Delhi High Court
S & S Technocrat Pvt. Ltd vs Hindustan Letex Ltd on 23 July, 2026
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on: 06.07.2026
Judgment pronounced on: 23.07.2026
+ O.M.P. (COMM) 398/2018
S & S TECHNOCRAT PVT. LTD. .....Petitioner
Through: Mr. Vivekanand & Mr.
Abhishek Semwal, Advs.
versus
HINDUSTAN LETEX LTD. .....Respondent
Through: Mr. Nikhilesh Krishnan, Mr.
Siddharth Singh, Mr. Karna
Mehra & Ms. Ritika Priya,
Advs.
CORAM:
HON'BLE MR. JUSTICE AVNEESH JHINGAN
JUDGMENT
1. This petition is filed under Section 34 of the Arbitration and
Conciliation Act, 1996 (for short „the Act‟) seeking setting aside of
arbitral award dated 05.05.2018.
Brief Facts
2. The brief facts are that on 10.02.2006, the respondent,
Hindustan Letex Ltd (for short, „HLL‟) invited a tender for
construction of an Office Complex. The petitioner, M/s S&S
Technocrats Pvt. Ltd. (for short, „SSTPL‟) was the successful bidder
and Letter of Acceptance (LOA) dated 17.03.2006 was issued for a
total value of Rs.3,48,85,500/-. The parties to the lis entered into a
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contract dated 31.05.2006 and the work was to be completed within
fifteen months from the date of commencement i.e., 27.03.2006.
2.1 The scope of contract was enhanced by including an additional
floor and the period for completion was extended till 26.08.2007. The
work could not be completed within the stipulated period and time
was extended till 16.05.2009.
2.2 Dispute arose between the parties and on 20.05.2009 the
petitioner invoked arbitration under clause 31 of the General
Conditions of Contract (for short „GCC‟). The work was not
completed within the extended period and the respondent terminated
the contract on 15.02.2010.
2.3 The decision on claims and counter-claims in the award are
tabulated below:
CLAIM DECISION
CLAIM NO. 1 Partly Allowed
Claim towards release of payment due under the (Gross final bill to be paid and
Final Bill after deducting the payments received to be calculated as per
against the running bills Annexure „F‟ after contractual
deductions. 12% p.a. interest
granted on awarded amount
subject to adjustments of HLL
awarded dues).
CLAIM NO. 2 Rejected
Claim towards payment of increase in rates other
than the deviated/ extra items executed beyond
the permissible deviation limit i.e., 10% of the
contract amount
CLAIM NO. 3 Rejected
Claim towards escalation on electrical works
CLAIM NO. 4 Allowed Conditionally
Claim towards release of security deposit (Security Deposit to be
computed on gross amount of
final bill and released after
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adjustment of awarded dues of
respondent. Interest @12%
p.a. awarded after expiry of
one year defect liability period
from 15.02.2010).
CLAIM NO. 5 Allowed
Claim towards release of Performance Bank (Performance Bank Guarantee
Guarantee released subject to recovery of
awarded dues of the
respondent).
CLAIM NO. 6 Rejected
Claim towards losses suffered for engaging
additional staff and machinery during the
extended period
CLAIM NO. 7 Rejected
Claim towards reimbursement of Bank
Guarantee commission paid after the completion
date
CLAIM NO. 8 Partly Allowed
Claim towards pre-suit and pendente lite interest (Pre-suit and pendente lite
at 18% per annum on Claims Nos. 1, 2, 3 and 4 interest @ 12% p.a. awarded
on claim nos. 1 & 4).
CLAIM NO. 9
Claim towards declaration that termination of the Rejected
contract is illegal
CLAIM NO. 10 Rejected
Litigation / Arbitration Costs
ADDITIONAL CLAIM Rejected
Claim towards reimbursement of renewal
charges of Contractors All Risk and Workmen
Compensation Policy (for short „CAR Policy‟)
COUNTER-CLAIM NO. 1(a)
Claim towards recovery of liquidated damages Liquidated damages @ 7.5%
@ 7.5% on the gross work done on gross value of XVIth &
final bill awarded with 12%
p.a. interest.
COUNTER-CLAIM NO. 2 Rejected
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Claim towards reimbursement of office rent for
the extended period
COUNTER-CLAIM NO. 3 Rejected
Claim towards payment of minimum electricity
charges for new office building
COUNTER-CLAIM NO. 4 Partly Allowed
Claim towards reimbursement of insurance paid (Rs.3,85,516/- towards CAR
and the interest on premium amount policy premium awarded with
12% p.a. interest subject to a
maximum of Rs.40,479/-).
COUNTER-CLAIM NO. 5 Rejected
Claim towards extra expenditure incurred for
engaging professionals during the extended
period beyond 10.01.2009
COUNTER-CLAIM NO. 6 Rejected
Claim towards additional amount claimed by
Architects due to prolongation of contract
(claims after10.01.2009 only included).
COUNTER-CLAIM NO. 7 Partly Allowed
Claim towards expenditure incurred for making (Claim of Rs.2,93,980/-
the building habitable allowed to the extent of
Rs.1,04,977/- with 12% p.a.
interest).
COUNTER-CLAIM NO. 8 Rejected
Claim towards expenditure likely to be incurred
on rectification of defects
COUNTER-CLAIM NO. 9 Partly Allowed
Claim towards inadequate deployment of (Claim of Rs. 31,40,000/-
qualified engineers allowed to the extent of
Rs.6,90,000/-).
COUNTER-CLAIM NO. 10 Rejected
Litigation Costs
COUNTER-CLAIM NO. 11 Rejected
Claim towards loss of interest on Counter Claims
Nos. 1-8
The challenge to the impugned award by petitioner while arguing the
matter was confined to claim nos. 1,2,3,6 & 9 and counter-claim no.
1(a).
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Submissions of the Parties
3. Learned counsel for the petitioner submits that claim no. 1 was
partly allowed without considering that the procedure prescribed
under clause 15(d) of the Special Conditions of Contract (for short
‘SCC’) was not followed. The submission is that the rates proposed by
the internal committee and approved by the respondent were not
binding on the petitioner. Reliance is on the Minutes of Meeting (for
short „MoM‟) dated 19.01.2007 wherein the consultant agreed to
recommend the rates for approval but instead the rates were
subsequently determined by a committee constituted by the
respondent. The contention is that the arbitrator failed to adjudicate
the issue by not deciding the prevailing market rates in accordance
with clause 15(d).
3.1 The contention is that the arbitrator erred in relying on clause
19 of the SCC in rejecting claim no.2 for payment of increased rates
for deviated and extra items beyond variable limit under clause 15(a)
of the SCC. The argument is that the claim was not on account of
prolongation of the contract but for revised rates of deviated and extra
items for additional works beyond the permissible deviation provided
under clause 15(a) of the SCC. It is contended that the rates were to be
determined in terms of clause 15(d) of the SCC and clause 19 of the
SCC was not applicable.
3.2 The rejection of claim nos. 3 & 6 relating to payment of
escalation in electrical work and loss suffered on account of
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maintaining additional staff and machinery during the extended period
of execution of the contract is challenged on the ground that Sections
55 and 73 of the Indian Contract Act, 1872 (for short, ‘Contract Act‘)
were not considered.
3.3 The grievance is that no reasons were assigned while deciding
the claims and the award is in violation of Section 31(3) of the Act.
3.4 It is submitted that claim no. 9 challenging the termination of
the contract was wrongly rejected without considering that the Virtual
Completion Certificate (for short „VCC‟) was issued certifying that
the building was fit for occupation. The arbitrator ignored that the
incomplete works enumerated by the respondent were recorded on
23.11.2009 whereas the contract was terminated on 15.02.2010 and
work done in between was not considered. The building was taken
over by the respondent, inaugurated and put to use yet the contract
was terminated. It is canvassed that extension was granted up to
16.05.2009 and no further period for completion was fixed thereby
rendering the time for completion of the work open-ended. Reliance is
placed upon the decision of the Supreme Court in Hind
Constructions v. State of Maharashtra (1979) 2 SCC 70 to fortify
the contention that the contract could be terminated only after fixing a
final time for completion and making time the essence of the contract.
3.5 Lastly, the grievance is that counter-claim no. 1(a) was allowed
awarding liquidated damages (for short „LD‟) for the delay in
completion of the work not attributable to the petitioner and in the
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absence of evidence of actual loss suffered or a genuine pre-estimate
of loss. The contention is that an adverse inference should be drawn
against the respondent for failure to produce the hindrance register.
Further that the arbitrator failed to consider the material evidence
while concluding that the delay was attributable to the petitioner. The
argument is that the respondent granted extension up to 16.05.2009
without levy of damages indicating that the delay was not attributable
to the petitioner. It is emphasized that the loss suffered was neither
quantified nor proved yet the maximum amount provided under clause
19 of the GCC was awarded as LD.
4. Per contra, the arbitrator passed a detailed award. The scope of
interference under Section 34 of the Act is limited and the Court
cannot sit in appeal over the award. The view taken by the arbitrator is
a plausible one and cannot be interfered with, for another possible
view. Reliance is placed upon Dyna Technologies Pvt. Ltd. v.
Crompton Greaves Ltd., 2009 SCC OnLine SC 1656 and
Hindustan Construction Company Ltd. v. Union of India 2019
SCC OnLine SC 1520.
4.1 The rejection of claim no. 1 is defended and the submission is
that clause 15(d) nowhere provides that the rates recommended by the
consultant shall be binding on the respondent. It is submitted that an
internal committee was constituted to determine the prevailing market
rates and the rates approved by the respondent were binding on the
petitioner.
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4.2 The rejection of claim no. 2 is defended by stating that the
permissible variation limits are provided under clause 15(a) whereas
the mechanism for fixation of rates is given under clause 15(d) and
clause 15 is to be read as a whole. It is argued that reliance upon the
MoM dated 19.01.2007 is misplaced.
4.3 Claim nos. 3 and 6 are asserted to have been rightly rejected in
view of clauses 17 & 19. Clause 17 of the SCC provides that time was
the essence of the contract and the work was to be completed within
the stipulated period. Clause 19 of the SCC debars claim of
compensation by the petitioner for loss suffered on account of delay in
commencement or execution of the work irrespective of the cause of
delay. Further that the work was not completed within the extended
period and the petitioner was not entitled to claim compensation
contrary to the contractual provisions. Reliance is placed upon the
decision of the Supreme Court in Nabha Power Ltd. v. Punjab State
Power Corporation Ltd. & Anr. (2018) 11 SCC 508.
4.4 It is argued that the respondent could terminate the contract
under clause 29(i) of the GCC for failure of the petitioner to maintain
the progress and to execute the work within prescribed period. The
emphasis is that despite extension of time and issuance of notices the
work was not completed in time. The issue raised is that issuance of
the VCC and taking over of the building was not the proof of
completion of work as per the contract. The respondent got the
balance work executed at the risk and cost of the petitioner.
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4.5 It is contended that the LD was worked out at the time of
preparation of the final bill after assessing the total cost and recording
the balance measurements. The LD determined is a factual finding and
calls for no interference under Section 34 of the Act. The emphasis is
that a number of letters were written to the petitioner stating that the
respondent was incurring huge expenditure in running the offices
which were to be shifted upon completion of the project and the LD
was awarded considering the loss suffered and is not liable to be
tinkered with.
5. Heard learned counsel for the parties at length. Though written
submissions and factual notes were filed by the parties but during the
course of arguments only the contentions and issues mentioned above
were raised and pressed.
6. Before proceeding further it would be relevant to reproduce the
relevant clauses of the GCC and SCC:
“Clause 15 of SCC
Variations, Extra/ Substituted items
15(a) Existing BOQ rates shall apply if the variation is ±
25% in quantity of individual items and ± 10% of the total
contract price. For items existing in the bill of quantities but
where quantities have increased beyond the variation limits,
the rate payable for quantity in excess of the quantity in the
Bill of Quantity plus the permissible variation should be
market rates of materials and labour.
(b) Within 7 days of date of instruction for executing varied
work, extra work or substituted works and before the
commencement of such work, notice shall be given either (i)
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intention to claim extra payment or a varied rate or price or
(ii) by the Employer/Consultant to the Contractor of his
intention to vary a rate or price”.
(d) In the case of extra items, whether additional, altered or
substituted for which rates cannot be derived either from
similar items of work in the contract or from CPWD-
schedule, the Contractor shall submit to the Employer the
rates which he proposes to claim supported by rate analysis
of the item based on the prevailing rates of material and
labour and allowing contractor‟s profit of 10%. The rates of
such items shall be recommended by the Consultant and
approved by the Employer and shall be binding to the
Contractor.
Clause 17 of SCC
Time shall be considered as the essence of the Contract. The
entire work must be completed in 15 Calendar months. It is
intended that the general works should be so completed as
to leave the last two months for installations and finishing
items. The attention of the tenderer is drawn to Clause 19 of
the general conditions contract referring to damages for
non-completion. The tenderer shall before commencing
work prepare a detailed work programme which shall be
approved by the Employer/Consultant.
Clause 19 of SCC
The contractor shall not be entitled to any compensation of
any loss suffered by him on account of delays in
commencing or executing the work whatever the cause of
delays may be including delays arising out of modification
to the work entrusted to him or any sub contracts (refer
clause 10) connected there with or delays in awarding
contracts for other trades of the project or in commencement
or completion of such works or in procuring government
controlled or other building materials or obtaining water and
power connection for construction purposes or for any other
reason whatsoever and the Employer shall not be liable for
claim in respect thereof. The Employer does not accept
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liability for any sum besides the tender amount subject only
to such variations as may be provided for herein.
Clause 19 of GCC
Damages for non-completion
If the contractor fails to complete the work and clear the site
on or before the dates fixed for completion, he shall without
prejudice be liable to pay liquidation damage (LD) ie. 0.5%
the contract value for every week that the whole or the part
of work remains Incomplete. The contract value shall be the
total value of quantities of items in the contract at the
contract rate plus algebraic sum of the subsequent work
ordered. However the total amount of LD to be paid under
this condition shall not exceed 7.5% of the contract value.
Such amounts may be deducted by the employer from any
money due or that may become due to the contractor.
Clause 23(i) of GCC
When the contractor successfully completes the works as
per the contract, he shall be eligible to apply for provisional
completion certificate in respect of the works. The
Employer shall issue to the Contractor the provisional
completion certificate after verifying from the completion
documents submitted by the Consultant and satisfying
himself that the work has been completed in accordance
with the construction drawings and the contract documents.
The contractor, after obtaining the provisional completion
certificate, is eligible to present the final bill for the wok
executed by him under the terms of the contract.
Clause 29(i) of GCC
Default of Contractor
If the contractor fails to maintain progress and quality of
work proportionate to time period allotted for the work in
spite of notices or complete the work within the stipulated
time period or extended time period, then the
consultant/owner shall have the right:-
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(i)To determine the contract: In this event, the contract
shall be terminated by giving written notice to the contractor
and the unfinished works shall be got completed by labours
engaged by the owner or through other agency at the cost of
the contractor.”
Analysis
7. Claim no.1 is against the deductions made from the final bill.
The dispute comprised of three parts: (a) dispute regarding rates of
items; (b) admissibility of extra items; and (c) short measurement of
items. During the arbitral proceedings, disputes under (b) & (c) were
resolved between the parties and only the dispute regarding rates of
items survived and was adjudicated.
8. As per clause 15(a) of the SCC, in case of variation of ±25% in
individual items and ±10% in the contract price, payment for the
excess quantity is to be made at the prevailing market rates of material
and labour. Under clause 15(b) variation beyond the prescribed limits
under clause 15(a) could be brought to the notice of the other party by
either party. Clause 15(d) provides the mechanism for determining the
rates of extra, additional, altered or substituted items where the rates
cannot be derived from similar items in the contract or the CPWD
Schedule. For such items the contractor had to submit a rate analysis
based on the prevailing market rates, whereafter the consultant was to
recommend the rates and on approval by the employer, these would be
binding on the contractor. The grievance is that the rates were not
recommended by the consultant but were recommended by an internal
committee for which there was no clause under the contract. The issue
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whether the rates determined contrary to the procedure under clause
15(d) would be binding on the petitioner was not considered by the
arbitrator. The submissions of the parties were recorded in the award
but there is no discussion or reasoning as to why the procedure
adopted by the respondent for determination of rates can be accepted.
The arbitrator decided the claims as per Annexure „F‟ which contains
calculations of quantities and rates but there are no reasons as to how
the conclusion was arrived at.
9. Under Section 31(3) of the Act, the arbitrator is obligated to
pass a reasoned award. The award is bereft of reasons and after
reading the award as a whole along with the annexures no reasons are
forthcoming. The award falls within the teeth of Section 31(3) of the
Act. Reference in this regard be made to the following decision of the
apex court:-
10. The Supreme Court in Dyna Technologies Pvt. Ltd. (supra)
has held as under:
“34. The mandate under Section 31(3) of the Arbitration Act
is to have reasoning which is intelligible and adequate and,
which can in appropriate cases be even implied by the
courts from a fair reading of the award and documents
referred to thereunder, if the need be. The aforesaid
provision does not require an elaborate judgment to be
passed by the arbitrators having regard to the speedy
resolution of dispute.”
11. The petitioner in claim no. 2 sought for increase in the rates of
deviated/extra items utilised beyond the prescribed limit under clause
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15(a) of the SCC. The arbitrator relying upon clause 19 of the SCC
proceeded on the basis that the petitioner was claiming revised rates
on account of prolongation of the contract. The claim was for fixation
of rates in terms of clause 15(d) and not on account of contract
continuing beyond the agreed period. Clause 19 of the SCC deals with
compensation for loss suffered on account of delay whereas clause 15
provides the mechanism for determining the rates of extra items. The
claim could not have been rejected by relying upon clause 19, without
considering the applicability of clause 15. The arbitrator proceeded on
a wrong foundation, the relevant clauses of the contract were not
considered and the award suffers from patent illegality.
12. The judgement in Nabha Power Ltd. (supra) pressed into
service to buttress the argument that the contractual terms are to be
given effect to, is of no help. Present is a case of non-consideration of
the relevant clauses and their applicability to the claims raised thereby
rendering the award liable to be set aside being patently illegal.
13. The Supreme Court in Delhi Metro Rail Corporation Ltd. V.
Delhi Airport Metro Express Pvt. Ltd. 2024 INSC 292 and Bharat
Coking Coal Ltd. v. Annapurna Construction (2003) 8 SCC 154
held that non-consideration of a relevant clause of the contract is a
patent illegality and renders the award liable to be set aside. The
relevant paras are:
13.1 In Delhi Metro Rail Corporation Ltd. (supra) held as under:
“38. In Associate Builders vs. Delhi Development
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although the interpretation of a contract is exclusively
within the domain of the arbitrator, construction of a
contract in a manner that no fair-minded or reasonable
person would take, is impermissible. A patent illegality
arises where the arbitrator adopts a view which is not a
possible view. A view can be regarded as not even a
possible view where no reasonable body of persons could
possibly have taken it. This Court held with reference to
Sections 28(1)(a) and 28(3), that the arbitrator must take
into account the terms of the contract and the usages of trade
applicable to the transaction. The decision or award should
not be perverse or irrational. An award is rendered perverse
or irrational where the findings are (i) based on no evidence;
(ii) based on irrelevant material; or (iii) ignores vital
evidence. Patent illegality may also arise where the award is
in breach of the provisions of the arbitration statute, as when
for instance the award contains no reasons at all, so as to be
described as unreasoned. A fundamental breach of the
principles of natural justice will result in a patent illegality,
where for instance the arbitrator has let in evidence behind
the back of a party. In the above decision, this Court
observed:
“31. The third juristic principle is that a
decision which is perverse or so irrational
that no reasonable person would have arrived
at the same is important and requires some
degree of explanation. It is settled law that
where:
(i) a finding is based on no evidence, or
(ii) an Arbitral Tribunal takes into account
something irrelevant to the decision which it
arrives at; or
(iii) ignores vital evidence in arriving at its
decision,
such decision would necessarily be perverse.
…
42.2. (b) A contravention of the Arbitration
Act itself would be regarded as a patent
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illegality — for example if an arbitrator
gives no reasons for an award in
contravention of Section 31(3) of the Act,
such award will be liable to be set aside.”
40. In essence, the ground of patent illegality is
available for setting aside a domestic award, if the decision
of the arbitrator is found to be perverse, or so irrational that
no reasonable person would have arrived at it; or the
construction of the contract is such that no fair or reasonable
person would take; or, that the view of the arbitrator is not
even a possible view.24 A „finding‟ based on no evidence at
all or an award which ignores vital evidence in arriving at its
decision would be perverse and liable to be set aside under
the head of „patent illegality‟. An award without reasons
would suffer from patent illegality. The arbitrator commits a
patent illegality by deciding a matter not within his
jurisdiction or violating a fundamental principle of natural
justice.”
13.2 In Bharat Coking Coal Ltd. v. Annapurna Construction,
(2003) 8 SCC 154 held as under:
“22. There lies a clear distinction between an error within
the jurisdiction and error in excess of jurisdiction. Thus, the
role of the arbitrator is to arbitrate within the terms of the
contract. He has no power apart from what the parties have
given him under the contract. If he has travelled beyond the
contract, he would be acting without jurisdiction, whereas if
he has remained inside the parameters of the contract, his
award cannot be questioned on the ground that it contains an
error apparent on the face of the record.”
(emphasis supplied)
14. Claim nos. 3 & 6 relates to escalation in the rates of electrical
items and expenses incurred on maintaining staff and machinery
during the extended period of execution of the contract. The claims
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were rejected by relying upon clause 19 of the SCC. The petitioner
made claims under Sections 55 and 73 of the Contract Act and
contended that the delay was attributable to the respondent. The
arbitrator rejected the claims in the light of clause 19 of the SCC
without dealing with the applicability of the provisions of the Contract
Act. No reasons are recorded for concluding that the provisions of the
Contract Act were not required to be considered in view of clause 19
of the SCC. The award is non-speaking and is in violation of Section
31(3) of the Act.
15. There is no quarrel with the proposition propounded by learned
counsel for the respondent that a plausible view taken by the arbitrator
should not be interfered with under Section 34 of the Act and the court
cannot re-appreciate the evidence. The judgment in Dyna
Technologies Pvt. Ltd (supra) relied upon by the learned counsel for
the respondent to contend that the award has to be read as a whole
does not advance the case of the respondent. It was held that the
reasons for arriving at a conclusion should be discernible from the
award. In the present case, the conclusions recorded by the arbitrator
are unsupported by reasons and the material contractual clauses
governing claims were not considered.
16. It is trite law that this court while exercising jurisdiction under
Section 34 of the Act does not sit in appeal. A possible view taken by
the arbitrator on appreciation of evidence or interpretation of the terms
of the contract in the normal course does not warrant interference.
Reliance placed by the respondent on Hindustan Construction
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Company Ltd. (supra) on the proposition that the scope of
interference under Section 34 is limited is of no avail. It is settled law
that interference can be made on the grounds mentioned under Section
34 of the Act including patent illegality. In Ramesh Kumar Jain v.
Bharat Aluminium Company Limited (BALCO) 2025 INSC 1457
held:-
“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) contravention of fundamental
policy of Indian law; or (b) the interest of India; or (c)
justice or morality, or (d) in addition, if it is patently
illegal.”
16.1 In Parsa Kente Collieries Limited. v. Rajasthan Rajya
Vidyut Utpadan Nigam Limited (2019) 7 SCC 236 held as under:-
“9.1. In Associate Builders [Associate Builders v. DDA,
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an occasion to consider in detail the jurisdiction of the Court
to interfere with the award passed by the Arbitrator in
exercise of powers under Section 34 of the Arbitration Act.
In the aforesaid decision, this Court has considered the
limits of power of the Court to interfere with the arbitral
award. It is observed and held that only when the award is in
conflict with the public policy in India, the Court would be
justified in interfering with the arbitral award. In the
aforesaid decision, this Court considered different heads of
“public policy in India” which, inter alia, includes patent
illegality………”
(emphasis supplied)
17. The claim no. 9 pertains to termination of the contract. Under
clause 29(i) of the GCC the respondent could terminate the contract
for failure of the petitioner to complete the work within the stipulated
or extended period. A written notice to the petitioner was a pre-
requisite for termination. The work remained incomplete despite
extension of time and issuance of notices. The petitioner responded to
the notices and thereafter the contract was terminated. The arbitrator
analysed the definition of „Virtual completion‟ and clause 23(i) of the
GCC regarding the completion certificate and held that the Provision
Completion certificate (for brevity „PCC‟) is the relevant document
and not the VCC. Under clause 23(i), upon completion of the work
the contractor was eligible to apply for the PCC and the petitioner
never applied for the PCC, this was factored in to conclude that the
work was not completed. The arbitrator also took into consideration
the fact that the unfinished works subsequently were executed by the
respondent at the risk and cost of the petitioner. The eight letters
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written by the respondent that the work was not complete and the
letter of petitioner dated 04.02.2010 stating that five items under the
head „Extinguisher‟ were pending, demonstrated that the work was
incomplete till 04.02.2010. The petitioner despite the specific query of
the arbitrator with regard to the work done between 25.11.2009 and
15.02.2010 produced no details. The reliance of the petitioner on
applications made to statutory authorities for issuance of the
completion certificate and NOC was held to be of no avail as the work
to be completed under the contract and the requirement under the
statute were different.
18. The contention that after 16.05.2009 there was no extension of
time and the contract was open-ended is ill-founded. The petitioner
failed to complete the work within the extended time. By writing eight
letters the petitioner was put to notice of inordinate delay in
completion of the work and was reminded that the work had to be
completed in a timely manner. Reliance on Hind Constructions
(supra) does not advance the case of the petitioner. It was held that
where time is not the essence of the contract, termination of the
contract for failure to complete the work within the stipulated period
cannot be sustained. Whereas in the present case, clause 17 expressly
provides that time was the essence of the contract and clause 29(i)
permitted termination of the contract for failure to maintain progress
or to complete the work within the extended period. Moreover, the
petitioner was put to notice to complete the work within the extended
time and after receiving response to the notices, the contract was
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terminated as per clause 29(i) of the GCC. The upholding of
termination of the contract is a plausible view and suffers from no
factual or legal error much less perversity.
19. Before proceeding further, it would be relevant to quote the
following decisions of the Supreme Court dealing with the principles
governing award of LD or penalty:-
19.1 The Supreme Court in Kailash Nath Associates v. DDA (2015)
4 SCC 136 held:
“43.1. Where a sum is named in a contract as a liquidated
amount payable by way of damages, the party complaining
of a breach can receive as reasonable compensation such
liquidated amount only if it is a genuine pre-estimate of
damages fixed by both parties and found to be such by the
court. In other cases, where a sum is named in a contract as
a liquidated amount payable by way of damages, only
reasonable compensation can be awarded not exceeding the
amount so stated. Similarly, in cases where the amount fixed
is in the nature of penalty, only reasonable compensation
can be awarded not exceeding the penalty so stated. In both
cases, the liquidated amount or penalty is the upper limit
beyond which the court cannot grant reasonable
compensation.
43.2. Reasonable compensation will be fixed on well-known
principles that are applicable to the law of contract, which
are to be found inter alia in Section 73 of the Contract Act.
43.3. Since Section 74 awards reasonable compensation for
damage or loss caused by a breach of contract, damage or
loss caused is a sine qua non for the applicability of the
section.
43.4. The section applies whether a person is a plaintiff or a
defendant in a suit.
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43.5. The sum spoken of may already be paid or be payable
in future.
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.”
19.2 The Supreme Court in State of Rajasthan v. Ferro Concrete
Construction (P) Ltd., (2009) 12 SCC 1 held:
“55.While the quantum of evidence required to accept a
claim may be a matter within the exclusive jurisdiction of
the arbitrator to decide, if there was no evidence at all and if
the arbitrator makes an award of the amount claimed in the
claim statement, merely on the basis of the claim statement
without anything more, it has to be held that the award on
that account would be invalid. Suffice it to say that the
entire award under this head is wholly illegal and beyond
the jurisdiction of the arbitrator, and wholly unsustainable.”
20. The position of law that emerges is that for claiming LD the
actual loss suffered is to be proved, except in cases where it is difficult
or impossible to prove the actual loss. The arbitrator awarded LD in
the absence of evidence adduced of actual loss suffered by the
respondent or concluding that it was impossible or difficult to prove
actual loss. The only material relied upon were the letters written by
the respondent to the petitioner stating that huge expenditure was
being incurred due to delay in shifting the offices to the building in
question and continuing the offices in rented accommodation. The
claim for LD in the statement of claim was not substantiated. It is not
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the case set that there were genuine pre-estimated damages fixed by
the parties. The 7.5% of the gross value fixed in the contract was the
upper limit for awarding damages and not a pre-estimate of damages.
There was no material on record to quantify the loss suffered yet
contrary to the settled position of law the maximum amount
prescribed under clause 19 of the GCC was awarded as LD.
21. In view of the above discussion the petition is allowed and the
impugned award is set aside.
AVNEESH JHINGAN, J.
JULY 23, 2026
‘ha’
Reportable:- Yes
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