It
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was further considered that in the earlier contract of 2013, the budget
allocation was revised and in the present contract proposals were
submitted to higher authorities for revision of the budget. The prima
facie findings recorded by this court while deciding application under
Section 9 of the Act that the contract was an item rate and not a lump
sum contract were noted though rightly considered not to be
conclusive. It was held that the contract was for a fixed period of
seven years and it was an item rate and not a lump sum contract.
10. It is an undisputed fact that the tender was invited on an item
rate basis. The completion period was stated to be of seven years
which could have been extended. The bid was quoted on per working
hour basis. There was an assurance of minimum hiring of the
machines for two hundred hours per month. The payments were to be
made on actual working hours and SCC provided for payment on a
pro-rata basis in case the deployment are less than eight hours a day.
11. The mentioning of total contract value and usage of the
expression ‗minimum’ for assuring deployment of the machines for
two hundred hours per month and availability for at least twenty five
days a month shall not be the only factors to determine the nature of
the contract. There cannot be quarrel with the proposition that contract
is to be read as whole and moreover, in case in hand the work order
and LOI are integral part of the contract.
12. The internal communications of the petitioner are not binding
but supports that the view taken by the tribunal to be plausible one.
The possibility of another view is not a ground under Section 34 of the
Act for setting aside the impugned award. The NIT, LOI, GCC and
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SCC were considered for holding that the work awarded was an item
rate. The interpretation of clauses of contract by the arbitrator cannot
be interfered with under Section 34 of the Act unless the relevant
clauses have been ignored, the contractual terms are rewritten or the
conclusion arrived at is perverse and it is not so in case in hand
making no case for interference under Section 34 of the Act.
Termination of Contract
13. The tribunal rightly concluded that the eventualities mentioned
in clause 11.1 of the GCC for termination of the contract never existed
and the termination of the contract was illegal. The contention of the
learned senior counsel for the petitioner that under clause 11.3 of the
GCC there was a power to terminate the contract is ill-founded.
Clauses 11.1 and 11.3 of the GCC are to be read in conjunction and
clause 11.3 of the GCC empowers DJB to wholly or in part terminate
the contract applies only if the circumstances mentioned in clause 11.1
of the GCC occur.
Scope under Section 34 of the Act
14. The scope of interference under Section 34 of the Act is well
settled that interpretation of the clauses of the contract falls within the
domain of the arbitrator and no interference is to be made if the
conclusion arrived at is plausible and interference is to be made only
in case of perversity. Reference is made to the following decisions of
the Supreme Court.
14.1 In Prakash Atlanta (JV) (Supra) it was held as under:
―52. ……Having considered the arbitral awards passed by
the arbitral tribunals in the five appeals filed by NHAI, weSignature Not Verified
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find that the interpretation and construction of those terms
and clauses by the arbitral tribunals cannot be said to be
arbitrary, perverse or patently illegal. Given the situation
obtaining in relation to the two Acts at the relevant time,
the arbitral awards cannot be said to have violated the
public policy of India or be in breach of Section 28(1)(a)
of the Arbitration Act. Once the view taken by the arbitral
tribunal is found to be a plausible and possible one on facts
and not an unreasonable one, it is not for the Courts, under
Sections 34 or 37 of the Arbitration Act, or for this Court
to sit in appeal or substitute its view for that of the arbitral
tribunal.‖
14.2 The Supreme Court in Ramesh Kumar Jain vs. Bharat
Aluminium Company Limited, 2025 SCC OnLine SC 2857 held as
under:
―28. The bare perusal of section 34 mandates a narrow lens
of supervisory jurisdiction to set aside the arbitral award
strictly on the grounds and parameters enumerated in sub-
section (2) & (3) thereof. The interference is permitted
where the award is found to be in contravention to public
policy of India; is contrary to the fundamental policy of
Indian Law; or offends the most basic notions of morality
or justice. Hence, a plain and purposive reading of the
section 34 makes it abundantly clear that the scope of
interference by a judicial body is extremely narrow. It is a
settled proposition of law as has been constantly observed
by this court and we reiterate, the courts exercising
jurisdiction under section 34 do not sit in appeal over the
arbitral award hence they are not expected to examine the
legality, reasonableness or correctness of findings on facts
or law unless they come under any of grounds mandated in
the said provision. In ONGC Limited. v. Saw Pipes
Limited14, this court held that an award can be set aside
under Section 34 on the following grounds: ―(a)
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the interest of India; or (c) justice or morality, or (d) in
addition, if it is patently illegal.‖
14.3 In Consolidated Construction Consortium Limited vs.
Software Technology Parks of India, (2025) 7 SCC 757 it was held
as under:
―46. Scope of Section 34 of the 1996 Act is now well
crystallized by a plethora of judgments of this Court.
Section 34 is not in the nature of an appellate provision. It
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 perforce 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.‖
Damages for Period of Suspension and Balance Period of Contract
15. The contract having been held to be an item rate contract and
the termination to be illegal, the question surviving is as to whether
MWHPL was entitled to damages for the remaining period of the term
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of the contract i.e. approximately twenty six months and the
quantification of damages.
16. From the reading of the terms of the contract dated 17.11.2017,
SCC, LOI and work order it is evident that the contract was for the
total cost of Rs.59,64,84,000/-. Clause II of the SCC stipulates that the
vehicles shall remain available for a minimum of twenty-five days a
month and DJB will hire each machine for a minimum of two hundred
hours per month for the duration of the contract. The calculation of the
total cost of the contract which was extendable by DJB has been made
taking into account the minimum two hundred hiring hours per month
for seven years and for five machines. In mathematical terms: 7101
(minimum rate per hour per machine) x 25 (minimum days per month)
x 8 (minimum hours per day) x 84 (duration of the contract in month)
x 5 (number of vehicles).
17. The contract was an item rate contract yet from reading of
contract in entirety, an assurance to MWHPL emerges that by hiring
of the five machines for seven years there would be a minimum
turnover of Rs.59,64,84,000/-. It is an undisputed fact that this amount
was paid to MWHPL prior to termination i.e. on completion of four
years and seven months. Clause II of the SCC provided that in case of
hiring of the machines for less than eight hour a day the payment
would be made on pro-rata basis. Further clause VI of the SCC
provided that the payment was to be made on actual usage. The
conclusion of the arbitrator that in spite of the additional working
hours in the four years seven months period, MWHPL was entitled to
a minimum of two hundred hiring hours per month per machine for
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seven years renders the clause of pro-rata payment and payment on
actual usage otiose.
18. Another angle to be considered is that in the absence of proof of
actual loss suffered MWHPL cannot claim damages due to premature
termination of the contract by DJB, more so, when the minimum
assured turnover to MWHPL upon completion of the contract was
paid prior to termination.
19. There is a dispute raised with regard to whether the machines
where tailor-made; the machines could have been put to use for
cleaning other sewers; and one of the machines was actually put to
usage after the termination of the contract but for claiming damages
under Sections 73 and 74 of the Contract Act, actual loss or damage
suffered has to be proved. The contention of the learned senior
counsel for the respondent that damages have been calculated on the
basis of a formula of genuine pre-estimate of loss provided in the
contract lacks merit. There is neither pre-determination of liquidated
damages nor a formula has been provided for doing so. The clause for
minimum hiring hours was only to ensure the bidder that minimum
business that would accrue on making an investment. At this stage, it
must be added albeit, the total contract value could have been
extended by the petitioner but that the respondent had no right to
claim enhancement of the contract amount.
20. The law is well settled that for claiming damages under
Sections 73 and 74 of the Contract Act the claimant has to prove
actual loss suffered and in case it is not possible to prove loss, a
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reasonable amount of damages is to be assessed. Reference in this
regard be made to the following judgments:
20.1 The Supreme Court in Unibros (supra) while dealing with a
claim for redressal of loss of profit made under Section 73 of the
Contract Act arising from prolongation of the contract held:
―19. The law, as it should stand thus, is that for claims
related to loss of profit, profitability or opportunities to
succeed, one would be required to establish the
following conditions : first, there was a delay in the
completion of the contract; second, such delay is not
attributable to the claimant; third, the claimant’s status
as an established contractor, handling substantial
projects; and fourth, credible evidence to substantiate
the claim of loss of profitability. On perusal of the
records, we are satisfied that the fourth condition,
namely, the evidence to substantiate the claim of loss
of profitability remains unfulfilled in the present case.‖
20.2. The Supreme Court in Kailash Nath Associates (supra) held:
―43.6. The expression ―whether or not actual damage
or loss is proved to have been caused thereby‖ means
that where it is possible to prove actual damage or loss,
such proof is not dispensed with. It is only in cases
where damage or loss is difficult or impossible to
prove that the liquidated amount named in the contract,
if a genuine pre-estimate of damage or loss, can be
awarded.‖
20.3 The Supreme Court in State of Rajasthan v. Ferro Concrete
Construction (P) Ltd., (2009) 12 SCC 1 held:
―55.While the quantum of evidence required to accept
a claim may be a matter within the exclusive
jurisdiction of the arbitrator to decide, if there was no
evidence at all and if the arbitrator makes an award of
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the basis of the claim statement without anything more,
it has to be held that the award on that account would
be invalid. Suffice it to say that the entire award under
this head is wholly illegal and beyond the jurisdiction
of the arbitrator, and wholly unsustainable.‖
20.4 The Division Bench of this court in Tower Vision India (P)
Ltd. v. Procall (P) Ltd., 2012 SCC OnLine Del 4396 held:
―16. Consequence for breach of the contract are
provided in Chapter VI of the Indian Contract Act,
1872, which contains three sections, namely, section
73 to section 75. As per section 73 of the Indian
Contract Act, the party who suffers by the breach of
contract is entitled to receive from the defaulting party,
compensation for any loss or damage caused to him by
such breach, which naturally arose in usual course of
things from such breach, or which the two parties knew
when they make the contract to be likely the result of
the breach of contract. This provision makes it clear
that such compensation is not to be given for any
remote or indirect loss or damage sustained by reason
of the breach. The underlying principle enshrined in
this section is that a mere breach of contract by a
defaulting party would not entitle the other side to
claim damages unless the said party has in fact suffered
damages because of such breach. Loss or damage
which is actually suffered as a result of breach has to
be proved and the plaintiff is to be compensated to the
extent of actual loss or damage suffered. When there is
a breach of contract, the party who commits the breach
does not eo instanti, i.e., at the instant incur any
pecuniary obligation, nor does the party complaining
of the breach becomes entitled to a debt due from the
other party. The only right which the party aggrieved
by the breach of the contract has is the right to sue for
damages. No pecuniary liability thus arises till the
court has determined that the party complaining of the
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place must decide that the defendant is liable and then
it should proceed to assess what the liability is. But, till
that determination, there is no liability at all upon the
defendant. The courts will give damages for breach of
contract only by way of compensation for loss suffered
and not by way of punishment. The rule applicable for
determining the amount of damages for the breach of
contract to perform a specified work is that the
damages are to be assessed at the pecuniary amount of
difference between the state of the plaintiff upon the
breach of the contract and what it would have been if
the contract had been performed and not the sum which
it would cost to perform the contract, though in
particular cases the result of either mode of calculation
may be the same. The measure of compensation
depends upon the circumstances of the case. The
complained loss or claimed damage must be fairly
attributed to the breach as a natural result or
consequence of the same. The loss must be a real loss
or actual damage and not merely a probable or a
possible one. When it is not possible to calculate
accurately or in a reasonable manner, the actual
amount of loss incurred or when the plaintiff has not
been able to prove the actual loss suffered, he will be,
all the same, entitled to recover nominal damages for
breach of contract. Where nominal damages only are to
be awarded, the extent of the same should be estimated
with reference to the facts and circumstances involved.
The general principle to be borne in mind is that the
injured party may be put in the same position as that he
would have been if he had not sustained the wrong.‖
(emphasis supplied)
21. The arbitrator erred in awarding damages of the entire turnover
for remaining period of contract, calculating it by minimum assured
hiring of the machines. The amount to be received by MWHPL was
the gross turnover and would include operational expenses,
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consumables and other overheads and does not denote the loss
suffered.
22. Another aspect is that making of a payment on actual usage
basis and on pro-rata basis in case of hiring of the machine for less
than eight hours a day makes the contract flexible enough to adjust
according to the situations arising at ground level, with the only
condition that MWHPL shall get minimum Rs.59,64,84,000/- during
the tenure of the contract. The award of damages in absence of
evidence on record of actual loss suffered or a finding recorded that
the loss suffered cannot be proved is in violation of Sections 73 and
74 of the Contract Act and against public policy. The tribunal awarded
damages without considering the value of the machines, the usage
these were put to, loss of business and other factors. The gross amount
to be received by MWHPL for remaining period of the contract,
calculated with minimum hiring guarantee of two hundred working
hours per month per machine in itself is not actual loss suffered by the
respondent as only a percentage of turnover can be regarded as profit.
23. It is trite law that, in case of termination of contract the
aggrieved party is to be awarded damages to put it in the same
position that it would have been in if the contract had been executed.
However, the damages must be reasonable and the parties should not
be allowed to make a windfall profit. The Supreme Court in Batliboi
Environmental Engineers Ltd. (supra) held:
―16. This is without doubt, a sound legal and correct
proposition. However, the computation of damages
should not be whimsical and absurd resulting in a
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other. The computation of damages should not be
disingenuous. The damages should commensurate with
the loss sustained. In a claim for loss on account of delay
in work attributable to the employer, the contractor is
entitled to the loss sustained by the breach of contract to
the extent and so far as money can compensate. The party
should to be placed in the same situation, with the
damages, as if the contract had been performed. The
principle is that the sum of money awarded to the party
who has suffered the injury, should be the same quantum
as s/he would have earned or made, if s/he had not
sustained the wrong for which s/he is getting
compensated. [Robinson v. Harman, (1848) 1 Ex 850, at
p. 855 and Livingstone v. Rawyards Coal Co., (1880) LR
5 AC 25 (HL)]‖
[emphasis supplied]23.1 Contrary to the settled principles governing the award of
damages, the gross turnover for the remaining period of the contract
was taken to be loss suffered by MWHPL. The awarding of damages
without deducting expenses puts MWHPL in position of having a
windfall gain rather than reimbursing the loss suffered. At cost of
repetition MWHPL has already achieved the assured minimum
business.
24. The damages for the period the contract was suspended were
awarded on the same basis and hence meet the same fate. The
awarding of the damages is set aside.
Grant of Interest on Delayed Payment
25. Clauses 12.2.1 and 12.2.2 of the GCC provide that payment of
interest at the rate of ten percent per annum is to be computed after
ninety days of the pay order. The petitioner though set up a case thatSignature Not Verified
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the ninety days is to be counted from the date of the issuance of the
pay order but the information exclusively in the possession of the
petitioner i.e. the date of pay order was not disclosed. Moreover, it
was not substantiated that for payments made to MWHPL, pay orders
were being issued. The emails exchanged between the parties were
also relied upon by tribunal wherein the amounts calculated were
inclusive of interest at the rate of ten percent per annum. The tribunal
rightly granted interest at the rate of ten percent per annum from the
ninety-first day of submission of the bills. The grant of interest is in
consonance with clause 12.2.2 of the GCC and calls for no
interference.
Deployment of Additional Labour and Interest Thereon
26. Clause III of the SCC provides for deployment of one trained
driver, operator and supervisor. DJB had to provide labour for other
activities such as removal of manhole and desilting of manhole (only
in abnormal circumstances). The contention of learned senior counsel
of the petitioner that the staff was to be deployed only in abnormal
circumstances as evident from clause III of the SCC, is ill-founded.
The arbitrator rightly held that the abnormal circumstances applied
only to de-silting of the manholes and not for other activities to be
done for example removal of manholes. The contention that the
deployment of additional labour itself shall not entitle the respondent
for payment unless actual wages paid are proved, is of no avail. SCC
provides for the log sheets were to be maintained for deployment of
labour and these were to be counter-signed by the parties. The
respondent produced the counter signed log sheets, extracts of the
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ledger and a certificate of the CA to prove deployment of additional
labour and wages paid. The counter-signatures on the log sheets for
deployment of additional labour were not disputed by the petitioner.
The extracts of ledger produced by the respondent were backed by
certificate issued by the CA and the entries in the log sheets. The
quality of evidence to be considered is in the domain of the tribunal.
Supreme Court in Parsa Kente Collieries Limited v. Rajasthan
Rajya Vidyut Utpadan Nigam Limited, (2019) 7 SCC 236 held that
quality of evidence to be relied upon is a matter for consideration of
arbitrator only. Relevant part is quoted below:
―9.1 ……… it is observed and held that an Arbitral Tribunal
must decide in accordance with the terms of the contract,
but if an Arbitrator construes a term of the contract in a
reasonable manner, it will not mean that the award can be
set aside on this ground. It is further observed and held that
construction of the terms of a contract is primarily for an
Arbitrator to decide unless the Arbitrator construes the
contract in such a way that it could be said to be something
that no fair-minded or reasonable person could do. It is
further observed by this Court in the aforesaid decision in
para 33 that when a court is applying the ―public policy‖
test to an arbitration award, it does not act as a court of
appeal and consequently errors of fact cannot be corrected.
A possible view by the Arbitrator on facts has necessarily
to pass muster as the Arbitrator is the ultimate master of
the quantity and quality of evidence to be relied upon
when he delivers his arbitral award. It is further observed
that thus an award based on little evidence or on evidence
which does not measure up in quality to a trained legal
mind would not be held to be invalid on this score.‖
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27. It would be relevant to note that the tribunal has not awarded
the entire claim made for additional deployment of labour but
considered the undisputed number of additional labour deployed and
the minimum wages statutorily prescribed. Conclusion arrived at by
the tribunal suffers from no legal error much less perversity. The
claim awarded is upheld.
28. The challenge to the grant of interest on the amount awarded for
deployment of additional labour on the ground that there is no clause
for grant of interest is noted to be rejected. The tribunal has given the
basis of awarding interest at the rate of ten percent per annum which is
equivalent to the rate agreed between the parties under clause 12.2.2
of the GCC in case of delay in payment of bills. Moreover, there is no
clause in the contract barring the grant of interest.
Escalation Charges
29. Clause 14.1 of the GCC read with Clause VII of the SCC
provides for payment of escalation charges in case of price fluctuation
in labour component, material and fuel. The claim for escalation of
prices and the fact that fifty-six bills on account of price variation
were submitted by the respondent from April 2018 to December 2022
were not disputed before the tribunal. The only defence pressed was
that there was deficiency in the documents submitted. The tribunal in
the facts and circumstances of the case rightly held the respondent to
be entitled to payment for the escalation bills submitted. For the grant
of interest at the rate of ten percent per annum on the delayed payment
of the escalation bills the tribunal relied upon clause 12.2.2 of the
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percent per annum on delayed payment of bills. It would be apposite
to mention that there is no clause in the contract that no interest would
be awarded for delay in payment due to escalation of prices. A
plausible conclusion arrived at by the tribunal backed by the reasons
cannot be tinkered with under Section 34 of the Act.
30. The tribunal under Section 31A(2) of the Act has the discretion
to award costs. The discretion was exercised by the tribunal
considering the expenditure incurred by the respondent in litigation,
the certificate of costs submitted and the fact and circumstance of the
case. The discretion exercised having a sound basis needs no
interference.
31. The Supreme Court in Gayatri Balasamy v. ISG Novasoft
Technologies Ltd., (2025) 7 SCC 1 held that while an arbitral award
cannot be modified under Section 34 of the Act, a severable part of the
award may be set aside. The relevant paragraphs are quoted below:
―32. In the present controversy, the proviso to Section
34(2)(a)(iv) is particularly relevant. It states that if the
decisions on matters submitted to arbitration can be
separated from those not submitted, only that part of the
arbitral award which contains decisions on matters non-
submitted may be set aside. The proviso, therefore,
permits courts to sever the non-arbitrable portions of an
award from arbitrable ones. This serves a twofold
purpose. First, it aligns with Section 16 of the 1996 Act,
which affirms the principle of kompetenzkompetenz, that
is, the arbitrators’ competence to determine their own
jurisdiction. Secondly, it enables the Court to sever and
preserve the ―valid‖ part(s) of the award while setting
aside the ―invalid‖ ones. [The ―validity‖ and ―invalidity‖,
as used here, does not refer to legal validity or merits
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Section 34(2)(a)(iv) of the 1996 Act.] Indeed, before us,
none of the parties have argued that the Court is not
empowered to undertake such a segregation.
33. We hold that the power conferred under the proviso
to Section 34(2)(a)(iv) is clarificatory in nature. The
authority to sever the ―invalid‖ portion of an arbitral
award from the ―valid‖ portion, while remaining within
the narrow confines of Section 34, is inherent in the
Court’s jurisdiction when setting aside an award.
34. To this extent, the doctrine of omne majus continet in
se minus–the greater power includes the lesser–
applies squarely. The authority to set aside an arbitral
award necessarily encompasses the power to set it aside
in part, rather than in its entirety. This interpretation is
practical and pragmatic. It would be incongruous to hold
that power to set aside would only mean power to set
aside the award in its entirety and not in part. A contrary
interpretation would not only be inconsistent with the
statutory framework but may also result in valid
determinations being unnecessarily nullified.
(emphasis supplied)
32. The quashing of awarding of damages for the period of
suspension and for the balance period of the contract along with the
interest thereon are separable, not dependant on other claims awarded
and are not intricately connected with each other.
Conclusion
33. In view of the above, it is concluded:-
i. The conclusion of the tribunal holding the contract to be an item
rate contract and the termination of the contract to be illegal is
upheld.
ii. The award of damages for the period of suspension and for the
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remaining tenure of the contract alongwith the interest thereon
is set aside.
iii. The award of escalation charges, amount towards deployment
of additional labour, grant of interest and costs awarded does
not call for interference and are upheld.
34. The petition is partly allowed. Pending application stands
disposed of.
AVNEESH JHINGAN, J.
APRIL 20, 2026
Ch
Reportable:-Yes
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