VYARA NAGARPALIKA vs JAGAJI CONSTRUCTION COMPANY

C/FA/4005/2014 (GJHC240414042014) JUDGMENT DATED: 09/09/2026
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/FIRST APPEAL NO. 4005 of 2014
==========================================================
VYARA NAGARPALIKA
Versus
JAGAJI CONSTRUCTION COMPANY
==========================================================
Appearance:
MR NV GANDHI(1693) for the Appellant(s) No. 1
MR. B.S. PATEL, LD. SR. ADV. WITH MR. UMANG H. OZA, MR. KHUSH
PATEL, MS. ASHA D. TIWARI AND MR CHIRAG B PATEL(3679) for the
Defendant(s) No. 1
==========================================================
CORAM: HONOURABLE THE CHIEF JUSTICE MRS. JUSTICE
SUNITA AGARWAL
and
HONOURABLE MR. JUSTICE DIVYESH A. JOSHI

Date : 09/09/2026

ORAL JUDGMENT
(PER : HONOURABLE THE CHIEF JUSTICE
MRS. JUSTICE SUNITA AGARWAL)
1. Heard learned counsels appearing for the parties and
perused the record.
2. This appeal under Section 37 of the Arbitration and
Conciliation Act, 1996 (for short “the Act, 1996”) has been
filed challenging the majority award dated 01.01.2010
whereby a sum of Rs.43,65,190.00 was awarded with interest
of Rs.49,79,330.00 till the date of the award and the
Arbitration cost to the tune of Rs.5,00,000/-, total
Rs.98,44,520.00 with 18% post award interest until the date
of payment.
3. This majority award was subjected to challenge in an
application under Section 34 of the Act, 1996 preferred by the
appellant herein, which was dismissed rejecting the argument
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C/FA/4005/2014 (GJHC240414042014) JUDGMENT DATED: 09/09/2026
of the applicant that the award is based on no evidence,
without any detail and vague in nature and hence is perverse.
It was held that the applicant has failed to establish that the
majority award is against the evidence. The arguments made
by the learned counsel for the applicant that the award was
not in accordance with Section 28 of the Act, 1996 and
Substantive law of India, were rejected as vague being
without justification or merit. These were the arguments on
the merits of the award which were rejected by the Court
within the scope of Section 34 of the Act, 1996. Same
arguments are being agitated before us in this appeal under
Section 37 of the Act, 1996.
4. It was firstly argued by the learned counsel for the
appellant that the appellant was not given an opportunity to
cross-examine the claimant despite a specific request made
before the Tribunal. However, the fact remains that the
claimant did not file any affidavit for oral evidence and hence,
there was no question of cross-examination of the claimant.
5. As regards the arguments made by the learned counsel
for the appellant on the merits of the award that the claimant
could not prove his claim by leading cogent evidence and the
award, as such, is perverse, suffice it to say that the merits of
the award cannot be looked into within the scope of Section
37 of the Act, 1996.
6. However, in order to bring the controversy to its logical
end, we may simply go through the award and it may be
recorded that the issues framed by the learned Arbitral
Tribunal have been answered on consideration of pleadings
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C/FA/4005/2014 (GJHC240414042014) JUDGMENT DATED: 09/09/2026
and evidence of the parties. The members of the tribunal
conducted site visit along with the representatives of the
claimant, respondent (appellant herein) with their advocates.
The observations of the site visit recorded in the award are:-
“i) Foot over bridge on eastern side seen-has a
flooring of Tiles instead of Kota stone.
ii) Pitching on embankment of central Island of the
pond seen-vegetation growth on pitching observed.
iii) Railing on central island of the pond seen- railing
consist of hollow square/rectangular section
iv) Inlet gate seen-
v) Pitching on embankment of central island not
found in line and level-disturb at the location opposite
the inlet gate. Open joints on pitching found. Cement
mortar in joint not seen. Loose earth spilled over
pitching seen.
vi) Foot over bridge on western side seen-has a
flooring of Tiles instead of Kota stone.
vii) On Western side of the Island-at some location the
dumping of rubble found on pitching area. Pitching
found disturbed below the foot over bridge west side.
viii) Depth of excavation cannot be assessed as the
pond is full of water.
ix) Location of the photographs attached with
document marked 'H' seen.
x) Spill way location seen-work of spill way not done
till date. Manually operated gate of existing spill way
removed. Respondent's representative reported that
work of toe wall/retaining wall was carried out by them
near the existing spill way.
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C/FA/4005/2014 (GJHC240414042014) JUDGMENT DATED: 09/09/2026
xi) Pitching not seen in the small portion below foot over
bridge on western side.”
7. With regard to the first issue as to whether the claimant
proves that the work under the contract between the parties
could not be completed on account of reasons detailed in
Para-6(a) to (j) in the claim statement, the findings are in
favour of the claimant. It was held that the respondent
committed breach of the contract in the matter of making of
payment on account of extra items, non-finalization of bills
etc. and the claimant was required to stop the work on
03.06.2000. Once the contract came to be terminated by the
respondent, and the termination was held illegal and
unwarranted, the respondent-Municipality/appellant was
bound to refund/return the security deposit with interest. It
was further held that the determination of contract by the
Chief Officer was contrary to the provision in the definition
clause of the Employer providing about President of the
Municipality being the Authority to determine the contract.
8. The claim was with regard to non-payment of the bills
for the work done. It was held that the payment of work has to
be based on measurements certified by the consulting
Engineer/Architect and tender rates or the rates approved by
the consulting Engineer/Architect. The claim of overhead was
awarded holding that the reasons for delay and consequent
breach are attributable to the respondent and during the
prolong period the claimant was there and there was no
complaint by the respondent during the said period.
9. So far as the issue No.2 whether the claimant proves
that the contract between the parties was illegally and
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C/FA/4005/2014 (GJHC240414042014) JUDGMENT DATED: 09/09/2026
unwarrantedly withdrawn/stopped on 03.06.2000, it was held
that:-
“The Respondent have argued that Claimant has
abandoned the work but failed to prove. It is an admitted
position that deepening of lake was completed by the
Claimant which is evident from the cross sectional
measurement verified by the Respondent's Consultant in
th
5 bill dated 19/4/1999, whereby the deepening of lake
was completed as per the required level. The quantity of
the item of earthwork in cutting in soft soil, hard
murrum and soft rock as provided in the contract, all
sum up together was to the extent of 116966 Cum. As
per certificate of bill dated 19/4/1999, the quantity of
soil, hard murrum, soft rock and hard rock executed sum
up together works out to be 119614 Cum which is more
than the quantity provided in the contract. The work of
foot over bridge and inlet gate was also completed,
except for the railing and flooring of the foot over
bridge. The railing and flooring work could not be
carried out as Respondent wanted to develop a garden
on the island for which top layer of soil was required to
be placed with fertile soil, which the Respondent could
not do at a relevant time. Without reaching the required
level for island, it was not possible to provide railing and
flooring. It is pertinent to mention here that
subsequently, Respondent carried out flooring with
chequerred tiles and provided design railing instead of
kota stone flooring and galvanized iron pipe railing
respectively.
The only work remain was that of spillway. The Claimant
in their letter dated 25/4/2000, claim statement has
stated that the same was not required to be carried out
as informed by the Respondent, which the Respondent
have denied after cancellation of contract. It is also an
admitted fact that work of spillway has not been carried
out till the date of site visit which was on 3/1/2009
nearly 10 years after the Claimant left the site in May
1999. The only conclusion can be drawn from this fact is
that the work of spillway was not required to be carried
out and therefore, Respondent neither took any action
against Claimant at relevant time for non execution of
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C/FA/4005/2014 (GJHC240414042014) JUDGMENT DATED: 09/09/2026
spillway work nor got it done through any other agency.
The Respondent for the first time, in their reply through
their advocate dated 5/6/2000 to Claimant's letter dated
20/4/2000, stated that work has not been completed.
There was complete silent on the part of Respondent
from May 1999 till 5/6/2000. The Respondent did not
take any action as provided in the contract for not
completing the work of spillway, kota stone flooring and
G.I. pipe railing. This fact leads us to believe that the
Claimant has completed the work. The Respondent have
not placed any document on record to show that
Claimant has abandoned the work.
Thus, we find that the contract between parties was
illegally and unwarrantedly withdrawn/stopped on
3/6/2000 as Respondent failed to make the payment and
did not call the Claimant to do the work of spillway.
Thus, issue no 2 is decided in favour of the Claimant.”
10. With regard to issue No.3, it has been held as under:-
“Claim no 1: (A) On account of refund of Security
Deposit.
It is the case of Claimant that they have paid security
deposit Rs.2,51,000.00 consisting of Rs 56,000.00
earnest money deposit submitted with the tender which
was converted in to security deposit and Rs. 1,95,000.00
paid in cash The Respondent had recovered Rs
1,87,360.00 from the running bills as retention money,
total amount of security deposit Rs 4,38,360.00.
According to Claimant, the security deposit is required
to be released after the defect liability period of six (6)
months reckoned from the date of completion and
Claimant had completed work, the security deposit was
due for release in November, 1998. During oral
arguments, learned advocate of the Claimant submitted
that the contract was terminated by the Respondent on
3/6/2000 which was illegal and security deposit should
have been released immediately
The Respondent in their reply has stated that the
amount of security deposit is not disputed but Claimant
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C/FA/4005/2014 (GJHC240414042014) JUDGMENT DATED: 09/09/2026
entitlement to claim is disputed. If, the Respondent are
entitled to counter claim, in that case Claimant would
not be entitled to this claim
Our finding
We have already recorded our finding on issue no 2
regarding illegal and unwarranted withdrawal/stoppage
of work The Security deposit is to be refunded after 6
months from the date of completion of work. The
Respondent had not served any notice of defect within
six month from 3/6/2000. Therefore, security deposit Rs
4,38,360.00 is to be refunded to Claimant by the
Respondent.
We award Rs. 4,38,360.00 against this claim.
In Para-8 of Claim no.1, Claimant have asked payment of
interest on Security Deposit amount from 1/12/1999 till
payment @ 21% interest per annum. Interest part of this
claim will be decided in the claim of interest at Serial
No.6.
Claim no 2: On account of Work Done.
In part A of this claim, the Claimant has demanded
payment of work done as per the final bill raised vide
their letter dated 25/4/2000, wherein details of
measurements are also furnished, the amount of work
done has been worked out as Rs 1,00,65,156.89 and due
and payable after deducting for the amount paid so far is
Rs. 56,40,410.00. During the course of oral arguments,
learned advocate of the Claimant submitted that final bill
was submitted on 25/4/2000 prior to the
withdrawal/stoppage work by the Respondent and they
had an opportunity to verify the measurements.
Claimant has placed reliance on the decision of the
Calcutta high court AIR 1997 Cal 266, wherein it was
decided that it was the duty of the Respondent to keep
proper account of measurements and if the Respondent
failed to maintain, the contractor could hot be deprived
of his legal dues. The learned advocate of the Claimant
submitted that claim is based on work certified and
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C/FA/4005/2014 (GJHC240414042014) JUDGMENT DATED: 09/09/2026
further work carried out after the last certificate.
The Respondent in their reply have stated that payment
work done has been already made to the Claimant, on
the contrary Respondent have to recover money from
Claimant towards liquidated damages. The learned
advocate of the Respondent during the arguments
submitted that the rate of item soft soil, hard murrum
and soft rock mentioned in the final bill are not as per
the accepted tender rate, similarly, rate of item pitching
is also disputed. The learned advocate further submitted
that measurements were not taken in presence of
Respondent's representative and Respondent were not
aware of it. The certificates issued by Consulting
Engineer are also disputed.
Our findings
We have already recorded our finding as to the
certificates issued by the Consulting Engineer/Architect
th
for bill no. 1 to 5 including two revised 5 R.A bill. The
only question to be decided now is whether the
uncertified amount of work done after the last certificate
issued by the Consulting Engineer/Architect is to be
considered? The answer to this is NO, as the
measurements taken by Claimant cannot be verified
after 10 years. According to Claimant, the work was
completed on or around 31/5/1999 and thereafter the
Respondent did not want further work to be done by
Claimant. Claimant submitted final bill on 25/4/2000, but
before that he should have got the measurements
verified by the Consulting Engineer/Architect. Therefore,
payment of work done has to be based on measurements
certified by the Consulting Engineer/ Architect and
tender rates or the rates approved by the Consulting
Engineer/Architect. Therefore, the out standing amount
of work done is worked out as under:-
Item No. Description Qty Rate Amount
in Rs.
1(a) Soft Soil 26038.34 21.11 546805.14
1(b) Hard Murrum 21296 26.00 553696.00
1(c) Soft Rock 55480 32.00 1775360.00
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C/FA/4005/2014 (GJHC240414042014) JUDGMENT DATED: 09/09/2026
Extra
Hard Rock 16800 139.00 2335200.00
Item
3 Pitching 2391.16 300.00 717348.00
Foot Over Bridge
1(a) Hard Murrum 160.06 26.00 4162.00
2 CC 1.3.6 16 800.00 12800.00
4 Cement Pla 47.24 19.00 897.56
8 HYSD Steel 2192.08 20.00 43841.60
1(a) Hard Murrum 224.43 26.00 5835.18
2 CC 1.3.6 22.97 800.00 18376.00
4 CC 1.2.4 133.76 1900.00 254144.00
8 HYSD Steel 9235.02 20.00 184700.40
Inlet Gate
1a 59.25 26.00 1540.00
2 6.84 800.00 5472.00
3 33.83 1900.00 64277.00
4 26.3 33.60 883.68
5 980 40.00 39200.00
9 1229.8 20.00 24596.00
Total without extra item of Hard rock
Rebate of 2.16% on the amount of tender item, i.e. excluding
extra item of Hard Rock
91885.00
Net amount of tender item 4162050.14
Add for extra item of Hard Rock 2335200.00
G. Total
6497250.14

Say Rs.
6497250.14
The amount worked out Rs.64,97,250.00. Out of which
Rs.45,78,393.00 is paid by Respondent which is stated in
the affidavit of Shri Saragkumar Shah (marked -H),
whereas the Claimant has stated that they have received
payment to the extent of Rs 44,24,764.00. We have
considered amount paid as Rs 45.78.393.00 and
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C/FA/4005/2014 (GJHC240414042014) JUDGMENT DATED: 09/09/2026
therefore, balance amount to be paid is Rs. 19,18,857.00
which also include amount of security deposit deducted
from the bill. The amount of security deposit deducted
from the bill is Rs 1,87,360.40, therefore, the amount
payable under this claim will be Rs 17,31,497.00 (Rs.
19,18,857.00-Rs.1,87,360.00 Amount of Security deposit
deducted from the bill).
We award Rs. 17,31,497.00 against claim of work done.
The claim of dewatering, compaction, and revision of
rates, the same is decided in issue no 6.
Regarding claim no.2 (C) of interest on claim amount of
claim no 2 (A & B), the same will decided in claim of
interest at serial no. 6.
5. Claim No.3: On account of Work Done in Prolong
Period.
The work was required to be completed on or before
29/8/1997 The Claimant has said to have completed the
work on or around 31/5/1999, when they were told by
the Respondent that no further work was required to be
done and subsequently alleged that the work of spillway
has been left by the Claimant. The facts remain that the
work of spillway is not carried till date, which was
observed during the site visit Thus, the prolonged period
is from 30/8/1997 to 31/5/1999, which is 21 months and
2 days, whereas Claimant has considered as 20 months
and 26 days, where by the date of completion would be
24" May 1999. We have already recorded our findings as
the reason of delay and consequent breach of contract
by the Respondent. It is admitted position that Claimant
establishment was there and there was no complaint
from the Respondent during the relevant period,
therefore, the Claimant are entitled for the claim of over
head in prolong period. The Claimant has carried work
to the extent of Rs.13,58,705.00 in the stipulated period
and of Rs. 51,38,545.00 in prolonged period, total
amount work done being Rs 64,97,250 00 as recorded in
claim no 1. Over head and profit, is always calculated as
percentage Based on the formula in the book by Hudson,
th
Building & Engineering Contract 10 edition, in this
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C/FA/4005/2014 (GJHC240414042014) JUDGMENT DATED: 09/09/2026
book, the Overhead & Profit is considered as 10% each.
However, in the interest claim, only the overhead is to
be considered. Claimant has claimed overhead at the
rate of 5% which is very reasonable in this type of
construction contract. Based on the formula, the
overhead in the prolonged period is worked out as
under:-
Overhead in
percentage Contract sum
______________________ x ______________ x Period of delay
100 Contract Period
= (5/100) x (50,13,652.00/4) x 20.86
= Rs.13,07,296.20
Say Rs.13,07,296.00
We find that claimant is entitled to Rs.13,07,296.00
against this claim.
We award Rs.13,07,296.00 against this claim of work
done in prolong period.
(C) Interest on amount of Claim No.3(A) and (B)
Interest part of this claim will be decided in the claim of
interest at serial no.6.”
11. As regards issue No.4, it has been held thus:-
“We have already recorded our findings of issue no.2
regarding illegal termination of contract, which has been
decided in favour of the Claimant and the same finding
hold good for this issue as well. Not a single letter or a
communication in any form suggesting that Claimant has
not mobilized fully, lack of machinery, men power or
work has remained suspended or slow progress either
from the Consulting Engineer/ Architect or from the
Respondent. No levy of liquidated damages at a relevant
time. The Respondent for the first time found default of
the Claimant only after the Claimant letter dated
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C/FA/4005/2014 (GJHC240414042014) JUDGMENT DATED: 09/09/2026
25/4/2000, demanding outstanding payment of bills and
claims of the damages for the breaches committed by
the Respondent and as a counter blast to the letter of
Claimant cancelled the contract and thereafter issued
notice where all the default of the Claimant were
mentioned which was reiterated again in the written
statement. The contract provisions in case of slow
progress are already referred and it is observed that no
action was taken by the Respondent at a relevant time.
After 31/5/1999, when Claimant has stated to have
completed the work except the spillway and the payment
certificate was issued by the Consulting
Engineer/Architect on 24/7/1999, the Respondent never
communicated to the Claimant regarding the balance
work. This fact is borne out from the documents. In view
of the decision of the Honourable Supreme Court AIR
1997 SC 720, it was essential to make the time essence
of the contract by fixing further time for completion of
balance work and put Claimant to notice to complete the
work within such time. Respondent did not take any such
action and first terminated the contract and then gave
notice. The Learned advocate of the Respondent argued
that the Claimant has abandoned the work but no
justification as to when they put Claimant to notice or
any correspondence whatsoever indicating the
abandonment the work by the Claimant. The only work
which was not carried out is that of spillway, which has
not been carried out till date.
These conducts of the respondent clearly lead us to
believe that there was no default on the part of Claimant
as alleged in the written statement.
Therefore, we decide this issue in favour of the
Claimant.”
12. With regard to issue No.5, it has been held as under:-
“We have already recorded our finding of issue no 3,
claim no 2(A) with regard payment of work done, which
has been decided in favour of the Claimant and the same
finding hold good for this issue as well. The last
certificate of payment was issued on 24/7/1999 by the
consulting engineer/architect Thereafter only
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C/FA/4005/2014 (GJHC240414042014) JUDGMENT DATED: 09/09/2026
communication is the letter of Claimant dated 25/4/2000,
demanding outstanding of bills and claims of damages
for the breaches committed by the Respondent. In the
said letter, Claimant has stated that the work of
deepening lake, foot over bridge inlet gate was
completed on around 31/5/99. The Claimant has
mentioned in the letter that it has requested Respondent
for giving details of Spillway. But, instead of giving
details of the spill way, Respondent informed Claimant
that no further work was required to be carried out.
Thus in the period between the certificate dated
24/7/1999 and letter dated 31/5/2000, there was
complete silence and no communication what so ever. If
the work of Spillway was required to be carried out, the
Respondent should have asked Claimant to complete the
work, or gave notice of taking action as per the terms of
the contract, but no action or communication in any
form. It is an admitted fact the work of spillway is still
not carried out which was confirmed during the site
visit. Thus, this very fact leads us to believe that the
work was deemed to have completed on 31/5/1999.
Therefore, we decide this issue in favour of the
Claimant.”
13. None of these findings recorded by the learned
Arbitrator on the merits of the claim of the contractor could
be assailed before us on the ground of patent illegality. The
vague assertions made during the course of argument about
the award being bereft of any evidence or having been passed
ignoring the evidence of the respondent, cannot be
appreciated.
14. It was, thus, concluded by the learned Arbitral Tribunal
while passing the award dated 01.01.2020 in favour of the
claimant/respondent herein that:-
“We have recorded our findings on the entire matter and
have adjudicated claims and Counter claims. We are of
the view that Respondent have unnecessarily dragged
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C/FA/4005/2014 (GJHC240414042014) JUDGMENT DATED: 09/09/2026
Claimant in to this arbitration proceeding and therefore,
the Claimant is entitled to Arbitration cost.
We award Rs. 5,00,000.00 towards the arbitration cost.
The summary of Award
Claim
Particular/Remarks Amount Claim
Amount of
No
in Rs.
Award in Rs.
1. On Account of refund of
4,38,360 40 4,38,360 40
Security Deposit
2(A) On Account of work done
56,40,411.00 1731497. 00
including dewatering
1,25,730.00
18,57,227.00
2(B) Revision of Rate due to
26,07,110.15 7,54,995.00
Variation in quantity of soft
soil, hard murrum and soft
rock
Total of Claim No.2 82.47,521 15 26,12,222.00
3 On Account of work done in
prolong period
On account of rise in labour
9,73,302 62 NIl
and petroleum product
(B) On Account of Overhead 13,07,296.00 13,07,296.00
Total of claim No.3 22,80,598.62 13,07,296.00
4. On Account of illegal
3,62,157. 91 Nil
deletion of work
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C/FA/4005/2014 (GJHC240414042014) JUDGMENT DATED: 09/09/2026
5. On Account of delay in
26,731.19 7,312.00
Payment
Total claim No.1 to 5 1,13,55,369.27 43,65,190.00
6. On Account of Interest on
Interest
49,79,330.00
all above claims
claimed @21%
per annum
7. On Account of Arbitration
8,84,400.00 5,00,000.00
Cost
All counter claims of the Respondent are rejected.
We award Rs. 43,65,190.00 against the claimant's claim
of Rs.1,13,55.369.27 under claim No. 1 to 5.”
15. In view of the aforesaid, from a careful perusal of the
award, we find that the findings arrived at by the learned
Arbitral Tribunal are well-reasoned, supported by evidence on
record, and are entirely plausible. The appellant-Municipality
has failed to demonstrate any patent illegality, perversity, or
violation of public policy that would warrant interference at
the ends of this Court. The present appeal stands dismissed,
accordingly.
16. It is pointed out by the learned senior counsel Mr. B. S.
Patel appearing for the respondent-claimant that under the
order dated 22.12.2014 passed in Civil Application No.14117
of 2014, the appellant was directed to deposit principal
amount of award barring interest and costs. Thereafter, vide
another order dated 16.02.2015 noticing that the amount, as
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C/FA/4005/2014 (GJHC240414042014) JUDGMENT DATED: 09/09/2026
directed by this Court, has already been deposited by the
appellant, it was kept open for the claimant-award Creditor to
withdraw the same after offering security to the satisfaction of
the Registrar of this Court.
17. Thereafter, vide another order dated 03.07.2023 passed
in Civil Application (Direction) No.01 of 2023, on the prayer
made by the respondent-claimant, the Court has directed the
registry to return the original papers of bank guarantee
furnished by the respondent for the purpose of renewal. The
submission is that the bank guarantee is being continuously
renewed by the Kalupur Commercial Cooperative Bank
Limited, and after each renewal, the papers are being
furnished to the Registrar of this Court.
18. The request is that in view of the dismissal of the
present appeal, the Bank guarantee furnished by the
respondent to withdraw the amount deposited by the
appellant under the order dated 16.02.2015 is to be returned
back to the respondent.
19. We, therefore, direct the Registrar General to return
back the papers of the original Bank guarantee to the
respondent forthwith, upon a proper identification and
acknowledgment.
(SUNITA AGARWAL, CJ )
(DIVYESH A. JOSHI,J)
VAHID
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