Calcutta High Court
Union Of India vs Senbo Engineering Limited on 11 March, 2026
Author: Debangsu Basak
Bench: Debangsu Basak
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IN THE HIGH COURT AT CALCUTTA
COMMERCIAL APPELLATE JURISDICTION
COMMERCIAL DIVISION
ORIGINAL SIDE
Present:
The Hon'ble Justice Debangsu Basak
And
The Hon'ble Justice Md. Shabbar Rashidi
AO COM 36 of 2024
WITH
AP COM 208 of 2024
Union of India
Vs.
Senbo Engineering Limited
With
OCOT 1 of 2025
Union of India
Vs.
Senbo Engineering Limited
For the Appellant : Mr. Sidhartha Lahiri, Adv.
Mr. Nandlal Singhania, Adv.
Ms. Amrita Pandey, Adv.
For the Respondent : Mr. Pradip Kr. Dutta, Sr. Adv.
Mr. Nilay Sengupta, Adv.
Mr. Sujit Banerjee, Adv.
Mr. Mohit Gupta, Adv.
Hearing Concluded on : January 21, 2026 Judgement on : March 11, 2026 DEBANGSU BASAK, J.:-
1. Appellant has assailed the judgment and order dated August
5, 2024 passed in AP-COM 208 of 2024 in AO COM 36 of 2024.
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Respondent has filed a cross objection which was registered as
OCOT 1 of 2025.
2. For the sake of convenience the parties in the appeal and the
cross objection are referred to in the manner as they appear in the
appeal. Both the appeal and the cross objection were heard
together.
3. By the impugned judgment and order, learned Single Judge
in exercise of powers under Section 34 of the Arbitration and
Conciliation Act, 1996, has allowed a part of the challenge by
setting aside a portion of the impugned award of the Arbitral
Tribunal before it, and allowed and upheld the balance part of the
award.
4. Learned advocate appearing for the appellant has contended
that, a tender dated February 11, 2011 was floated in which, the
respondent participated. The appellant had issued the Letter of
Acceptance on July 19, 2011. Finding that, the respondent was not
executing the contract in terms thereof, appellant had terminated
the same on November 10, 2017. A notice under Section 21 of the
Act of 1996 was issued on June 21, 2017. The Arbitral Tribunal
had entered into reference and in consequence thereto made and
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published the award on March 9, 2021 with a corrigendum thereof
on November 27, 2021.
5. Learned Advocate appearing for the appellant has drawn the
attention of the Court to the statement of claim. He has contended
that, all claims made by the appellant before the Arbitral Tribunal
fell within the excepted clause of the arbitration agreement. In this
regard, he has referred to the arbitration clause and the excepted
clause contained in the contract.
6. Learned advocate appearing for the appellant has contended
that, out of 11 claims, the Arbitral Tribunal allowed claim nos.
1,2,7,8 and 11. All of such claims which were allowed by the
Arbitral Tribunal had fallen within the excepted clause.
7. Relying upon 2014 Volume 9 Supreme Court Cases 246
(Harsha Constructions Vs. Union of India and Others), 2022
Volume 4 Supreme Court Cases 463 (Indian Oil Corporation
Limited Vs. Shree Ganesh Petroleum Rajgurunagar) and 2023
Volume 2 Supreme Court Cases 539 (Indian Oil Corporation
Limited Vs. NCC Limited) learned Advocate appearing for the
appellant has contended that, since, the disputes adjudicated upon
fell within the excepted clause, the award cannot be sustained.
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Learned Judge has erred in sustaining a portion of the award
passed by the Arbitral Tribunal.
8. Learned Senior Advocate appearing for the respondent has
contended that, none of the claims allowed by Arbitral Tribunal fell
within the excepted clause. He has relied upon 2011 Volume 5
Supreme Court Cases 758 (J.G. Engineers Private Limited Vs.
Union of India and Another) and 2025 SCC Online SC 419 (Dr.
Poornima Advani and Anr Vs. Government of NCT and Anr) in
support of such contention.
9. Learned Senior Advocate appearing for the respondent has
referred to the claims made by the Arbitral Tribunal as also the
excepted clause. He has contended that, none of the claims fell
within the excepted clause.
10. Learned Senior Advocate appearing for the respondent has
contended that, the learned Judge erred in disallowing claim Nos.
2,8 and 11 which were granted by the Arbitral Tribunal. He has
contended that, none of those claims fell within the excepted
clause.
11. In course of hearing of the appeal and this cross objection we
had invited the attention to the learned counsel for the parties to
2024 SCC Online SC 2632 (Punjab State Civil Supplies
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Corporation Limited Versus Sanman Rice Mills) on the scope
and ambit of Section 37 of the Act of 1996. The learned Counsel for
the respective parties had made their submissions on the same.
12. The appellant had invited bids comprising of a technical and
financial construction of viaduct including related works for 2.16
km length including substructure on pile foundation with
substructure and superstructure work of Dum Dum cantonment
station building. The respondent had participated in such tender
process and was successful therein. Appellant had issued a work
order dated July 19, 2011 to the respondent.
13. The contract between the parties had reciprocal obligations to
be performed by each of the parties. Disputes and differences had
arisen between the parties which were referred to arbitration of the
Arbitral Tribunal.
14. In the arbitration proceedings, the respondent had filed a
statement of claim containing 11 heads of claims, which are as
follows:-
Claim No. Description Claim Amount in
(Rs.)
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Claim No. 1 Claim of amount for Rs. Rs.6,30,01,176.26
2,47,81,885.20 withheld in
CC/30th Account Bill
Claim of amount withheld/not
released towards CC/7th
Escalation Bill for Rs.
2,24,53,931.00 against escalation
in prices calculated in terms of
the formula provided in the
contract.
Claim Amount for Rs.
98,16,012.33 against CC/31st On
Account Bill submitted.
Claim Amount for Rs.
59,49,347.73 towards CC/8th
Escalation Bill submitted.
Claim No. 2 Recovery of Security deposit as Rs. 10,48,723.00
retention money from the
Claimant’s On Account Bills for
Rs. 10,48,723/-
Claim No. 3 Claim for Refund of total Bank Rs.22,55,37,111.00
Guarantees invoked amounting to
Rs. 22,55,37,111/-
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Claim No. 4 Loss due to idle on-site and off- Rs.23,65,23,517.00
site overheads during the entire
period upto 30-08-2017 = Rs.
23,65,23,517/-
Claim No. 5 Loss due to idle machinery upto Rs.30,47,30,000.00
30-08-2017=Rs. 30,47,30,000/-
Claim No. 6 Loss of profit during the entire Rs.57,55,40,556.00
period upto 30-08-2017=Rs.
57,55,40,556/-
Claim No. 7 Refund of interest on Mobilization Rs. 2,97,35,112.00
Advance paid by the Claimant so
far beyond the original schedule
and waiver of the same in
future=Rs. 2,97,35,112/-
Claim No. 8 Refund of commission paid to Rs. 1,95,10,505.00
Bank for extension of Bank
Guarantees from time to time
beyond the original contractual
period = Rs. 1,95,10,505/-
Claim No. 9 Non-payment of item for Rs. 1,70,00,000.00
dismantling of hutments for
removal of encroachments from
site and reconstruction of new
hutments along with improvement
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of land and drainage system - Rs.
1,70,00,000/-
Claim Claim for loss due to Rs. 4,90,00,000.00
No. 10 unauthorised offloading of work
between Ch. 3009.945 M to Ch.
3123.445 M for Rs. 4,90,00,000/-
Claim Claim for interest
No. 11
Claim Cost of Arbitration Proceedings =
No. 12 As to be accrued.
Total claim Amount is Rs. (Rupees One Hundred Rs.152,16,26,700.26
Fifty Two crore sixteen lacks twenty six
thousand seven hundred and paisa twenty six)
15. The appellant had filed a counter statement and counterclaim
before the Arbitral Tribunal. In the counter statement and
counterclaim, the appellant had two heads of claims, namely claims
on account of damages and claims for costs of arbitration. The
respondent had filed a rejoinder to the counter statement and
counterclaim of the appellant.
16. Arbitral Tribunal had made and published the award on
March 9, 2021. Arbitral Tribunal had corrected the award on March
27, 2021. Arbitral Tribunal had by the award as corrected allowed
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all the 11 claims of the respondent and dismissed the two
counterclaims of the appellant. The Arbitral Tribunal had rejected
claims counter No. 1 (iv), 4, 5, 6, 9, and 10 of the respondent. These
rejections have not been challenged by the respondent.
17. Appellant had challenged the award dated March 9, 2021 as
corrected on March 27, 2021 under Section 34 of the Arbitration
and Conciliation Act, 1996. Such challenge has been partly allowed
and partly disallowed by the impugned judgement and order.
18. By the impugned judgement and order, learned Single Judge
has upheld the challenge in respect of claims Nos. 2, 8 and 11 of
the respondent before the Arbitral Tribunal while rejecting the
challenge towards claim Nos. 1, 3 and 7.
19. The appellant has premised the primary, if not the only,
ground of challenge to the award upon the Excepted Clause in the
contract, which is as follows: –
Existing Clause Revised Clause
63 - 63 -
Matters finally determined by Matters finally determined
the Railway – all disputes and by the Railway – All disputes
differences of any kind and differences of any kind
whatsoever arising out of or in whatsoever arising out of or
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connection with the contract, in connection with the
whether during the progress of contract, whether during the
the work or after its completion progress of the work or after
and whether before or after the it’s the determination of the
determination of the contract, contract, shall be referred by
shall be referred by the the contractor to the GM
contractor to the Railway and and the GM shall within 120
the Railway shall within 120 days after receipt of the
days after receipt of the Contractor’s representation
Contractor’s representation make and notify decisions
make and notify decisions on on all matters referred to by
all matters referred to by the the contractor in writing
contractor in writing provided provided that matters for
that matters for which which provision has been
provisions has been made in made in clauses 8, 18, 22(5),
clauses 8, 18, 22(5), 39, 43(2), 39, 43(2), 45(a), 55, 55-A(5),
45(a), 55, 55-A(5), 57, 57A, 57, 57A, 61(1), 61 (2) and
61(1), 61 (2) and 62(1) to (xii)(B) 62(1) to (xii)(B) of General
of General Conditions of Conditions of Contract or in
Contract or in any clause of the any clause of the special
special conditions of the conditions of the contract
contract shall be deemed as shall be deemed as ‘excepted
‘excepted matters’ and matters’ shall stand
decisions of the Railway specifically excluded from
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authority, thereon shall be final the purview of the
and binding on the contractor arbitration clause.
provided further that ‘excepted
matters’ shall stand specifically
excluded from the purview of
the arbitration clause and not
be referred to arbitration.
Note : Existing Clause be read
with Correction Slip No. 2
issued vide Board’s letter No.
96/CE-I/CT/29 dated 22-2-
2021.
20. Harsha Constructions (supra) has held that, even if a non
arbitrable dispute is referred to arbitration or even if an issue is
framed by arbitrator as to such dispute, it is not open for an
arbitrator to arbitrate on such non arbitrable dispute since it was
beyond his jurisdiction.
21. Shree Ganesh Petroleum Rajgurunagar (supra) has held
that, award on issues and matters beyond the scope of arbitration
clause are invalid.
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22. NCC Limited (supra) has held that, an arbitration clause is
required to be strictly construed. Any expression in the clause must
unequivocally express the intent of arbitration. If a clause stipulates
that under certain circumstances there can be no arbitration and
they are demonstrably clear thus the controversy pertaining to
appointment of arbitrator has to be put to rest.
23. J.G. Engineers Private Limited (supra) has considered the
excepted matter clause in the contract. It has held that, a contract
cannot provide that one party will be the arbitrator to decide
whether he committed breach or the other party committed the
breach. Consequently, it has held that, the question whether the
employer or the contractor was responsible for the delay in the
execution of work was arbitrable.
24. Dr. Poornima Advani (supra) has held that, if on the facts of
the case, the doctrine of restitution is attracted interest should
follow. It has held that, when a person is deprived of the use of his
money to which he is legitimately entitled, he has a right to be
compensated for the deprivation which may be called interest or
compensation.
25. Arbitral Tribunal has dealt with the plea of Excepted Clause
as follows: –
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” 7.2 Excepted Matters
7.2.1. Respondent’s Case: The Respondent took a plea of
various Matters being Excepted Matters in terms of the
contract with regard to various claims like measurements,
determination of rates for new items etc.
7.2.2. Claimant’s Case: The Railway have taken the plea
of Excepted matters with regard to the final measurements,
and rates for newly introduced item E2 for affecting
reduction. The claimant argued that they were not
associated in either the final measurements not the
determination of the new negative rate and his
protestations were also simply ignored. Without following
the due process as per GCC of associating the Contractor or
entertaining his representation, the Claimant argued that
the Railway’s plea of Excepted matter has no merit.
7.2.3. Deliberations of the AT: A Contract has to be read
in its totality. AT is of the view that the exceptions like
Excepted Matter cannot be applied in isolation. To take the
Respondent’s argument regarding Measurement of
quantities, undoubtedly there is a contractual provision that
it is an ‘excepted matter’, but subject to certain pre-
conditions enjoined in the agreement being observed. The
Railway cannot on one hand not follow the requisite
procedure for jointly recording measurements, formally
resolving representations etc. and then hide behind the plea
of Excepted Matter. Hence while AT takes note and record
that the Respondent have made this plea from time to time
but nevertheless, the Respondent have been amiss in not
following the due process as provided in the Contract, which
would have made the Excepted matter immune to Arbitral
interference. Hence, AT is not convinced of the Respondent’s
plea of treating such matters as Excepted Matters. However
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AT will again discuss this matter in the Claims awards
discussion where the Respondent has taken the plea of
“Excepted Matter.”
26. Arbitral Tribunal has dealt with the plea of excepted matters
specifically. In the award, Arbitral Tribunal has dealt with
contentions of the respective parties on such an issue. Arbitral
Tribunal has held that, a contract has to be read in its totality.
Arbitral Tribunal has noted the quality of the claims of the
respective parties. It has held that, new items of claim with respect
to the bills not paid, forfeiture of security deposit are inextricably
linked to the dispute and are within the scope of arbitration.
27. It is trite law that, an Arbitral Tribunal has the jurisdiction to
decide on the parameters of the arbitrable disputes. In the facts and
circumstances of the present case, Arbitral Tribunal has come to
the finding that, all claims are inextricably intertwined with each
other and therefore, the excepted clause will not apply. In addition
thereto, Arbitral Tribunal has noted that the appellant before us,
conducted its affairs contemporaneously in such a manner so as
not to distinguish between excepted matters and matters which are
arbitral at the time of execution of contract.
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28. The view taken by the Arbitral Tribunal on the issue of
excepted matters being plausible, no interference is called for by the
Court exercising its jurisdiction under Section 34 of the Arbitration
and Conciliation Act, 1996 or under Section 37 thereof.
29. A Court exercising jurisdiction under Section 37 of the Act of
1996 is to consider whether, the Section 34 of the Act of 1996,
Court exercised jurisdiction within the parameters of law or not. In
the facts and circumstance of the present case, Section 34 Court
has set aside the award in respect of claim nos. 2, 8 and 11. Claim
no. 2 is on account of recovery of security deposit while claim no. 8
is on account of refund of commission paid to bank for extension of
bank guarantee and claim no. 9 is on account of interest.
30. So far as the claim no. 2 is concerned, the
claimant/respondent herein, is entitled to the security deposit
which was deducted from bills of the claimant/respondent from
time to time. When the Arbitral Tribunal has held that, the
appellant before us, was guilty of delay in handing over the work
site, deleting and adding to the contract, and unilaterally
introducing new item causing reduction in rates of RCC items and
that to with retrospective effect, and where the Arbitral Tribunal
has arrived at the finding that, the appellant created circumstances
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for making the respondent unable to perform its obligation under
the contract and where, the Arbitral Tribunal has concluded that
the termination of contract is without merit, then, claim no. 2 on
account of recovery of security deposit should be allowed.
31. Similarly, claim no. 8 is inextricably intertwined with the
other claims. It has been established before the Arbitral Tribunal
that, the appellant had brought about a circumstance which
prevented the respondent from executing the contract. Arbitral
Tribunal has recorded a finding that the termination of contact
itself is without any merit. Arbitral Tribunal has also held that,
there was undue delay on the part of the appellant in handing over
work sites, deletion and addition of contract and introducing new
items. Therefore, the respondent was required to extend the bank
guarantee from time to time for no fault of theirs. Consequently, it
is just and proper that, the respondent be reimbursed with the
commission paid to the bank for extension of the bank guarantee.
Contract had required the respondent to furnish a bank guarantee
which the respondent did. Respondent had from time to time
extended such bank guarantee. Obtaining such extensions of bank
guarantee was obviously at a cost to the respondent. The appellant
being guilty of delay with regard to the execution of the contract,
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has to compensate the respondent for the commission that the
respondent was required to pay for extension of bank guarantee.
32. The issue of claim for interest under claim no. 11 has to be
considered in light of the ratio of Dr. Poornima Advani (supra).
Delay in execution of contract being attributable to the appellant
and the termination of the contract by the appellant being held to
be illegal, and, the appellant being found to be withholding money
belonging to the respondents wrongfully, then, the natural course of
compensation for the wrongful withholding money belonging the
respondent is a compensation by way of interest being awarded in
favour of the respondent.
33. In view of the above discussions, we find that, the Court
exercising powers under Section 34 of the Act of 1996 did not apply
the parameters of law for setting aside a portion of the award,
appropriately. Learned Single Judge did not find, claim nos. 2, 8
and 11 which were disallowed were severable from the other parts
of the award itself.
34. In view of the irregular exercise of jurisdiction by the Section
34 Court, we set aside the impugned judgment and order dated
August 05, 2024. Challenge to the award consequently fails.
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35. AO COM 36 of 2024 is dismissed without any order as to
costs.
36. OCOT 1 of 2025 is allowed. No order as to costs.
[DEBANGSU BASAK, J.]
37. I agree.
[MD. SHABBAR RASHIDI, J.]