Delhi Metro Rail Corporation Ltd vs Gyt Tpl Joint Venture

* IN THE HIGH COURT OF DELHI AT NEW DELHI
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Date of decision: 04 MAY, 2026
IN THE MATTER OF:
+ O.M.P. (COMM) 202/2021 & I.A. 9690-9692/2021
DELHI METRO RAIL CORPORATION LTD .....Petitioner
Through: Mr. Tarun Johri and Mr. Vishwajeet
Tyagi, Advocates

versus

GYT TPL JOINT VENTURE .....Respondent
Through: Mr Jayant Mehta, Senior Advocate,
Mr. Tushad Cooper, Senior Advocate
with Mr. Dhirendra Negi, Ms. Pragya
Chauhan, Mr. Shaurya Rohit and Mr.
Pallav Arora, Advocates.

CORAM:
HON'BLE MR. JUSTICE SUBRAMONIUM PRASAD
JUDGMENT
1. The present Petition under Section 34 of the Arbitration and
Conciliation Act, 1996 („ the Act ‟) has been filed by the Petitioner,
challenging the Majority Arbitral Award dated 28.04.2021 („ Impugned
Award’ ) passed by the Arbitral Tribunal with respect to the disputes between
the parties, arising out and in relation to the Contract Agreement dated
07.01.2015 executed between the parties.
2. The Petitioner is a company incorporated under the relevant
provisions of the Companies Act, 1956, having its registered office at Metro
Bhawan, 13 Fire Brigade Lane, Barakhamba Road, New Delhi, is inter alia
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engaged in the business of development and implementation of the Mass
Rapid Transit System in the National Capital Territory of Delhi.
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3. The Respondent is a joint venture having its registered office at 11
Floor, Hiranandani Knowledge Park, Technology Street, Powai, Mumbai.
4. The Petitioner, on 05.08.2014, issued a Tender and invited bids for
development and construction of Contract No. 87: Part Design and
construction of Elevated Viaduct and 8 Elevated Stations viz. Shahid Nagar,
Raj Baugh, Rajendra Nagar, Shyam Park, Mohan Nagar, Arthla, Hindon
River, and New Bus Adda, including Architectural finishing works of
Station from Chainage 3323.582 m to 12920.678 m of Line 1 Extension
(Dilshad Garden to New Bus Adda, Ghaziabad) of Phase-III MRTS Project
(„ Project ‟).
5. On 15.10.2014, the Respondent submitted its bid for the Project in
response to the said Tender. The Petitioner, on 09.12.2014, issued a Letter of
Acceptance for the project in favour of the Respondent for a total value of
Rs. 665, 87, 92, 409/-.
6. A Notice to Proceed was issued by the Petitioner to the Respondent on
15.12.2014. The Project work was to be completed within a period of 30
months, i.e., on or before 14.06.2017.
7. A Contract Agreement dated 07.01.2015 was executed between the
parties. It is stated that the Project was completed by the Respondent on
05.02.2019 with a total delay of 19 months.
8. Disputes arose between the parties with respect to the Project.
Consequentially, the Respondent invoked the arbitration clause under the
Contract seeking reference of disputes to an Arbitral Tribunal. On
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15.10.2019, a three-member Arbitral Tribunal („ Tribunal ‟) was constituted
for adjudication of disputes between the parties.
9. The Tribunal passed the Impugned Award allowing the Claim No. 1,
2, 3, 4, 7, & 8 raised by the Respondent. A Dissenting Award was passed by
the third member of the Tribunal.
10. The findings of the Tribunal in the Impugned Award with respect to
the objected Claims are as follows:-
a. Claim No. 1 – Prolongation Costs
This claim pertained to compensation for extended overheads and
establishment expenses allegedly incurred due to prolongation of the
contract period on account of delays attributed to the Petitioner. The
quantification was based on site overheads, manpower deployment,
head office overhead allocation, and cost statements correlated to the
period of employer-attributable delay.
The Tribunal analysed the delay matrix, Extension of time (EOT)
determinations, hindrance records, and contemporaneous
correspondence to ascertain responsibility for delay. It held that
substantial delays were attributable to the Petitioner, including late
drawings and site constraints. The Tribunal rejected the contention
that grant of EOT barred monetary compensation and confined the
award strictly to the period and components substantiated by
evidence. Consequently, the claim was allowed in part to the extent
found proved and attributable to employer-caused delay.

b. Claim No. 3 – GST/ Statutory Tax Variation
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This claim was for reimbursement of the additional financial burden
that arose due to the introduction of GST during the currency of the
contract. The amount claimed was calculated on the basis of the
difference in tax liability under the pre-GST regime and the GST
regime, supported by invoices and proof of payments.
The Tribunal examined the contractual provisions relating to taxes
and change in law to determine who was required to bear such
additional burden. It held that the introduction of GST amounted to a
statutory change affecting the contract price and was not fully
factored into the bid at the time of submission. On consideration of
the relevant statutory notifications and the documentary evidence
placed on record, the Tribunal allowed reimbursement of the
differential tax liability to the extent it was actually paid and duly
proved. Accordingly, the claim was partly allowed to the extent
established.
c. Claim No. 5 – Increase in Minimum Wages / Labour Escalation
This claim related to additional expenditure incurred on account of
statutory revision of minimum wages during the execution of the
contract. The amount claimed was calculated on the basis of
government notifications enhancing minimum wages, labour
deployment records, wage registers, and the differential cost impact
allegedly not covered under the contractual escalation formula.
The Tribunal examined the relevant contractual clauses dealing with
price adjustment and statutory variations to determine whether the
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increased wage liability was contractually compensable. It held that
to the extent the contractual escalation mechanism did not fully
absorb the increase arising from statutory revision of minimum
wages, the additional burden was recoverable. Upon scrutiny of the
notifications and supporting records, the Tribunal confined the award
strictly to the proven differential attributable to statutory increase
and disallowed any unsupported or overlapping components.
Accordingly, the claim was partly allowed to the extent established
by evidence.

d. Claim No. 8 – Environmental Compensation Charges (ECC)
This claim concerned reimbursement of Environmental
Compensation Charges (ECC) levied during execution of the works
pursuant to order passed by the Apex Court by way of notification
dated 23.12.2015 read with notification dated 05.01.2016 issued by
the NCT of Delhi. The Claimant sought recovery of the amounts
paid towards such charges, contending that the levy was introduced
during the subsistence of the contract and was not factored into the
bid price.
While analysing the claim, the Tribunal examined the contractual
provisions relating to statutory levies, change in law, and allocation
of risk. As noted in paragraph 391 of the Award, the Tribunal
considered the nature of ECC and the circumstances under which it
was imposed. It observed that the levy arose from regulatory
directions issued during the currency of the contract and was not part
of the original contractual pricing framework. The Tribunal also
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verified documentary proof of payment to ensure that only actual
and substantiated amounts were considered. Reimbursement was
confined strictly to the amounts proved to have been paid and
supported by record. The claim was accordingly allowed to that
limited extent.
e. Taxes on the Awarded Amount
This issue related to whether any statutory taxes were payable on the
amounts awarded under the various claims.
The Tribunal clarified that the amounts awarded represented the
principal sums found payable under each claim. It held that if any
statutory tax is legally applicable on such awarded amounts and is
required to be paid under law, the same would be payable in
accordance with the relevant statute. However, the Tribunal did not
grant any blanket or automatic direction for payment of future taxes.
It made it clear that only those taxes which are legally leviable and
actually payable can be recovered.
Interest was awarded on the principal sums as determined, in terms
of the contract and applicable law.
11. The Petitioner, aggrieved by the findings rendered by the Tribunal in
the Impugned Award, has filed the present Petition under Section 34 of the
Act, objecting the Impugned Award to the extent of aforementioned Claim
No. 1, 3, 5, 8, and the payment of taxes on the awarded amount.
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12. With respect to Claim no. 1, it is submitted that the Tribunal erred in
determining the effective period of prolongation and in awarding overheads
accordingly.
13. The Counsel for the Petitioner states that the Tribunal reduced 3.25
months towards execution of variations from the total delay period and held
the effective prolongation to be 16.51 months. It is the case of the Petitioner
that this finding was based merely on a comparison between the scheduled
completion date and the actual completion date, without examining the
actual time consumed in execution of variations.

14. Learned Counsel for the Petitioner submits that the actual data
regarding variations and the time required for their execution was available
and could have been called for by the Tribunal. Instead, the Tribunal
proceeded on assumptions without requiring documentary substantiation.
15. It is further contended that the Tribunal arbitrarily assumed
contractor‟s Site and Head Office Overheads at 10% of the contract price
while computing monthly overheads. In the absence of any evidence
demonstrating existence of a separate head office of the Joint Venture or
documentary proof of such expenditure, the award of head office overheads
is stated to be unsustainable.
16. With respect to Plant and Machinery ( P&M ) idling charges, the
Tribunal assumed that 50% of the machinery was hired and 50% was owned
by the contractor. It is submitted that such an assumption was not pleaded by
either party and was adopted without affording an opportunity to address the
methodology. The Tribunal, according to the Petitioner, effectively created a
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new case for the contractor and quantified damages on basis de hors the
pleadings and evidence.
17. The Learned Counsel places reliance on Batliboi Environmental
Engineers Limited vs. Hindustan Petroleum Corporation Limited, 2023 SCC
OnLine SC 1208 , Satluj Jal Vidyut Nigam Ltd. vs. Jaiprakash Hyundai
Consortium and Ors., 2023 SCC OnLine Del 4039, Wadia Techno
Engineering Services Limited vs. Director General of Married
Accommodation Project and Anr., 2024 SCC OnLine Del 4062; and on
NHPC Limited vs. Hindustan Construction Company and Ors., 2023 SCC
OnLine Del 8395.
18. The Learned Counsel by way of these judgments state that the Apex
Court and the High Court have consistently held that arbitral awards
granting prolongation costs, wage escalation, or reimbursement-type claims
must be founded on cogent evidence and reasoned analysis. While
recognised formulae such as Hudson, Emden or Eichleay may be adopted in
appropriate cases, their application must be preceded by satisfaction of
foundational assumptions and cannot result in arbitrary, inflated or
overlapping compensation. Claims for reimbursement of actual expenditure,
in particular, must be supported by documentary proof such as wage records,
payment vouchers and accounts, and cannot be sustained on mathematical
derivations or notional percentages of contract value. An award that departs
from contractual stipulations, scales figures notionally, or quantifies
substantial sums without evidentiary basis would be vulnerable to challenge
under Section 34 as being unreasoned, perverse, or contrary to the
fundamental policy of Indian law.
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19. For Claim No. 3, the Counsel for the Petitioner contends that the
Tribunal erroneously awarded compensation on account of GST by adopting
labour and P&M components of 22% and 18% respectively, relying upon
the price variation formula, despite there being no documentary evidence
establishing such allocation within the contract value.
20. It is submitted that the Respondent failed to produce GST challans,
returns, payment records, demand notices or other primary documents to
substantiate the alleged additional burden. The Tribunal, therefore, awarded
the claim on assumed figures.

21. Learned Counsel for the Petitioner further submits that Clause 11.1.4
of the GCC and the corresponding sub-clause in the SCC expressly provide
that the contract price is inclusive of all taxes, duties and levies, and no
adjustment is permissible on account of change in law. The impact of
variation in taxes was already contemplated under Clause 11.1.3 of the GCC
(Price Variation Clause). The award of GST, therefore, is stated to be
contrary to the express contractual stipulations. The relevant extract of
Clause 11.1.4 of the GCC, Sub-Clause 11.1.4 of the SCC, and the Price
Variation Clause 11.1.3 is reproduced hereunder:
Adjust in
contract
price
11.1.3 Adjustment in contract price on account of
inflation shall be done only if a "Price Variation
Formula" is given in the special conditions of
contract otherwise it will be a fixed price
contract.
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Change in
Taxes/Duty
11.1.4 The Contract Price shall not be adjusted to take
into account any increase or decrease in cost
resulting from any change in taxes, duties, levies
from the last date of submission of the Tender to
the completion date including the date of the
extended period of Contract unless a contrary
provision exists in Special Conditions of Contract
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18 Sub-Clause 11.1.4 Changes in cost due to legislation:
"Change in Law" means the occurrence or
coming into force of the following, at any
time after the date of submission of tender.
(a) any new tax which is imposed after the
due date of submission of tender
(b) change in the rate of any existing tax.
The Contract Price shall not be adjusted
due to any of the above two conditions and
its impact shall be considered covered in
the price indices of various components and
thus compensated in Price Variation
Clause. Also, the Contract price shall not
be adjusted on account of fluctuations in the
rates of exchange between the foreign
currencies of the Contract and Indian
Rupees from the last date of submission of
tender.
19 Sub-Clause 11.1.3 Price Variation
The rates as per the accepted. Bill of
Quantities shall be applicable till the
completion of the Work and will be varied
only to the extent of permissible price
variation under this Clause. However, this
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adjustment shall be to the extent that full
compensation for any rise or fall in costs to
the Contractor is not covered by the Price
variation formula, the rates. In the accepted
Bill of Quantities shall be deemed to
include amounts to cover the contingency of
such rise or fall in costs.
The price variation will be payable· only on
the Indian currency component (no
adjustment for Foreign currency
component) of the Contract Price as per the
follow price variation formula.
Payment as per the contract shall be subject
to adjustment in accordance with the
following Price Variation formula, and
other terms given herein, to provide for
variation in the market rates of inputs like
labour, materials and fuel/energy during
the currency of the Contract:
V=Vl +Vs +Vc +Vf+Vm
Where,
v = Total adjustment on account of all
factors
Vl = Adjustment on account of labour
component.
= p x R x(l-lo)lo
Vs = = Adjustment. on account of Steel
component
= q x R x (Ws - Wso) / Wso
Vc= Adjustment on account of Cement
component

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22. The Tribunal awarded Claim No. 5 to the Respondent for additional
cost due to variation in basic rate of minimum wages. The Learned Counsel
for the Petitioner argues that the award of increased wages is violative of
Clause 6.2 of the GCC, wherein no extra amount is payable due to increase
in minimum wages. Further, Clause 11.1.4 of GCC and Clause 11.1.4 of
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SCC, provides that nothing extra would be payable on account of change in
law. Clause 6.2 of the GCC is reproduced hereunder:
Rates of
Wages and
Conditions
of Labour
6.2 Full compliance of statutory requirements apart, the
Contractor shall pay rates of wages and observe
conditions of labour not less favourable than those
established for the trade or the industry where the
work is carried out.

The Contractor shall make himself aware of all
labour regulations and their impact on the- cost and
build up the same in the Contract Price, During the
Contract Period no extra amount in this regard shall
be payable to the Contractor, for whatsoever reason
including any revision of rates payable to the labour
due to revision of rates payable in Minimum Wages
Act.

Labour provide by the Contractor, either directly or
through sub-contractors, for the exclusive use of the
Employer or the Engineer, shall, for the purpose of
this Sub-Clause, be deemed to be employed by the
Contractor.

In the event of default belong made In the payment
of any money in respect of wages of any person
employed by the Contractor or any of its sub-
contractors of any tier in and for carrying out of this
Contract and if a claim therefore is filed. in the
office of the Labour Authorities and proof thereof is
furnished to the satisfaction of the· labour
Authorities, the Employer may, failing payment of
the said money by the Contractor, make payment of
such claim on behalf of the said Contractor to the
said Labour Authorities and any sums so paid shall
be recoverable by the Employer from the
Contractor.

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23. He further states that the Respondent did not furnish any record of
payments made to labourers, PPF details, payments of salaries/wages, ESI
details, before the Tribunal. Hence, the claim was allowed without
verification of any actual payments.
24. The Tribunal awarded a sum of Rs. 3,47,50,300/- as Environment
Compensation Charges to the Respondent. The Learned Counsel for the
Petitioner states that the said award is violative of Clause C2.6(c) of the
Contract. The said clause provides that the contract price shall not be
adjusted to take into account any change in law, duties, levies, etc, even
during the extended period of contract. The said Clause C2.6(c) is
reproduced hereunder:
“ C 2.6 The tenderers must note the following:-
xxx
c) Change in Taxes/Duty:
The contract price shall not be adjusted to take into
account any change in taxes, duties, levies or
introduction of any new tax, duty or levy till the
completion date including date of extended period of
contract.”
25. The Learned Counsel for the Petitioner also states that the award of
taxes on the awarded amount is also violative of Clause 11.1.4 of the GCC
and Sub-Clause 11.1.4 of the SCC.
26. Per contra , Learned Senior Counsel for the Respondent supports the
Impugned Award and submits that the present Petition is an attempt to seek
re-appreciation of evidence and re-interpretation of contractual clauses,
which is impermissible under Section 34 of the Act.
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27. In relation to Claim No. 1 (prolongation costs), it is contended that the
Petitioner neither pleaded nor proved the actual value or duration of
variations before the Tribunal. No documentary evidence was led to
demonstrate the time attributable to variations. In absence of such material,
the Tribunal was justified in adopting a reasonable methodology based on
the evidence available on record. It is submitted that the quantification of
damages and adoption of a particular formula fall squarely within the
domain of the Arbitral Tribunal.
28. With respect to Claim No. 3 (GST), Learned Senior Counsel for the
Respondent submits that Clause 11.1.4 applies only to a “new tax” or
change in rate of tax. GST, being a subsuming tax regime replacing existing
indirect taxes, does not fall within the contractual bar in the manner
suggested by the Petitioner. In any event, GST was introduced after the
scheduled completion date and during the extended period, the delay for
which was attributable to the Petitioner. It is submitted that the Tribunal
recorded a finding that GST was deposited and that the quantification was
certified and based on accepted industry practice. Such findings of fact are
not amenable to interference under Section 34 of the Act.
29. Insofar as Claim No. 5 (increase in minimum wages) is concerned, it
is argued by the Learned Senior Counsel for the Respondent that Clause 6.2
of the GCC cannot operate to deny compensation during the extended period
when the delay was caused by the Petitioner. The Tribunal has recorded that
evidence was led to establish payment of enhanced wages and that the
formula applied was derived from the contractual mechanism. These are
pure findings of fact and contractual interpretation.
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30. Regarding Claim No. 8 for Environment Compensation Charges
(ECC), the Learned Senior Counsel for the Respondent states that ECC
cannot be equated with a “tax”, “duty” or “levy” within the meaning of the
exclusion clauses. The imposition arose pursuant to the direction of the
Apex Court and constituted an additional financial burden during the
execution of the works. The Tribunal‟s interpretation, being a plausible
view, is immune from challenge under Section 34.
31. As to the direction regarding payment of applicable taxes on the
awarded amounts, it is submitted that the same is a natural legal
consequence and does not amount to rewriting the contract.
32. Learned Senior Counsel for the Respondent finally submits that the
scope of interference under Section 34 is narrow. The Court cannot
substitute its own interpretation for that of the Tribunal, nor re-assess
evidence or re-quantify damages. The Impugned Award represents a
plausible and reasoned view based on the material on record and, therefore,
warrants no interference.
33. He specifically states that the quantification of damages is in the
domain of the Tribunal and such interpretation cannot be interfered with
under Section 34 of the Act. He places reliance on McDermott International
Inc. vs. Burn Standard Co. Ltd, 2006 (11) SCC 181 ; NHAI vs. Oriental
Pathways, 2016 OnLine Del 3163; NHAI vs. Lanco Infratech Ltd., 2014
SCC OnLine Del 1029.
34. The Apex Court in McDermott International Inc. vs. Burn Standard
Co. Ltd, 2006 (11) SCC 181 , has observed as under:-
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“ 106 . We do not intend to delve deep into the matter as
it is an accepted position that different formulae can be
applied in different circumstances and the question as
to whether damages should be computed by taking
recourse to one or the other formula, having regard to
the facts and circumstances of a particular case, would
eminently fall within the domain of the arbitrator.
107 . If the learned arbitrator, therefore, applied the
Emden Formula in assessing the amount of damages,
he cannot be said to have committed an error
warranting interference by this Court.”

35. This Court in NHAI vs. Oriental Pathways, 2016 OnLine Del 3163,
has observed as under:-
“ 38 . It is trite that it is open to the Arbitrator to adopt
any reasonable formula for arriving at the computation
of the compensation. In this regard, reference may be
made to the pronouncement of the Supreme Court in
(2015) 3 SCC 49, Associate Builders v. Delhi
Development Authority extracted above.

39 . In para 43 of the judgment, the Supreme Court has
held that the construction of the contract by the
Arbitrator is also within the jurisdiction of the
Arbitrator. It is trite law that such construction is
clearly beyond the scope of consideration by the Court
while considering objections under Section 34 of the
Arbitration and Conciliation Act, 1996.

40 . In paragraph 56 of the judgment, the Supreme
Court has held that the adoption and application of a
formula by an Arbitrator is a pure question of fact.
Clearly, the same is beyond the purview of objections
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under Section 34 of the Arbitration and Conciliation
Act.

41 . In view of the above statement of law, the
objections of NHAI to the Arbitral Award were clearly
beyond the scope and purview of Section 34 of the
Arbitration and Conciliation Act and have been rightly
rejected by the learned Single Judge.”

36. This Court in NHAI vs. Lanco Infratech Ltd., 2014 SCC OnLine Del
1029, has observed as under:-
“ 4.3. If in arriving at quantum of damages, the arbitral
tribunal chose a particular formula, Court ought to not
interfere with it simply because another formula could
have been chosen, as long as the contract does not
provide for any formula and the formula adopted by
the arbitrator is an acceptable and reasonable one.
[McDermott International Inc. v. Burn Standard Co.
Ltd., (2006) 11 SCC 181.]”

37. He further states that as long as there is material on record to
demonstrate that a party has suffered damages, the Tribunal is allowed to
employ guesswork to calculate damages. He places reliance on Gemini Bay
Transcription vs. Integrated Sales Service, (2022) 1 SCC 753; and Cobra
Instalaciones Y Servicios, S.A. & Shyam Indus Power Solution Pvt Ltd. vs.
Haryana Vidyut Prasaran Nigam Ltd. (HVPNL), 2024 SCC OnLine Del
2755, .
38. The Apex Court in Gemini Bay Transcription vs. Integrated Sales
Service, (2022) 1 SCC 753, has observed as under:-
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“ 78. That such “guesstimates” are not a stranger to
the law of damages in the US and other common law
tradition nations has been established very early on in
a judgment of Asutosh Mookerjee, J. reported as
Frederick Thomas Kingsley v. Secy. of State for India
[Frederick Thomas Kingsley v. Secy. of State for India,
AIR 1923 Cal 49] . In this judgment, a learned
Division Bench of the Calcutta High Court put it thus:

“It may be conceded that though every breach of
duty arising out of a contract gives rise to an action
for damages, without proof of actual damage,
Marzetti v. Williams [Marzetti v. Williams, (1830) 1
B & Ad 415 : 109 ER 842 : 35 RR 329] , Embrey v.
Owen [Embrey v. Owen, (1851) 6 Ex 353 : 155 ER
579 : 86 RR 331] , the amount of damages
recoverable is, as general rule, governed by the
extent of the actual damage sustained in the
consequence of the defendant's act, Hiort v. London
& North West Railway Co. [Hiort v. London & North
West Railway Co., (1879) 4 Exch Div 188] In cases
admitting proof of such damage, the amount must be
established with reasonable certainty, Commerce, In
re [Commerce, In re, (1850) 3 W Rob 286 : 166 ER
969] . But this does not mean that absolute certainty
is required, nor in all cases, is there a necessity for
direct evidence as to the amount. Damages are not
uncertain for the reason that the loss sustained is
incapable of proof with the certainty of
mathematical demonstration or is to some extent
contingent and incapable of precise measurement.
As Harlan, J. observed in delivering the judgment of
the Supreme Court of the United States in Hetzel v.
Baltimore & O.P. Co. [Hetzel v. Baltimore & O.P.
Co., 1898 SCC OnLine US SC 12 : 42 L Ed 648 :
169 US 26 (1898)] , US at p. 38 certainty to
reasonable extent is necessary, and the meaning of
that language is that the loss of damage must be so
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far removed from speculation or doubt as to create
in the minds of intelligent and reasonable men the
belief that it is most likely to follow from the breach
of the contract and was a probable and direct result
thereof. To the same effect is the decision in Morris
v. United States [Morris v. United States, 1899 SCC
OnLine US SC 105 : 43 L Ed 946 : 174 US 196
(1899)] that where absolute certainty is impossible,
judgment of fair men as to damages directly
resulting governs.” (at pp. 50, 51)”

39. This Court in Cobra Instalaciones Y Servicios, S.A. & Shyam Indus
Power Solution Pvt Ltd. vs. Haryana Vidyut Prasaran Nigam Ltd. (HVPNL),
2024 SCC OnLine Del 2755, has observed as under:-
“ 32. It is against this backdrop that the learned
arbitrator adopted the methodology enunciated by the
Supreme Court in the Construction and Design
Services case; which is that a “rough and ready
method” could be applied for awarding L.D. to
HVPNL. The Supreme Court, in that case, directed that
the damages should be borne by the disputants in equal
measure because it was difficult, as opposed to
impossible, to quantify damages.

32.1 The learned Single Judge, however, in our
opinion, wrongly concluded that because the
Construction and Design Services case used the
expression “guesswork”, such methodology could not
be adopted by courts other than the Supreme Court.
This view was premised on the learned Single Judge
erroneously observing that the Supreme Court had
reduced the burden of damages befalling the defaulting
party by taking recourse to the powers conferred on it
under Article 142 of the Constitution.

32.2 As rightly contended by Mr. Singh on behalf of the
J.V. Company, the Supreme Court made no such
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observation and instead concluded that once an
adjudicator (i.e., the arbitrator) found that the L.D. did
not represent a genuine pre-estimate of damages and
that the aggrieved person/entity may suffer on account
of the breach committed by the defaulting party
concerning a project conceived in public interest, the
aggrieved person/entity was entitled to a reasonable
compensation, subject to the maximum amount payable
under the L.D. clause. It is when such circumstances
are present in a given case, that the court could
proceed based on “guesswork” with regard to the
quantum of compensation to be allowed to the
aggrieved party. The following observations made in
the Construction and Design Services case being
apposite are set forth hereafter:

“15. Once it is held that even in absence of specific
evidence, the respondent could be held to have
suffered loss on account of breach of contract, and it
is entitled to compensation to the extent of loss
suffered, it is for the appellant to show that
stipulated damages are by way of penalty. In a given
case, when highest limit is stipulated instead of a
fixed sum, in absence of evidence of loss, part of it
can be held to be reasonable, compensation and the
remaining by way of penalty. The party complaining
of breach can certainly be allowed reasonable
compensation out of the said amount if not the entire
amount. If the entire amount stipulated is genuine
pre-estimate of loss, the actual loss need not be
proved. Burden to prove that no loss was likely to be
suffered is on party committing breach, as already
observed.

xxx

17. Applying the above principle to the present case,
it could certainly be presumed that delay in
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executing the work resulted in loss for which the
respondent was entitled to reasonable compensation.
Evidence of precise amount of loss may not be
possible but in absence of any evidence by the party
committing breach that no loss was suffered by the
party complaining of breach, the Court has to
proceed on guess work as to the quantum of
compensation to be allowed in the given
circumstances. Since the respondent also could have
led evidence to show the extent of higher amount
paid for the work got done or produce any other
specific material but it did not do so, we are of the
view that it will be fair to award half of the amount
claimed as reasonable compensation.”

33 . As noticed hereinabove, the learned arbitrator did
not conclude that the entire amount calculable as per
Clause 26.2 of the GCC read with Clause 26.2 of the
P.C. represented a genuine pre-estimate of damages
that HVPNL could incur if the J.V. Company committed
a breach.

33.1 Therefore, in our opinion, the learned arbitrator
was well within the bounds of law to employ a “rough
and ready method” for awarding a reasonable
compensation towards losses/legal injury suffered by
HVPNL.

33.2 The fact that HVPNL was partially responsible for
the delay emerges upon perusal of the following
finding of fact returned by the learned arbitrator:

“….. The entire delay post deemed commissioning
had to be condoned by the respondent as the
Claimant could not be said to be responsible for said
delay. Delay of certain days stated hereinbefore,
even before the deemed date of commissioning was
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condoned by the respondent wherever the delay was
attributable to the Respondent”

34 . Furthermore, it is evident upon a perusal of the
impugned judgment that the learned Single Judge was
not convinced that HVPNL could have levied L.D. with
regard to the project in issue, i.e., Project G09 when it
had not embarked on the said path in other contracts,
as alluded to hereinabove. The observations made by
the learned Single Judge in paragraph 57 of the
impugned judgment bring forth this aspect:

“57. In addition to the above, there is also merit in
Cobra's contention that the Arbitral Tribunal has not
taken into account other similar contracts between
the parties where HVPNL had not levied any
Liquidated Damages by accepting Cobra's
contention that it was not responsible for the delay
in commissioning of the project (s).”

35 . According to us, although the fact that HVPNL had
either not imposed L.D. or imposed minuscule
damages in respect of other projects may not have
much relevance work qua each project is executed
based on the terms and conditions provided in the
contract governing such projects, it certainly throws up
a scenario where the adjudicator/arbitrator may need
to employ a rough and ready method to ascertain
reasonable compensation payable to the aggrieved
person/entity. Rough and ready method/guesswork is a
tool available to an arbitrator, which has received the
imprimatur not only of the Supreme Court but also of
other courts, even before judgment was rendered in the
Construction and Design Services case.

35.1 The underlying rationale appears to be that as
long as there is material available with the arbitrator
that damages have been suffered, but it does not give
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him an insight into the granular details, he is permitted
the leeway to employ honest guesswork and/or a rough
and ready method for quantifying damages [See Mohd.
Salamatullah v. Government of Andhra Pradesh,
(1977) 3 SCC 590; Delhi Development Authority v.
Anand and Associates, 2008 SCC OnLine Del 179;
Good Value Engineers v. M.M.S. Nanda, Sole
Arbitrator, 2009 : DHC : 5231; National Highway
Authority of India v. ITD Cementation India Ltd., 2010
: DHC : 404; Mahanagar Gas Ltd. v. Babulal
Uttamchand and Co., 2012 SCC OnLine Bom 1254;
Bata India Ltd. v. Sagar Roy, 2014 SCC OnLine Cal
17998].

35.2 Hence, in our view, the learned Single Judge
could not have set aside the award on this score.”

40. Heard the Learned Senior Counsels and perused the material on
record.
41. At the outset, it is necessary to delineate the contours of interference
under Section 34 of the Arbitration and Conciliation Act, 1996. The
jurisdiction of this Court is supervisory and not appellate. The Court does
not sit in appeal over the findings of fact or interpretation of contract
adopted by the Arbitral Tribunal. Interference is permissible only on the
limited grounds enumerated in Section 34(2), including patent illegality
appearing on the face of the award, contravention of the fundamental policy
of Indian law, or conflict with the most basic notions of justice or morality.
Errors of fact, re-appreciation of evidence, or substitution of contractual
interpretation fall outside the permissible scope of review under Section 34
of the Act.
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42. The principal objection of the Petitioner is that the Tribunal erred in
determining the effective period of prolongation and in computing
overheads and P&M idling charges on assumed parameters. It is contended
that the Tribunal ought to have called for further documentary substantiation
and that its adoption of industry norms amounts to conjecture.
43. The record reflects that the Tribunal examined the pleadings, the
evidence adduced, and the sequence of extensions granted. It returned a
finding that the delay in completion extended beyond the scheduled date and
that such prolongation was attributable to the Petitioner. The quantification
of prolongation costs was thereafter undertaken by adopting a formula based
on the contract value and accepted industry practice. The Petitioner did not
place before the Tribunal any specific and cogent quantification of the time
exclusively attributable to variations, nor did it produce material segregating
the value of work executed during the alleged variation period. In such
circumstances, the Tribunal cannot be faulted for proceeding on the basis of
the material available.
44. The Arbitral Tribunal in paragraphs 220, 222, 225 has dealt with the
facts of the case and held that the extensions sought by the Respondent, and
the delay in works were due to the conduct of the Petitioner entirely. It
further held that all the extensions were granted without the levy of
liquidated damages upon the Petitioner. The Tribunal held that the
Respondent is benefitted under Section 54, 55, and 73 of the Indian Contract
Act. The Tribunal has fairly held that if there is a contractual clause
prohibiting a claim for loss/damages, then such contractual clauses have to
be ignored and the contractor is liable to damages as per law. The Tribunal
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relied upon a judgment of the Apex Court in G. Ramachandra Reddy vs.
Union of India (2009) 6 SCC 414 and K.N. Sathyapalan vs. State of Kerala
(2007) 13 SCC 43 .
45. The Tribunal further held in paragraphs 228 and 229 of the Impugned
Award that notices of delay and cost implications were tendered by the
Respondent to the Petitioner. The Apex Court in Northern Railway vs.
Sarvesh Chopra (2002) 4 SCC 45 , has held that if such notice is tendered,
then in law, such claims can be provided despite of a clause prohibiting the
same.

46. It is settled that while damages must be founded on evidence,
mathematical precision is not an indispensable requirement where exact
computation is impracticable. An arbitral tribunal is entitled to adopt a
reasonable and recognised methodology for estimating loss, provided the
estimation is not arbitrary and is supported by the evidentiary record. The
adoption of a 10% parameter for overheads and a proportionate approach for
P&M does not, in the facts of the present case, amount to creation of a new
case. It constitutes a quantification exercise within the domain of the
Tribunal.
47. The decisions relied upon by the Petitioner to contend that an award
based on “assumptions” is liable to be set aside would apply only where the
finding is based on no evidence or where material evidence has been
ignored. The Impugned Award in the present case does not disclose such
infirmity. The Tribunal in paragraph 233 of the impugned Award has
already dismissed the objection of the Petitioner that the Claim No. 1 is
based on assumed figures. The Tribunal has held that the claim has been
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quantified on the basis of evidence before it, i.e., CW-1 and CW-2. Further,
the Tribunal has relied upon the report of the EY to assess the claim. This
Court is of the opinion that the Tribunal has passed a well-reasoned order
taking into consideration all the evidence put before it for assessment of
claim and therefore, this Court is not inclined to interfere with the aforesaid
claim under Section 34 of the Act.
48. The Petitioner seeks a re-evaluation of the sufficiency of evidence and
the correctness of the formula adopted. Such re-assessment is impermissible
under Section 34. It is trite law that computation of damages depends on
circumstances and how the quantum of such damages should be determined
is a matter which would fall for the decision of the arbitrator. Therefore, this
Court is not inclined to interfere with the findings of the Tribunal with
respect to Claim No. 1.
49. In McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11
SCC 181 , the Apex Court underscored that the court cannot correct errors of
fact or re-quantify damages, and that the arbitrator is the final authority on
appreciation of evidence. The Court further recognised that reasonable
estimation of damages is permissible where precise computation is not
feasible. The relevant portion of the said Judgment reads as under:-
“ 52. The 1996 Act makes provision for the supervisory
role of courts, for the review of the arbitral award only
to ensure fairness. Intervention of the court is
envisaged in few circumstances only, like, in case of
fraud or bias by the arbitrators, violation of natural
justice, etc. The court cannot correct errors of the
arbitrators. It can only quash the award leaving the
parties free to begin the arbitration again if it is
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desired. So, the scheme of the provision aims at
keeping the supervisory role of the court at minimum
level and this can be justified as parties to the
agreement make a conscious decision to exclude the
court's jurisdiction by opting for arbitration as they
prefer the expediency and finality offered by it.
53. However, this Court, as would be noticed
hereinafter, has had the occasion to consider the
matter in great detail in some of its decisions.
54. In Primetrade AG v. Ythan Ltd. [(2006) 1 All ER
367] jurisdictional issue based on interpretation of
documents executed by the parties fell for
consideration having regard to the provisions of the
Carriage of Goods by Sea Act, 1992. It was held that
as the appellant therein did not become holder of the
bills of lading and alternatively as the conditions laid
down in Section 2(2) were not fulfilled, the arbitrator
had no jurisdiction to arbitrate in the disputes and
differences between the parties.
Vis-à-vis the duty to assign reasons
55. Another important change which has been made by
reason of the provisions of the 1996 Act is that unlike
the 1940 Act, the arbitrator is required to assign
reasons in support of the award. A question may
invariably arise as to what would be meant by a
reasoned award.
57. In Konkan Rly. Corpn. Ltd. v. Mehul Construction
Co. [(2000) 7 SCC 201] this Court emphasised the
mandatoriness of giving reasons unless the arbitration
agreement provides otherwise.
Public policy
58. In Renusagar Power Co. Ltd. v. General Electric
Co. [1994 Supp (1) SCC 644] this Court laid down that
the arbitral award can be set aside if it is contrary to
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(a) fundamental policy of Indian law; (b) the interests
of India; or (c) justice or morality. A narrower
meaning to the expression “public policy” was given
therein by confining judicial review of the arbitral
award only on the aforementioned three grounds. An
apparent shift can, however, be noticed from the
decision of this Court in ONGC Ltd. v. Saw Pipes
Ltd. [(2003) 5 SCC 705] (for short “ONGC”). This
Court therein referred to an earlier decision of this
Court in Central Inland Water Transport Corpn.
Ltd. v. Brojo Nath Ganguly [(1986) 3 SCC 156 : 1986
SCC (L&S) 429 : (1986) 1 ATC 103] wherein the
applicability of the expression “public policy” on the
touchstone of Section 23 of the Indian Contract Act
and Article 14 of the Constitution of India came to be
considered. This Court therein was dealing with
unequal bargaining power of the workmen and the
employer and came to the conclusion that any term of
the agreement which is patently arbitrary and/or
otherwise arrived at because of the unequal bargaining
power would not only be ultra vires Article 14 of the
Constitution of India but also hit by Section 23 of the
Indian Contract Act. In ONGC [(2003) 5 SCC 705]
this Court, apart from the three grounds stated
in Renusagar [1994 Supp (1) SCC 644] , added
another ground thereto for exercise of the court's
jurisdiction in setting aside the award if it is patently
arbitrary.
59. Such patent illegality, however, must go to the root
of the matter. The public policy violation, indisputably,
should be so unfair and unreasonable as to shock the
conscience of the court. Where the arbitrator, however,
has gone contrary to or beyond the expressed law of
the contract or granted relief in the matter not in
dispute would come within the purview of Section 34 of
the Act. However, we would consider the applicability
of the aforementioned principles while noticing the
merits of the matter.
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xxx
106. We do not intend to delve deep into the matter as
it is an accepted position that different formulae can be
applied in different circumstances and the question as
to whether damages should be computed by taking
recourse to one or the other formula, having regard to
the facts and circumstances of a particular case, would
eminently fall within the domain of the arbitrator.
107. If the learned arbitrator, therefore, applied the
Emden Formula in assessing the amount of damages,
he cannot be said to have committed an error
warranting interference by this Court.
xxx
110. As computation depends on circumstances and
methods to compute damages, how the quantum thereof
should be determined is a matter which would fall for
the decision of the arbitrator. We, however, see no
reason to interfere with that part of the award in view
of the fact that the aforementioned formula evolved
over the years, is accepted internationally and,
therefore, cannot be said to be wholly contrary to the
provisions of the Indian law.”
50. The controversy relating to GST centres around the interpretation of
Clause 11.1.4 of the GCC and the corresponding provision in the SCC. The
Petitioner contends that the contract price was inclusive of all taxes and that
no adjustment could be granted on account of change in law. The Tribunal,
however, interpreted the clause to hold that the introduction of GST, which
subsumed earlier indirect tax regimes, occurred after the scheduled
completion date and during an extended period attributable to the Petitioner,
thereby resulting in additional financial burden to the Respondent. In fact,
the Petitioner itself offered to reimburse the Respondent towards
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implementation of GST at a rate lower than the awarded sum. The Petitioner
therefore admitted its liability to reimburse the additional amount due to
introduction of GST.
51. The Petitioner has objected to the interpretation of the relevant clauses
by the Tribunal. The interpretation of contractual clauses lies squarely
within the province of the Arbitral Tribunal. Section 28(3) of the Act
mandates that the Tribunal decide in accordance with the terms of the
contract. A mere difference in interpretation does not amount to violation of
Section 28(3), unless the Tribunal disregards the contract altogether or
adopts a view that is plainly contrary to its express and unambiguous
language. The Impugned Award demonstrates that the Tribunal considered
the relevant clauses and construed them in the factual matrix of delay and
extension. The view that the exclusion clause would not operate to deny
compensation for a financial burden arising during a prolonged period
attributable to the employer is a plausible construction.
52. Clause 6.2 of the GCC, relied upon by the Petitioner, provides that no
extra amount would be payable due to increase in minimum wages during
the currency of contract period. The Tribunal interpreted this clause in the
context of an extended period occasioned by the Petitioner‟s delay and held
that the bar could not operate to deprive the contractor of compensation
where the prolongation was not attributable to it. The Tribunal further
recorded that evidence was led to demonstrate payment of enhanced wages.
The Apex Court in P. M. Paul v. Union of India, 1989 Supp (1) SCC 368,
has held that grant of compensation when there is a delay on account of
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employer is justified. The relevant extract of the judgment is reproduced
hereunder:
“ 12. In the instant case, it is asserted that the extension
of time was granted and the arbitrator has granted 20
per cent of the escalation cost. Escalation is a normal
incident arising out of gap of time in this inflationary
age in performing any contract. The arbitrator has
held that there was delay, and he has further referred
to this aspect in his award. The arbitrator has noted
that claim No. I related to the losses caused due to
increase in prices of materials and cost of labour and
transport during the extended period of contract from
9-5-1980 for the work under phase I, and from 9-11-
1980 for the work under phase II. The total amount
shown was Rs 5,47,618.50. After discussing the
evidence and the submissions the arbitrator found that
it was evident that there was escalation and, therefore,
he came to the conclusion that it was reasonable to
allow 20 per cent of the compensation under claim No.
I, he has accordingly allowed the same. This was a
matter which was within the jurisdiction of the
arbitrator and, hence, the arbitrator had not
misconducted himself in awarding the amount as he
has done.
13. It was submitted that if the contract work was not
completed within the stipulated time which it appears
was not done then the contractor has got a right to ask
for extension of time, and he could claim difference in
price. This is precisely what he has done and has
obtained a portion of the claim in the award. It was
submitted on behalf of the Union of India that failure
to complete the contract was not the case. Hence, there
was no substance in the objections raised.
Furthermore, in the objections raised, it must be within
the time provided for the application under Section 30
i.e. 30 days during which the objection was not
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specifically taken, we are of the opinion that there is no
substance in this objection sought to be raised in
opposition to the award. Once it was found that the
arbitrator had jurisdiction to find that there was delay
in execution of the contract due to the conduct of the
respondent, the respondent was liable for the
consequences of the delay, namely, increase in prices.
Therefore, the arbitrator had jurisdiction to go into
this question. He has gone into that question and has
awarded as he did.”
53. This constitutes an exercise in contractual interpretation and
appreciation of evidence. The Tribunal has not ignored the clause; it has
construed it harmoniously with the factual finding regarding delay. Such
interpretation cannot be said to be perverse or in direct conflict with the
contract. The Petitioner‟s objection once again invites this Court to re-
appreciate evidence and re-interpret the clause, which is impermissible
under Section 34.
54. The Tribunal awarded compensation towards ECC upon holding that
the imposition did not fall squarely within the meaning of “tax”, “duty” or
“levy” as contemplated in the exclusion clauses and that it arose pursuant to
order passed by the Apex Court by way of notification dated 23.12.2015
read with notification dated 05.01.2016 issued by the NCT of Delhi, during
execution of the works. The Tribunal held that Clause 17.1 of the GCC
permitted the Respondent to raise a claim for „any additional payment under
any clause of these Conditions and otherwise‟, and therefore, the Contract
permitted the Respondent to advance claims „otherwise‟ under law. The
relevant extract of Clause 17.1 of the GCC is reproduced hereunder:
Procedure 17.1 If the Contractor intends to claim any
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for claims additional payment under any clause of
these Conditions or otherwise, the
Contractor shall give notice to the Engineer
as soon as possible and in any event within
28 days of the start of the event giving rise
to the claim.
The Contractor shall keep such
Contemporary records as may be necessary
to substantiate any claim, either on the Site
or at any other location acceptable to the
Engineer. Without admitting the Employer's
liability, the Engineer shall on receipt of
such notice, inspect such records and may
instruct the Contractor to keep further
contemporary records. The Contractor shall
permit the Engineer to inspect all such
records, and shall (if Instructed) submit
copies to the Engineer.
Within 28 days of such notice, or such other
time as may be agreed by the Engineer, the
Contractor shall send to the Engineer an
account, giving detailed particulars of the
amount and basis of the claim. Where the
event giving rise to the claim has a
continuing effect, such amount shall be
considered as interim. The Contractor shall
then, at such intervals as the Engineer may
reasonably require, send further interim
accounts giving the accumulated amount of
the claim and any further particulars.
Where interim accounts are sent to the
Engineer, the Contractor shall send a final
account within 28 days of the end of the
effects resulting from the event.
If the Contractor fails to comply with this
Sub-Clause, he shall not be entitled to claim
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any additional payment.

55. Since ECC was not a tax or levy but an additional charge imposed by
the Apex Court, the clause C2.6(c) could not have been applicable. The
Petitioner has not demonstrated that the said clause unequivocally and
unambiguously bars such a claim irrespective of the cause or timing of the
imposition. The interpretation adopted is not so irrational or implausible as
to warrant interference.
56. The direction regarding payment of applicable taxes on the awarded
amount is a consequential direction. In the absence of an express contractual
prohibition, such a direction does not amount to rewriting the contract. No
patent illegality is made out on this count.
57. A recurring theme in the Petitioner‟s objections is that the Tribunal
relied upon assumptions, adopted inappropriate formulae, or ought to have
demanded further documentary substantiation. These submissions, in
essence, question the sufficiency and appreciation of evidence. The
Impugned Award records that material evidence was led and that
quantification was undertaken on the basis of recognised norms. The Court
cannot sit in appeal over such appreciation.
58. This Court, therefore, finds that the Impugned Award does not suffer
from patent illegality, is not in violation of Section 28(3), or in conflict with
the fundamental policy of Indian law. The objections raised by the Petitioner
seek re-appreciation of evidence and re-interpretation of contractual
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provisions, which is beyond the permissible scope of interference under
Section 34 of the Act.
59. The Apex Court in Consolidated Construction Consortium Ltd. v.
Software Technology Parks of India , (2025) 7 SCC 757 has reiterated the
limited scope of interference of courts under Section 34 of the Act and has
held as follows:
“ 46 . Scope of Section 34 of the 1996 Act is now well
crystallised 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 per force 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.

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47 . Therefore, the role of the court under Section 34 of
the 1996 Act is clearly demarcated. It is a restrictive
jurisdiction and has to be invoked in a conservative
manner. The reason is that arbitral autonomy must be
respected and judicial interference should remain
minimal otherwise it will defeat the very object of the
1996 Act.
*
51 . We are afraid the learned Single Judge had clearly
gone beyond the grounds provided in Section 34 of the
1996 Act to set aside the arbitral award. The learned
Single Judge exceeded the jurisdiction under Section
34 of the 1996 Act. There was no justification for
setting aside the arbitral award by taking a different
view. The view taken by the Arbitral Tribunal is
certainly a possible and plausible view. A different
interpretation of Clause 26 other than the one taken by
the Arbitral Tribunal is possible but that will not bring
the challenge to the arbitral award within the four
corners of Section 34. In any view of the matter, mere
setting aside of the arbitral award did not confer any
benefit to the appellant. In the circumstances, the
Division Bench [Software Technology Parks of India v.
Consolidated Construction Consortium Ltd., 2019 SCC
OnLine Mad 39306] was justified in reversing the
order [Consolidated Construction Consortium Ltd. v.
Software Technology Parks of India, 2019 SCC
OnLine Mad 1633] of the learned Single Judge under
Section 37 of the 1996 Act.”

60. The Apex Court in Ssangyong Engineering & Construction Co. Ltd. v.
NHAI, (2019) 15 SCC 131 , held that “patent illegality” must appear on the
face of the award and must go to the root of the matter. An erroneous
application of law or re-assessment of evidence would not justify
interference unless the award is so irrational that no reasonable person could
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have arrived at such a conclusion. The Court emphasised that where two
views are possible, the view taken by the arbitral tribunal must prevail. The
relevant portion of the said Judgment reads as under:-
“ 70. The expression “most basic notions of … justice”
finds mention in Explanation 1 to sub-clause (iii) of
Section 34(2)(b). Here again, what is referred to is,
substantively or procedurally, some fundamental
principle of justice which has been breached, and
which shocks the conscience of the Court. Thus, in
Parsons [Parsons & Whittemore Overseas Co. Inc. v.
Societe Generale de l'Industrie du Papier (RAKTA),
508 F 2d 969 (2nd Cir 1974)] , it was held:

“7. Article V(2)(b) of the Convention allows the
court in which enforcement of a foreign arbitral
award is sought to refuse enforcement, on the
defendant's motion or sua sponte, if
„enforcement of the award would be contrary to
the public policy of (the forum) country‟. The
legislative history of the provision offers no
certain guidelines to its construction. Its
precursors in the Geneva Convention and the
1958 Convention's ad hoc committee draft
extended the public policy exception to,
respectively, awards contrary to “principles of
the law” and awards violative of „fundamental
principles of the law‟. In one commentator's
view, the Convention's failure to include similar
language signifies a narrowing of the defense
[Contini, “International Commercial
Arbitration: The United Nations Convention on
the Recognition and Enforcement of Foreign
Arbitral Award” [8 Am J Comp L 283 (1959)] ,
Am J Comp L at p. 304]. On the other hand,
another noted authority in the field has seized
upon this omission as indicative of an intention
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to broaden the defense [Quigley, “Accession by
the United States to the United Nations
Convention on the Recognition and
Enforcement of Foreign Arbitral Awards” [70
Yale LJ 1049 (1961)] , Yale LJ at pp. 1070-71].

8. Perhaps more probative, however, are the
inferences to be drawn from the history of the
Convention as a whole. The general pro-
enforcement bias informing the Convention and
explaining its supersession of the Geneva
Convention points towards a narrow reading of
the public policy defense. An expansive
construction of this defense would vitiate the
Convention's basic effort to remove pre-existing
obstacles to enforcement. [see “Straus,
Arbitration of Disputes between Multinational
Corporations, in New Strategies for Peaceful
Resolution of International Business Disputes”
114-15 (1971); Digest of Proceedings of
International Business Disputes Conference,
14-4-1971, at 191 (remarks of Professor W.
Reese)]. Additionally, considerations of
reciprocity — considerations given express
recognition in the Convention itself — counsel
courts to invoke the public policy defense with
caution lest foreign courts frequently accept it
as a defense to enforcement of arbitral awards
rendered in the United States.

9. We conclude, therefore, that the Convention's
public policy defense should be construed
narrowly. Enforcement of foreign arbitral
awards may be denied on this basis only where
enforcement would violate the forum State's
most basic notions of morality and justice.
[Restatement Second of the Conflict of Laws
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117, comment c, at 340 (1971); Loucks v.
Standard Oil Co. [Loucks v. Standard Oil Co.,
224 NY 99 : 120 NE 198 (1918)] , NY at p.
111].”

71 . In Dongwoo Mann+Hummel Co. Ltd. v.
Mann+Hummel GmbH [Dongwoo Mann+Hummel Co.
Ltd. v. Mann+Hummel GmbH, 2008 SGHC 67] , the
High Court of Singapore held:

“131. In PT Asuransi Jasa Indonesia (Persero)
v. Dexia Bank SA [PT Asuransi Jasa Indonesia
(Persero) v. Dexia Bank SA, (2007) 1 SLR (R)
597] [PT Asuransi Jasa Indonesia (Persero)],
the Court of Appeal explained what would
constitute a conflict with public policy (at [57]
and [59]):

„57. … The legislative policy under the
Act is to minimise curial intervention in
international arbitrations. Errors of law
or fact made in an arbitral decision, per
se, are final and binding on the parties
and may not be appealed against or set
aside by a court except in the situations
prescribed under Section 24 of the Act
and Article 34 of the Model Law. … In
the present context, errors of law or fact,
per se, do not engage the public policy of
Singapore under Article 34(2)(b)(ii) of
the Model Law when they cannot be set
aside under Article 34(2)(a)(iii) of the
Model Law.

*
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59. Although the concept of public policy
of the State is not defined in the Act or
the Model Law, the general consensus of
judicial and expert opinion is that public
policy under the Act encompasses a
narrow scope. In our view, it should only
operate in instances where the upholding
of an arbitral award would “shock the
conscience” (see Downer Connect
[Downer Connect Ltd. v. Pot Hole
People Ltd., CIV 2003-409-002878,
decided on 19-5-2004 (NZ, unreported)]
, at p. 136, para 58), or is “clearly
injurious to the public good or … wholly
offensive to the ordinary reasonable and
fully informed member of the public”
(see Deutsche Schachtbau-und
Tiefbohrgesellschaft GmbH v. R'As al-
Khaimah National Oil Co. [Deutsche
Schachtbau-und Tiefbohrgesellschaft
GmbH v. R'As al-Khaimah National Oil
Co., (1990) 1 AC 295 : (1987) 3 WLR
1023 : (1987) 2 Lloyd's Rep 246 (CA)] ,
Lloyds' Rep at p. 254, per Sir John
Donaldson MR), or where it violates the
forum's most basic notion of morality and
justice: seeParsons & Whittemore
Overseas Co. Inc. v. Societe Generale de
l'Industrie du Papier (RAKTA) [Parsons
& Whittemore Overseas Co. Inc. v.
Societe Generale de l'Industrie du Papier
(RAKTA), 508 F 2d 969 (2nd Cir 1974)] ,
F 2d at p. 974. This would be consistent
with the concept of public policy that can
be ascertained from the preparatory
materials to the Model Law. As was
highlighted in the Commission Report
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(A/40/17), at para 297 [referred to in A
Guide to the Uncitral Model Law on
International Commercial Arbitration:
Legislative History and Commentary by
Howard M. Holtzmann and Joseph E.
Neuhaus (Kluwer, 1989) at 914]:

In discussing the term „public policy‟, it
was understood that it was not equivalent
to the political stance or international
policies of a State but comprised the
fundamental notions and principles of
justice… It was understood that the term
„public policy‟, which was used in the
1958 New York Convention and many
other treaties, covered fundamental
principles of law and justice in
substantive as well as procedural
respects. Thus, instances such as
corruption, bribery or fraud and similar
serious cases would constitute a ground
for setting aside.‟ (emphasis in original)

132. In Profilati Italia SRL v. Paine Webber Inc.
[Profilati Italia SRL v. Paine Webber Inc.,
(2001) 1 Lloyd's Rep 715] (Profilati), Moore-
Bick, J. made the following observations in
relation to the argument that non-disclosure of
material documents constituted a breach of
public policy in the context of Section 68 of the
English Arbitration Act, 1996 (at [17], [19] and
[26]):

„17. … Where the successful party is said
to have procured the award in a way
which is contrary to public policy it will
normally be necessary to satisfy the
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Court that some form of reprehensible or
unconscionable conduct on his part has
contributed in a substantial way to
obtaining an award in his favour.
Moreover, I do not think that the Court
should be quick to interfere under this
section [i.e. Section 68(2)(g) of the
Arbitration Act, 1996]. In those cases in
which Section 68 has so far been
considered the Court has emphasised
that it is intended to operate only in
extreme cases…

*

19. Where an important document which
ought to have been disclosed is
deliberately withheld and as a result the
party withholding it has obtained an
award in his favour the Court may well
consider that he procured that award in
a manner contrary to public policy. After
all, such conduct is not far removed from
fraud…
*
26. Even if there had been a deliberate
failure to give disclosure of the two
documents in question it would still be
necessary for Profilati to satisfy the
Court that it had suffered substantial
injustice as a result.‟”

72 . And finally, in BAZ v. BBA [BAZ v. BBA, 2018
SGHC 275] , the High Court of Singapore stated:

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“156. From the outset, it is important to
reiterate that the public policy ground for
setting aside or refusal of
recognition/enforcement is very narrow in
scope. The Court of Appeal has held that the
ground should only succeed in cases where
upholding or enforcing the arbitral award would
“shock the conscience”, or be “clearly injurious
to the public good or … wholly offensive to the
ordinary reasonable and fully informed member
of the public”, or violate “the forum's most
basic notion of morality and justice” [PT
Asuransi Jasa Indonesia (Persero) v. Dexia
Bank SA [PT Asuransi Jasa Indonesia (Persero)
v. Dexia Bank SA, (2007) 1 SLR (R) 597] , SLR
para 59] (PT Asuransi). In Sui Southern Gas
Co. Ltd. v. Habibullah Coastal Power Co. (Pte)
Ltd. [Sui Southern Gas Co. Ltd. v. Habibullah
Coastal Power Co. (Pte) Ltd., (2010) 3 SLR 1]
(Sui Southern Gas), the High Court stated that
to succeed on a public policy argument, the
party “had to cross a very high threshold and
demonstrate egregious circumstances such as
corruption, bribery or fraud, which would
violate the most basic notions of morality and
justice” (at [48]). The 1985 UN Commission
Report states at para 297 that the term public
policy “comprised the fundamental notions and
principles of justice”, and it was understood that
the term “covered fundamental principles of law
and justice in substantive as well as procedural
respects”. The 1985 UN Commission Report
further explains that Article 34(2)(b)(ii) of the
Model Law “was not to be interpreted as
excluding instances or events relating to the
manner in which an award was arrived at”.

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157. It is clear that errors of law or fact, per se,
do not engage the public policy of Singapore
under Article 34(2)(b)(ii) of the Model Law
when they cannot be set aside under Art
34(2)(a)(iii) of the Model Law (PT Asuransi [PT
Asuransi Jasa Indonesia (Persero) v. Dexia
Bank SA, (2007) 1 SLR (R) 597] , SLR para 57),
with the exception that the court's judicial power
to decide what the public policy of Singapore is
cannot be abrogated (AJU v. AJT [AJU v. AJT,
(2011) 4 SLR 739] , SLR para 62 AJU v. AJT).
…

*
159. … This balance is generally in favour of the
policy of enforcing arbitral awards, and only
tilts in favour of the countervailing public policy
where the violation of that policy would “shock
the conscience” or would be contrary to “the
forum's most basic notion of morality and
justice”. In determining whether the balance
tilts towards the countervailing public policy, it
is important to consider both the subject nature
of the public policy, the degree of violation of
that public policy and the consequences of the
violation.””

61. The Apex Court in Delhi Metro Rail Corporation Limited v. Delhi
Airport Metro Express Private Limited, 2024 (6) SCC 357, has reiterated the
limited scope of courts under Section 34 of the Act and has held as under:
“ 33. Section 34 of the Arbitration Act delineates the
grounds for setting aside an arbitral award. The
provision, as amended by the Arbitration and
Conciliation (Amendment) Act, 2015 reads as follows:
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“ 34. Application for setting aside arbitral award .—
(1) *
(2) An arbitral award may be set aside by the Court
only if—
(a) *
(b) the Court finds that—
(i) the subject-matter of the dispute is not capable of
settlement by arbitration under the law for the time
being in force, or
(ii) the arbitral award is in conflict with the public
policy of India.
Explanation 1.—For the avoidance of any doubt, it
is clarified that an award is in conflict with the
public policy of India, only if—
(i) the making of the award was induced or affected
by fraud or corruption or was in violation of Section
75 or Section 81; or
(ii) it is in contravention with the fundamental policy
of Indian law; or
(iii) it is in conflict with the most basic notions of
morality or justice.
Explanation 2.—For the avoidance of doubt, the test
as to whether there is a contravention with the
fundamental policy of Indian law shall not entail a
review on the merits of the dispute.
(2-A) An arbitral award arising out of arbitrations
other than international commercial arbitrations,
may also be set aside by the Court, if the Court finds
that the award is vitiated by patent illegality
appearing on the face of the award:
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Provided that an award shall not be set aside merely
on the ground of an erroneous application of the law
or by reappreciation of evidence.”
(emphasis supplied)
34. The contours of the power of the competent court to
set aside an award under Section 34 has been explored
in several decisions of this Court. In addition to the
grounds on which an arbitral award can be assailed
laid down in Section 34(2), there is another ground for
challenge against domestic awards, such as the award
in the present case. Under Section 34(2-A) of the
Arbitration Act, a domestic award may be set aside if
the Court finds that it is vitiated by “patent illegality”
appearing on the face of the award.
35. In Associate Builders v. DDA [Associate
Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC
(Civ) 204] , a two-Judge Bench of this Court held that
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.
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36. 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.
37. 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
in Associate Builders v. DDA [Associate
Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC
(Civ) 204] observed : (SCC pp. 75 & 81, paras 31 &
42)
“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.
*
42.1. … 42.2. (b) A contravention of the Arbitration
Act itself would be regarded as a patent 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.”
(emphasis supplied)
38. In Ssangyong Engg. & Construction Co.
Ltd. v. NHAI [Ssangyong Engg. & Construction Co.
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Ltd. v. NHAI, (2019) 15 SCC 131 : (2020) 2 SCC (Civ)
213] , a two-Judge Bench of this Court endorsed the
position in Associate Builders [Associate
Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC
(Civ) 204] , on the scope for interference with domestic
awards, even after the 2015 Amendment : (Ssangyong
Engg. & Construction Co. case [Ssangyong Engg. &
Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 :
(2020) 2 SCC (Civ) 213] , SCC p. 171, paras 40-41)
“40. The change made in Section 28(3) by the
Amendment Act really follows what is stated in
paras 42.3 to 45 in Associate Builders [Associate
Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC
(Civ) 204] , namely, that the construction of the
terms of a contract is primarily for an arbitrator to
decide, unless the arbitrator construes the contract
in a manner that no fair-minded or reasonable
person would; in short, that the arbitrator's view is
not even a possible view to take. Also, if the
arbitrator wanders outside the contract and deals
with matters not allotted to him, he commits an error
of jurisdiction. This ground of challenge will now
fall within the new ground added under Section
34(2-A).
41. … Thus, 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 on the ground of patent illegality. Additionally,
a finding based on documents taken behind the back
of the parties by the arbitrator would also qualify as
a decision based on no evidence inasmuch as such
decision is not based on evidence led by the parties,
and therefore, would also have to be characterised
as perverse.”
(emphasis supplied)
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39. 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.
[Patel Engg. Ltd. v. North Eastern Electric Power
Corpn. Ltd., (2020) 7 SCC 167 : (2020) 4 SCC (Civ)
149.] 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.”
62. Tested on the touchstone of the aforesaid law, the present challenge
does not meet the threshold contemplated under Section 34 of the Act. The
objections raised by the Petitioner essentially invite this Court to re-
appreciate the evidence relating to delay and prolongation, re-interpret
contractual clauses concerning taxes, minimum wages and change in law,
and re-assess the methodology adopted for quantification of damages. Such
an exercise would amount to converting proceedings under Section 34 into a
first appeal on facts and law, which is impermissible.
63. The Impugned Award reflects a reasoned consideration of the
pleadings, evidence and contractual framework. The Tribunal has not
disregarded the contract; rather, it has interpreted the relevant clauses in the
factual context of delay and extension. The interpretation adopted cannot be
said to be so implausible, irrational or contrary to the express terms of the
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Contract as to attract the ground of patent illegality under Section 34. Nor
has the Petitioner demonstrated any violation of Section 28(3) of the Act.
64. The existence of a dissenting award, howsoever elaborate, does not
dilute the binding character of the Majority Award. Arbitration law
recognises that the decision of the majority constitutes the award. Where the
majority view represents a plausible and reasoned construction of the
contract, the Court cannot supplant it with the reasoning of the dissent.
65. In view of the foregoing discussion, this Court is satisfied that the
Petitioner has failed to establish any ground falling within the limited
parameters of Section 34 of the Act. The impugned Majority Award dated
28.04.2021 does not suffer from patent illegality, perversity, or conflict with
the fundamental policy of Indian law.
66. Accordingly, the present Petition under Section 34 of the Arbitration
and Conciliation Act, 1996 is dismissed. All pending applications, if any,
stand disposed of. In the facts and circumstances of the case, there shall be
no order as to costs.

SUBRAMONIUM PRASAD, J
MAY 04, 2026
hsk/mt





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