Union Of India vs M/S. Navayuga Engineering Co. Ltd. & Anr.
- Court
- Delhi High Court
$~17
* IN THE HIGH COURT OF DELHI AT NEW DELHI
# CNR No. DLHC010019442017
+ O.M.P. (COMM) 97/2017, I.A. 2597/2017, I.A. 2599/2017, I.A.
13968/2019, I.A. 15763/2019 & I.A. 13968/2019
UNION OF INDIA .....Petitioner
Through: Ms. Vaishali Gupta, Adv. Panel
Counsel for GNCTD with Ms.
Aanchal Rajput, Advs.
versus
M/S. NAVAYUGA ENGINEERING CO. LTD. & ANR.
.....Respondents
Through: Mr. Arvind Minocha, Sr.Adv.
with Mr. Mukesh Kumar, Ms.
Meenakshi Sood, Ms. Muskan
Katyayan and Mr. Gaurav
Nayak, Advs.
CORAM:
HON'BLE MR. JUSTICE OM PRAKASH SHUKLA
JUDGMENT (ORAL)
% 19.08.2026
1. The present petition under Section 34 of the Arbitration and
1
Conciliation Act, 1996 is filed by the Petitioner challenging the arbitral
2
award dated 14.10.2016 passed by the learned Sole Arbitrator, Shri O.
P. Bhatia, Former Additional Director General (Works), Special
CPWD.
2. The arbitral proceedings arose out of Agreement No. 21/EE/DS
3
& CM/PWD/06-07 , under which the Petitioner had awarded to the
Respondent the work of constructing the flyover at Naraina T-Point,
1
“the Act” hereinafter
2
“impugned Award” hereinafter
3
“contract” hereinafter
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Ring Road, New Delhi.
3. The stipulated period for completion of the work was 21 months,
commencing from 14.03.2007, and the work was to be completed by
13.12.2008. During the execution of the work, the Petitioner granted six
extensions of time, ultimately extending the date of completion up to
15.01.2013, without levy of any Liquidated Damages.
4. As per the Respondent, the work was delayed due to reasons
attributable to the Petitioner, as a result of which the Respondent had to
continue with the work during the extended period and incurred
additional expenditure and losses. However, the Petitioner disputed this
and attributed the delay to the Respondent. Thus, dispute arose between
the parties as to who was responsible for the delay and as to whether
the Respondent was entitled to recover the additional costs alleged to
have been incurred during the prolongation of period. Accordingly,
these disputes were referred to the Arbitral Tribunal in terms of Clause
25 of the Contract.
5. After the Arbitral Tribunal was constituted, the Respondent
raised almost six claims before the learned Sole Arbitrator, the amounts
claimed under each of which are set out in the following tabular chart:
Claim No. Brief Description of the Claims Amount of Claim
(Rs in Lac)
1 Claim on account of final bill 184.05
2 Claim on account of arbitrarily deduction on
24.01
less lead of construction material
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3 Claim on account of losses/damages due to
prolongation of contract.
3(a) Claim on account of damages on account of
1343.82
idling of tools & plants
3(b) Claim on account of losses suffered on
697.18
account of extra expenditure incurred on site
establishment
3(c) Claim on account of extra expenditure
160.55
incurred on account of site expenses
3(d) Claim on account of expenditure incurred on
54.32
account of extending the B.G. for
performance, security and mobilization
advance
3(e) Claim on account of expenditure on account
97.91
performance of Head Office Overheads
3(f) Claim on account of extra expenditure for
21.56
providing inspection vehicle & mobile
3(g) Claim on account of extra interest paid on
136.24
mobilization advance
3(h) Claim on account of loss opportunity/profit 566.04
4 Interest on due amount of claim no 1 to 3 To be calculated on
award
5 Claim @ 18% on claim no 1 to 4 for date of
To be calculated on
due to date of payment
award
6 Cost of Arbitration 30.00
6. The learned Arbitrator after considering the pleadings and
evidence on record, ultimately awarded Rs.1,07,02,697/- under Claim
No. 1, while Claim No. 2 was rejected in its entirety. Under Claim No.
3(a), an amount of Rs.45,51,450/- was awarded and a further sum of
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Rs.1,70,45,681/- was awarded collectively under Claim Nos. 3(b) to
3(g), aggregating to Rs.2,15,97,131/-. Claim No. 3(h), towards loss of
profit, was rejected.
7. Under Claim No. 4, interest was awarded only on the amount
awarded under Claim No. 1, at the rate of 8% per annum, while a sum
of Rs.3,00,000/- was awarded under Claim No. 5. Thus, the total
amount awarded in favour of the Respondent was Rs.3,25,99,828/-,
together with interest on Claim No. 1 at the rate of 8% per annum.
8. In the present petition, the Petitioner principally assails the
impugned Award to the extent it awards amounts under Claim Nos. 3(a)
to 3(g).
9. Learned Counsel appearing for the Petitioner submits that the
impugned Award, insofar as it allows Claim nos. 3(a) to 3(g), is liable
to be set aside as being contrary to the terms of the Contract,
unsupported by the evidence on record and vitiated by patent illegality.
10. It is further submitted that Special Conditions 3.18 and 3.52 of
the Contract specifically bar any claim for idle establishment, labour,
machinery, equipment, tools and the like during or after execution of
the work and that the express bar was specifically brought to the notice
of the learned Arbitrator. It is contended that despite the same, the
Tribunal awarded compensation towards such claims, and thereby acted
in direct contravention of the express terms of the Contract warranting
interference by this Court.
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11. Learned Counsel pointed out that the learned Arbitrator found
that, out of the total prolongation of 1484 days, only 568 days were
attributable to the Petitioner, while the remaining delay was attributable
to the Respondent, and also found inaccuracies and exaggeration in the
expenditure claimed. Therefore, it is contended that the approach of the
Tribunal is internally inconsistent, as despite these findings, it awarded
compensation without disclosing any basis for the amount finally
awarded. According to the Petitioner, the assessment is unsupported by
any evidence and, in substance, rests on equitable considerations, in
contravention of Section 28(2) of the Act.
12. It is further submitted that, having attributed only 568 days of
delay to the Petitioner, the Tribunal erred in awarding compensation for
the entire period of prolongation without separately quantifying the loss
attributable to those 568 days or taking into account the Respondent’s
own contribution to the delay.
13. Learned Counsel for the Petitioner also submits that Claim Nos.
3(a) to 3(g) were claims for actual loss and damages and could not have
been allowed merely on the basis of estimates furnished by the
Respondent. It is contended that the Respondent failed to produce
cogent evidence to establish the actual loss suffered and that mere self-
serving estimates, by themselves, could not constitute proof of such
loss.
14. It is further submitted that the Respondent was required to take
reasonable steps to mitigate its loss under Section 73 of the Indian
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4
Contract Act,1972 which it failed to establish that it had done, and that
the Tribunal failed to take this aspect into consideration while awarding
compensation.
15. Per contra , learned Senior Counsel for the Respondents submits
that the impugned Award is a reasoned Award, passed after considering
the pleadings, documentary evidence and the oral and written
submissions of the parties.
16. It is further submitted that the project was prolonged by 1484
days and that the Petitioner granted extensions of time on four occasions
without levying any liquidated damages. Such prolonged extensions,
according to learned Senior Counsel, could not be treated as an ordinary
extension of time and entitled the Respondents to compensation for the
losses suffered on account of the prolongation.
17. Learned Senior Counsel further submits that the claims in
question were for damages arising from prolongation and were distinct
from the ordinary escalation contemplated under the contract and even
the clauses relied upon by the Petitioner did not bar the learned
Arbitrator from examining a claim for damages arising from breach and
delay attributable to the Petitioner. It is, therefore, submitted that the
Tribunal acted within the scope of the reference and its jurisdiction in
considering and quantifying such claims under Sections 55 and 73 of
the ICA.
4
“ICA” hereinafter
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18. I have heard the learned Counsel for both parties and perused the
material on record.
19. At the outset, it is necessary to keep in mind that a petition under
Section 34 of the Act is not an appeal against an arbitral Award. This
Court does not sit in appeal over the findings of the Arbitral Tribunal,
nor can it reappreciate the evidence merely because another view is
possible. The scope of interference is limited to the grounds recognised
under Section 34 and does not permit this Court to substitute its own
view with the Tribunal’s view unless it is a view which no reasonable
person could have arrived at.
20. Nonetheless, this Court, is only required to examine whether the
findings recorded and the conclusions reached by the Tribunal are
within the terms of the Contract and are supported by the material
placed before it. An Award which proceeds contrary to the contractual
terms, suffers from patent illegality appearing on its face, or reaches a
conclusion having no basis in the material on record, can be interfered
with within the limited grounds available under Section 34 of the Act.
The said principles stand recognised in DMRC Ltd. v. Delhi Airport
5
Metro Express (P) Ltd. , PSA Sical Terminals (P) Ltd. v. V.O.
6
Chidambaranar Port Trust , State of Chhattisgarh v. Sal Udyog Pvt.
7 8
Ltd. , and Associate Builders v. Delhi Development Authority .
21. Adverting to the contentions raised in the present case, the
5
(2024) 6 SCC 357
6
2021 SCC OnLine SC 508
7
(2022) 2 SCC 275
8
(2015) 3 SCC 49
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principle objections raised by the Petitioners in assailing the impugned
Award are two-fold. Firstly, it is contended that the Tribunal awarded
compensation despite the clear bar given in Special Conditions Clause
3.18 and 3.52 and therefore, the Tribunal acted beyond the four corners
of the Contract. Secondly, it is vehemently contended that the Tribunal
itself found that only part of the delay was attributable to the Petitioner
and that the expenditure claimed by the Respondent was exaggerated
and the evidence in support thereof was unreliable, yet the Tribunal
awarded overhead compensation without separately linking the amount
awarded to the delay attributable to the Petitioner or disclosing a clear
basis for the ultimate quantum awarded.
22. In regard to the contention of the Petitioner that Special
Condition 3.18 and 3.52 ousted the right of the Respondent to claim
overhead compensation and other costs during the period of
prolongation, it is relevant to note that the Petitioner had raised similar
contention before the Tribunal, which were duly considered and the
Tribunal has returned its finding.
23. The Petitioner is now raising the very same contention before this
Court, without pointing out any error in the reasoning adopted by the
Tribunal. A reading of the impugned Award indicates that the Tribunal
examined the said clause in great detail and held it to be void and
unlawful, being contrary to Sections 23 of the ICA, as it sought to
curtail the substantive right flowing from ICA of the Respondent to
claim damages.
24. The Tribunal did not stop at this finding. It also examined the
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Respondent’s entitlement under Sections 55 and 73 of the ICA. It noted
that the Contract itself provided for extension of time, that the
milestones had been shifted on several occasions and that extension had
been granted on at least four occasions without levy of any
compensation. It further noticed that the Respondent had reserved its
rights for compensation and pursue any further remedy available in law.
On this basis, the Tribunal held that time was not the essence of the
Contract and that the Respondent was entitled to compensation for the
delay and breaches attributable to the Petitioner under Sections 55 and
73 of the ICA.
25. Once the Tribunal held that the said clause was void and
unlawful, being in violation of Section 23 of the ICA, and that the
Respondent was entitled to compensation under Sections 55 and 73 of
the ICA, it only thereafter proceeded to consider the Respondent’s
claims for compensation on their merits. Thus, the Tribunal has not
ignored the specific bar. It considered the clause and its legal effect
before considering the Respondent’s entitlement.
26. The reasoning adopted by the Tribunal cannot also be said to be
contrary to the legal position governing clauses which bars the
entitlement of the contractor to claim expenditure incurred in the
prolongation period. The Hon’ble Supreme Court in Asian Techs Ltd.
9
v. Union of India considered the effect of clauses restricting claims for
compensation where the contract is prolonged and held that such clause
only prohibits the Department from entertaining the claim but did not
9
(2009) 10 SCC 354
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prohibit the arbitrator from entertaining it.
10
27. In Simplex Concrete Piles (India) Ltd. v. Union of India , a
coordinate Bench of this Court held that a contractual clause which
takes away the substantive right to claim damages will be hit by Section
23 of the ICA. The same principle was subsequently re-affirmed by this
Court in MBL Infrastructure Ltd. v. Delhi Metro Rail Corporation
11
Ltd. , where, this Court relying upon Simplex (supra) , held that such
a restriction could not operate as an absolute bar to a claim for damages
arising from delay attributable to the employer. The relevant
observations are as follows-
“54. In view of the aforesaid judgment, it is settled law that the
learned Arbitral Tribunal can award damages when the clause of the
contract contemplates that only extension of time can be given as
remedy when there is a delay on the part of the employer. Hence, the
act of awarding the damages to the aggrieved party does not amount
to transgression from the terms of the contract.
55. Furthermore, as per Section 23 of the Indian Contract Act when
there is a Contract which contains clauses that are against the public
policy then such consideration or object of an agreement is
considered unlawful and void.
56. In the instant facts, the impugned award merits interference since
the award has shocked the conscience of the court due to the fact that
despite holding that there is a delay on the part of the respondent and
there has been wrongful termination of the contract by the
respondent. The learned Tribunal has not awarded any damages to
the petitioner. Learned Arbitral Tribunal has wrongly not awarded
any damages to the petitioner.
57. The learned Tribunal failed to appreciate the fact that such a
clause which restricts the right of the party to claim damages is a
prohibitionary clause and is wrongly disentitles the aggrieved party
10
2010 SCC OnLine Del 821
11
2023 SCC OnLine Del 8044
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to claim damages. Such clause is against the public policy since it is
contrary to the fundamental policy of Indian law.
*
61. This Court is of the opinion that, the learned Tribunal has erred
in not awarding the damages to the petitioner despite holding that
the delay is attributable to the respondent. Hence, rendering the
petitioner remediless.
62. The learned Tribunal should have taken looked into the situation
at hand, there is no extension of time which could have been granted
to the petitioner since the contract had terminated. Moreover, the
petitioner never committed any such delay in execution of the
contract as held by the Tribunal itself.
63. In the instant petition, the petitioner has placed on record various
damages suffered by him due to the delay caused by the respondent
in execution of the contract. Such as the delay in handing over of
hindrance free site, delay in delay in issuing goods for construction
drawings, delay in providing decisions and instructions, act or
omissions of other contractor on whose performance, the
performance of the petitioner was dependent, etc.
64. In light of the aforesaid findings, this Court is of the view that
rejection of Claim No. 3 in the Impugned Award by relying upon
Clause 8.3 is erroneous as the said clause pertains to power of
engineer and the nature of claim that can be made before the
engineer. Thus, the same cannot be interpreted to exclude Arbitrator
from its ambit from granting an award of damages or compensating
the petitioner for breach of contract as contemplated by
Section 73of Indian Contract Act.
65. The Hon'ble Supreme Court in Asian (Supra) and this Court
in Simplex Concrete (Supra) has cogently enumerated that keeping
the sanctity of contracts and its bindingness is a matter of public
policy and the same must be given precedence over the entitlement
to breach of the said contract vide clauses rendering no remedy of
damages to the aggrieved party.
66. Thus, the rejection of Claim No. 3 in Impugned Award is liable
to be set aside and the petitioner is entitled for damages due to
inaction and delays by the respondent.”
28. The said view also finds support from the decisions of this Court
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12
in DMRC Ltd. v. J. Kumar , Ministry of Health & Family Welfare v.
13
Nagarjuna Construction Ltd. , Union of India v. Chiraj Stock &
14 15
Security (P) Ltd. and Ircon International Ltd. v. DMRC .
29. In view of the above legal position, the Tribunal’s finding that
Special Conditions 3.18 and 3.52 could not operate as an absolute bar
cannot be faulted with and, according to this Court, does not disclose
any ground warranting interference under Section 34 of the Act. A
perusal of the impugned Award shows that the Tribunal considered the
applicable legal position, the authorities relied upon by the parties and
the material before it, and thereafter proceeded to examine the claims
for compensation on their merits.
30. Apart from the above legal position, a mere reading of the relied
upon clauses also indicates that it does not in any manner curtail the
power of the Arbitrator to award compensation. The adjudication of
such a claim by the Tribunal, therefore, cannot be said to be beyond its
jurisdiction.
31. Accordingly, the contention that the Tribunal ignored the
contractual bar or acted beyond the four corners of the Contract is
rejected.
32. As far as other contention regarding the basis of quantification of
the amount awarded and its linkage with the period of delay attributable
12
2022 SCC OnLine Del 1210
13
2026 SCC OnLine Del 1558
14
2024 SCC OnLine Del 10170
15
2023 SCC OnLine Del 6368
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to the Petitioner is concerned, this Court need not go into the reasons
for the delay or examine afresh which party was responsible for the
delay and for what cause, as there was no specific challenge during the
oral arguments to the Tribunal’s finding as to the period of delay
attributable to either party.
33. The Petitioner also does not dispute that the Tribunal had
examined the evidence in detail and considered the respective causes
due to which project got prolonged. The grievance is restricted to the
fact that, although only 568 days out of the total 1484 days of
prolongation were attributed to the Petitioner, the Tribunal, in the same
breath, awarded compensation without specifically quantifying the loss
referable to those 568 days or taking into account the delay attributable
to the Respondent itself.
34. The Petitioner has also contended that the amount ultimately
awarded was not supported by any reliable evidence. In substance,
according to the Petitioner, once the Tribunal had found the expenditure
claimed by the Respondent to be inaccurate and exaggerated, it could
not have proceeded to award compensation by simply adopting a
random figure as a percentage without disclosing any basis for it. The
adoption of such a percentage, in the absence of supporting material or
reasons, is therefore contended to be a matter of guesswork, rendering
the finding perverse and patently illegal.
35. In the view of this Court, the Petitioner may be correct to some
extent that the Tribunal could have separately considered the period of
delay attributable to each party and quantified the claim with reference
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to the respective periods while assessing the compensation. However,
the endeavour of this Court is not to determine the method which the
Tribunal ought to have adopted. The question is whether the method
actually adopted by the Tribunal was so unreasonable or unsupported
by the material placed on record before the Tribunal so as to render the
impugned Award perverse or patently illegal.
36. On a reading of the impugned Award, this Court does not find
any perversity or patent illegality going to the root of the matter in the
approach adopted by the Tribunal while awarding the Claim 3(a) to (g)
in favour of the Respondent.
37. In para 8.5.7, while assessing the quantum of compensation for
Claim Nos. 3(a) to 3(g), the Tribunal was conscious and specifically
noted the fact that the entire period of prolongation was not attributable
to the Petitioner and that there were delays on the part of the Respondent
as well. Although not couched in so many words, the Tribunal also took
note of the Respondent’s duty to mitigate its loss. Thus, the Tribunal
did not proceed on the footing that every expenditure incurred during
the extended period was recoverable from the Petitioner and did take
into account the Respondent’s own responsibility and obligations.
38. The evidence produced by the Respondent was also examined in
detail by the Tribunal and the amounts claimed were found to be
excessive or exaggerated for several reasons. In relation to site
establishment, it noted that the Respondent had claimed expenses for
235 personnel, although the licence was only for 150 labourers, and
found the claim of Rs.26.77 lakhs to be on the higher side. Similar
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considerations weighed with the Tribunal while dealing with site
expenses and head-office overheads. As regards interest on the
mobilisation advance, the Tribunal did not accept the assumption that
80% progress would have been achieved within 12 months and also
noted that the Respondent could have repaid the advance earlier to
reduce the interest burden.
39. At the same time, the Tribunal was satisfied that, although the
amounts claimed by the Respondent were exaggerated, the prolongation
of the Contract had nevertheless resulted in some additional
expenditure. It noted that the work had been prolonged due to the
hindrances in its execution and that some additional expenditure by the
Respondent on account of such prolongation was, therefore, inevitable.
40. Only after rejecting the quantification of the claim given by the
Respondent and satisfying itself that Respondent incurred additional
expenditure, the Tribunal adopted its own method of quantification of
16
the compensation. In NHAI v. Oriental Pathways , and DMRC v. GYT
17
TPL Joint Venture , it was held that the choice of the method of
quantification lies within the domain of the Arbitral Tribunal and that
merely because another method could have been adopted is no ground
for interference under Section 34, so long as the method adopted by the
Tribunal is reasonable.
18
41. In Airports Authority of India v. URC Construction (P) Ltd. ,
16
2016 SCC OnLine Del 3163
17
2026 SCC OnLine Del 3540
18
2026 SCC OnLine Del 534
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this Court recognised that where a project is prolonged due to reasons
attributable to the employer, the contractor has to keep its resources and
establishment deployed for the extended period, which results in the
contractor incurring additional overhead costs without corresponding
revenue. The Court further observed that such overheads may not
always be capable of precise calculation and may have to be reasonably
assessed by adopting an appropriate method or yardstick, the choice of
which lies within the domain of the Arbitral Tribunal. The relevant
observations are as follows:
Claim No. 4: Compensation for Overheads:
“129. The Petitioner has challenged the award of Rs.
89,18,765/- towards Overhead expenses, on the ground that the
Respondent failed to lead specific evidence, such as salary registers,
vouchers, or books of account, to prove that it incurred actual
expenditure during the extended period. The Petitioner relies on the
principle that damages must be proved and contends that the
Arbitrator's reliance on the CPWD Circular dated 14.12.2007 acts
as a substitute for evidence, which is impermissible.
130. To adjudicate this challenge, it is necessary to appreciate the
commercial nature of construction contracts.
131. Overheads refer to the indirect costs incurred by a
contractor which cannot be directly allocated to a specific
physical item of work, but are necessary for the sustenance of
the business and the project. These include Head Office
administrative costs and Site Office expenses like staff salaries,
rent, electricity, stationary, etc.
132. It is a judicially recognized fact that when a Project is
delayed due to the fault of the Employer, the Contractor is
forced to keep its resources and establishment deployed for a
period longer than anticipated. This inevitably results in the
consumption of overheads without corresponding revenue
generation from the project. As observed by the Supreme Court
in McDermott International Inc. (supra), in the absence of direct
proof of every minute expenditure, the use of standard formulae
is a permissible method to compute these damages.
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133. In the present case, the Arbitrator was faced with the task
of quantifying the loss after having already established
the factum of delay attributable to the Petitioner. Instead of
applying a complex international formula, the Arbitrator
adopted the CPWD Circular, which specifically quantifies
overheads at 7.5%.
134. This Court finds that the approach of the Arbitrator is neither
arbitrary nor perverse as the CPWD Manual and Circulars are
standard reference documents, in government infrastructure
contracts. Adopting a percentage fixed by the CPWD as
a reasonable estimate of overheads, is a plausible method of
quantification.
135. As held in A.T. Brij Paul Singh v. State of Gujarat , (1984) 4
SCC 59, it is not always possible for a contractor to produce
minute proof of every rupee lost due to the prolongation of the
contract. In such cases, a broad evaluation based on industry
norms, is legally sustainable.
136. The award of 7.5% towards overheads is not an
exaggerated figure that would shock the conscience of the Court.
It is a conservative estimate of the administrative costs required
to maintain a construction setup for an additional 477 days .
137. The Petitioner's argument that there was no evidence is,
therefore, misconceived. The evidence was the prolongation of
the contract itself and the industry standard evident from the CPWD
Circular establishing the norm for such costs. The Arbitrator applied
the law of damages by using a reasonable yardstick for
quantification. This falls squarely within the domain of the Arbitral
Tribunal, as the master of facts.
138. Consequently, this Court finds no patent illegality in the
Arbitrator's order to award overhead charges based on the CPWD
Circular.”
42. In the present case also, the Tribunal found that the quantum
claimed by the Respondent was exaggerated and did not reflect the
actual expenditure. It therefore did not accept the figures claimed by the
Respondent and, instead, considered the percentages prescribed under
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19
the Ministry of Road Transport & Highways Standard Data Book and
CPWD schedules for Claim Nos. 3(b) to (g), which have also been
recognised as a basis for assessment in National Highways Authority
20
of India v. IJM-Gayatri Joint Venture , National Highways
21
Authority of India v. DIC-NCC (JV) and Public Works Department
22
(NH Wing) v. GVR Infra Projects Ltd .
43. However, the Tribunal found that the overhead percentages
under the CPWD and MORTH schedules varied for different items and,
therefore, directed the Petitioner to furnish the weighted average of the
overheads. Only when the Petitioner failed to furnish those details, the
Tribunal made its own assessment of quantification. In doing so, it gave
regard to its earlier findings and the material placed before it and the
amount ultimately awarded was worked out to be only 5% for Claim
3(a) and 15% of the aggregate claim and about 1.74% of the tendered
amount for Claim 3 (b) to 3 (g). The relevant reasoning of the Tribunal
is reproduced below-
“Award : Facts of the case do not reveal any major idling of the
Plant-Machinery. Clause 4.7 of the agreement quoted above also
provides for deployment of the P & Mat appropri~te time. Ideally if
this can be achieved, there would be no idling of the machinery and
no losses. However, due to hindrances in execution of the works
resulting into prolongation of the contracts, certain idling of the P &
M resources becomes inevitable. Moreover shifting of the
machinery during the idle/hindrance periods also involves certain
extra expenses. The Claimant needs to be compensated for such
contingencies. As explained above, the claim has been highly
exaggerated and not based on realistic grounds . . Considering the
explanations given under paras (i)to (xi) above and all other facts of
the case as well as various pleadings/submissions made by both the
19
“MORTH” hereinafter
20
2020 SCC OnLine Del 2498
21
2018 SCC OnLine Del 11931
22
2026 SCC OnLine Del 5087
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parties, amount of the compensation is hereby assessed by me @
5.0% of the amount claimed i.e. 5.0% of Rs 9,10,29,000/00 =Rs.
45,51,450/00 which is felt to be very fair and reasonable. Therefore,
I hereby award an amount of Rs 45,51,450/00 in favor of the
Claimant against this part of the claim.
*
Award: Overhead expenses are included in analysis of rates of all
the items incorporated in the tenders. The schedule of quantities of
the present contract includes items based on CPWD schedule as well
as MORTH data book. Percentage of the O.H. expenses are different
in both cases. Even in the case of MORTH data book, different items
have provisions for different percentage of over heads. The
percentage of overhead expenses on the cost of materials & labor for
the schedule items varies from 2.5% to 25.0%. In my order sheet dtd
20.5.2016 I had directed the Respondent to work out weighted
average of the overheads for all items included in the agreement. The
Respondent however could not provide these details. In the absence
of these details, I have assessed amount of compensation against
these sub claims considering a reasonable percentage of the amounts
claimed. While assessing this compensation, I have duly considered
my observations/comments given in the fore-going paras (i) to (vii)
besides all other facts of the case.
As explained above, the claims have been exaggerated and not based
on realistic grounds. With careful consideration of all facts of the
case as well as various pleadings/submissions made by both the
parties, the amount of compensation for these sub claims 3(b), (c),
(d), (e), (n and (g) is hereby assessed by me@ 15.0%(on average
basis for all these sub claims) of the amount of these sub claims as
shown above. The amount @ 15.0% of Rs. 11,36,37,871/00 works
out to Rs 1,70,45,681/00 which is about 1.74% of the tendered
amount of Rs. 97,91,42,871/00. This amount of compensation thus
assessed is felt to be very fair and reasonable. Therefore, I hereby
award an amount of Rs 1,70,45,681/00 in favor of the claimant
against these sub claims.”
44. After a perusal of the reasoning of the Tribunal, this Court is of
the view that the adoption of 5% or 15% cannot be said to be mere
guesswork in dark. The Tribunal rejected the figures claimed by the
Respondent for all Claims, considered the percentages for overhead
items given under the MORTH and CPWD schedules for Claim Nos.
3(b) to (g) and, after taking into account its earlier findings and the
material on record, adopted a figure of 5% or 15% as a reasonable
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overall percentage. The Petitioner, having failed to furnish the weighted
average sought by the Tribunal, cannot now contend that there was no
basis for the calculation. In these circumstances, the percentages
adopted by the Tribunal cannot be said to be either unreasonable or
arbitrary, nor does the figures so adopted shock the conscience of this
Court. It is also recognised in McDermott International Inc. v. Burn
23
Standard Co. Ltd and M/s Cobra Instalaciones Y Servicios, S.A. &
Shyam Indus Power Solution Pvt. Ltd. (JV) v. Haryana Vidyut
24
Prasaran Nigam Ltd. , that some degree of estimation is permissible
in assessing damages where exact computation is not feasible.
45. The same reasoning also addresses the Petitioner’s objection
regarding the absence of a separate day-wise calculation. The Tribunal
had found the claims as presented to be exaggerated and not based on
realistic figures and, therefore, the question of separately calculating the
expenditure for the period attributable to the Petitioner never arose.
46. The Tribunal in its reasoning specifically noted that it arrived at
a figure after considering its earlier finding in regard to delay and
obligation of the respective parties. In these circumstances, this Court
is of the view that the mere absence of a separate calculation of
expenditure for each day of delay cannot, by itself, mean that the
Tribunal awarded compensation for the entire period of prolongation
ignoring that the Respondent was also responsible for prolongation of
the project.
23
(2006) 11 SCC 181
24
2024:DHC:2880-DB
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47. In view of this Court, the reasoning of the Tribunal also satisfies
the settled principles governing the adequacy of reasoning in an arbitral
Award. The principles in this regard have been laid down in Dyna
25
Technology Private Limited v. Crompton Greaves Limited and
reiterated in OPG Power Generation (P) Ltd. v. Enexio Power Cooling
26
Solutions (India) (P) Ltd. . It was held that where the objection is one
of inadequacy of reasons, the Award has to be read as a whole, keeping
in view the nature of the issues before the Tribunal. If the reasoning is
intelligible and the conclusion can be understood from the Award and
the material considered by the Tribunal, the Award cannot be set aside
merely because the reasoning could have been more elaborate.
48. It is also well settled that an arbitral award is also not required to
follow the form of a judgment or set out every step of the Tribunal’s
reasoning, particularly where the Tribunal comprises persons of
27
technical expertise.
49. Applying these principles, the reasoning of the Tribunal, when
read as a whole, is sufficiently clear. It examined the claims, considered
the deficiencies in the evidence, took note of the respective obligations
of the parties during the prolongation period and adopted a reasonable
basis for quantifying the compensation. The conclusion reached by the
Tribunal can, therefore, be understood from the reasons recorded and
the material before it. There is no such gap in reasoning as would render
the conclusion unintelligible or warrant interference under Section 34.
25
(2019) 20 SCC 1
26
(2025) 2 SCC 417
27
Rakesh Kumar & Co. v. Union of India, 2015 SCC OnLine Del 14673
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50. In view of the aforesaid findings, this Court finds no merit in the
Petitioner’s challenge to Claim Nos. 3(a) to 3(g). The Tribunal did not
accept the Respondent’s claim as presented but made its own
assessment based on the material available before it and adopted
reasonable figures. Merely because the Tribunal did not reiterate each
of its earlier findings while recording its final conclusion, that by itself
cannot render the impugned Award perverse or patently illegal. No
ground for interference under Section 34 is, therefore, made out.
51. The challenge to Claims 3(a) to 3(g) is, accordingly, rejected.
52. The present petition is dismissed.
53. Pending application(s), if any, also stand disposed of.
OM PRAKASH SHUKLA, J
AUGUST 19, 2026/ ss
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