M/S Indogreen International vs Delhi Development Authority

$~34
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 12.05.2026
+ O.M.P. (COMM) 448/2023, I.A. 21545/2023 & I.A. 21546/2023
M/S INDOGREEN INTERNATIONAL .....Petitioner
Through: Mr. Debesh Panda and Mr. Piyush
Pandit, Advs.
versus
DELHI DEVELOPMENT AUTHORITY .....Respondent
Through: Mr. Sanjay Vashishtha, Mr.
Siddhartha Goswami, Ms. Geetanjali
Reddy and Mr. Aditya Sachdeva,
Advocates.
CORAM:
HON'BLE MR. JUSTICE AVNEESH JHINGAN
AVNEESH JHINGAN, J. (ORAL)

1. This petition is filed under Section 34 of the Arbitration and
Conciliation Act, 1996 (for short „the Act‟) seeking setting aside of the
arbitral award dated 17.07.2023 (for brevity „the award‟).
2. The brief facts are that the respondent/ Delhi Development Authority
(DDA) invited bids for sale of plots on freehold basis, for construction of a
hotel to provide accommodation for the Commonwealth Games 2010
(CWG). The petitioner/ M/S Indogreen International was the successful
bidder of a plot located at Hari Nagar and on 04.01.2008 a Demand-cum-
Allotment letter was issued. The hotel project was to be made functional
within twenty four months from the date of allotment. Clause 3.14 of the
tender document reproduced below provides for furnishing of performance
security, equivalent to five percent of the bid amount in the form of a bank
guarantee.
Signature Not Verified
Signed By:HONEY
ARORA
Signing Date:14.05.2026
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“Clause 3.14: Performance Security
The construction of the hotel will have to be
completed and made functional within a period
of 24 months from the Date of Allotment-cum-
Demand letter of the land. The intending Tender
purchaser shall be required to deposit the
performance security to the tune of 5% of the
Bid Amount before the time of execution of the
Conveyance Deed, which shall be in the nature
of a bank guarantee in an approved form valid
for 4 years. The institution furnishing such
security shall be subject to the approval of the
same by the Authority. The penalty for delay in
completion of the hotel beyond 24 months shall
be levied as under:

Bank guarantee amount to the extent there is
delay in completion of hotel, will be encashed as
per the schedule mentioned above. The date of
completion will be treated as the date on which
necessary completion certificate is obtained by
the intending allottee/purchaser.”
2.1 On 13.05.2008, a Performance Bank Guarantee (for short „PBG‟) of
Rs.63,05,000/- (Rupees Sixty Three Lakhs and Five Thousand) was
furnished. There was a delay in completion of the hotel and dispute arose
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Signed By:HONEY
ARORA
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between the parties to the lis . The terms and conditions agreed between the
parties provided for dispute resolution through arbitration. A notice under
Section 21 of the Act was issued by the petitioner invoking arbitration. In an
application under Section 17 of the Act, the arbitrator permitted encashment
of PBG but the amount was to be kept in a Fixed Deposit (FDR) with a
nationalized bank. The amount along with interest accrued on FDR shall
abide by the outcome of the arbitration proceedings.
2.2 The petitioner claimed damages of Rs.7,00,00,000 (Rupees Seven
Crores) towards business losses suffered on account of delay in grant of
permissions by the respondent and also the amount realised by the
invocation of the PBG.
2.3 The respondent filed five counter-claims, namely: (i) that the claimant
was liable to pay the PBG amount for breaching the terms and conditions of
the tender; (ii) interest at the rate of 18% per annum on the amount of the
PBG; (iii) recovery of all charges payable by the petitioner in accordance
with law and policy upon completion of the project; (iv) pendent lite and
future at the rate of interest 18% per annum on the counter claims and (v)
litigation and arbitration costs of Rs. 2,00,000/- (Rupees Two Lakhs).
2.4 The claims of the petitioner and the counter-claims nos. (ii) to (v) of
the respondent were rejected and are not in issue in the present petition. The
respondent has chosen not to challenge the award.

3. Learned counsel for the petitioner contends that the award is non-
speaking. Counter-claim no. 1 was allowed without considering the pre-
requisites of Sections 73 and 74 of the Indian Contract Act, 1872 (for short
„the Contract Act‟). The arbitrator erred in holding that the counter-claim is
allowed for the reason that the petitioner failed in claim seeking damages for
Signature Not Verified
Signed By:HONEY
ARORA
Signing Date:14.05.2026
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business loss.
4. Per contra , the petitioner is a partnership firm but the claim was filed
without proper authorisation and therefore had no locus standi to invoke the
arbitration proceedings. The submission is that on this ground alone, the
award of the counter claim is liable to be upheld.
4.1 The argument is that once the claim seeking refund of the PBG was
rejected the natural consequence thereof was that the respondent was
entitled to retain the amount realized upon encashment of the PBG.

5. Heard learned counsel for the parties at length and no issue other than
those noted above was pressed.
6. The only pin-pointed issue is whether the counter-claim of the
respondent that the petitioner was liable to pay the amount of the PBG for
breach of terms of the tender document could have been allowed solely on
the basis of the rejection of claims of the petitioner for damages towards
business loss and for refund of the PBG.
7. It is an admitted fact that the hotel was not completed within the
stipulated period of twenty four months. The PBG was encashed in terms of
the interim order passed under Section 17 of the Act and the claim of the
petitioner seeking refund of the PBG was rejected.
8. The counter claim made is unambiguous that on account of breach of
the terms of the tender document the PBG was liable to be invoked and the
amount realised is to be retained.
9. There cannot be a dispute with the proposition that for a claim under
Sections 73 and 74 of the Contract Act, the twin conditions are required to
be fulfilled; first, breach of the contractual conditions and second the actual
loss or damage suffered or proof that it was not possible to prove the actual
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ARORA
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damage suffered.
10. The foundation of the counter-claim i.e., breach of the terms of the
tender document by the petitioner was not dealt with and no finding in that
regard is recorded. The impugned award is bereft of reasons for allowing
counter-claim no. 1 and falls in the teeth of Section 31(3) of the Act
whereby the arbitrator is obligated to pass a reasoned award.
11. The counter-claim awarded without determining the breach of
contract and the actual loss or damage suffered, is contrary to Sections 73
and 74 of the Contract Act, is against public policy and the law laid down by
the Supreme Court in Kailash Nath Associates v. DDA , (2015) 4 SCC 136 :
“43. On a conspectus of the above authorities, the law on
compensation for breach of contract under Section 74 can be
stated to be as follows:
43.1. Where a sum is named in a contract as a liquidated
amount payable by way of damages, the party complaining of
a breach can receive as reasonable compensation such
liquidated amount only if it is a genuine pre-estimate of
damages fixed by both parties and found to be such by the
court. In other cases, where a sum is named in a contract as a
liquidated amount payable by way of damages, only
reasonable compensation can be awarded not exceeding the
amount so stated. Similarly, in cases where the amount fixed
is in the nature of penalty, only reasonable compensation can
be awarded not exceeding the penalty so stated. In both
cases, the liquidated amount or penalty is the upper limit
beyond which the court cannot grant reasonable
compensation.
43.2. Reasonable compensation will be fixed on well-known
principles that are applicable to the law of contract, which are
to be found inter alia in Section 73 of the Contract Act...”

Signature Not Verified
Signed By:HONEY
ARORA
Signing Date:14.05.2026
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11.1 The Division Bench of this court in Tower Vision India (P) Ltd. v.
Procall (P) Ltd ., 2012 SCC OnLine Del 4396 held:
“16. Consequence for breach of the contract are provided in
Chapter VI of the Indian Contract Act, 1872, which contains
three sections, namely, section 73 to section 75. As per
section 73 of the Indian Contract Act, the party who suffers
by the breach of contract is entitled to receive from the
defaulting party, compensation for any loss or damage
caused to him by such breach, which naturally arose in usual
course of things from such breach, or which the two parties
knew when they make the contract to be likely the result of
the breach of contract. This provision makes it clear that such
compensation is not to be given for any remote or indirect
loss or damage sustained by reason of the breach. The
underlying principle enshrined in this section is that a mere
breach of contract by a defaulting party would not entitle the
other side to claim damages unless the said party has in fact
suffered damages because of such breach. Loss or damage
which is actually suffered as a result of breach has to be
proved and the plaintiff is to be compensated to the extent of
actual loss or damage suffered. When there is a breach of
contract, the party who commits the breach does not eo
instanti, i.e., at the instant incur any pecuniary obligation, nor
does the party complaining of the breach becomes entitled to
a debt due from the other party. The only right which the
party aggrieved by the breach of the contract has is the right
to sue for damages. No pecuniary liability thus arises till the
court has determined that the party complaining of the breach
is entitled to damages. The court in the first place must
decide that the defendant is liable and then it should proceed
to assess what the liability is. But, till that determination,
there is no liability at all upon the defendant. The courts will
give damages for breach of contract only by way of
compensation for loss suffered and not by way of
punishment. The rule applicable for determining the amount
of damages for the breach of contract to perform a specified
work is that the damages are to be assessed at the pecuniary
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Signed By:HONEY
ARORA
Signing Date:14.05.2026
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amount of difference between the state of the plaintiff upon
the breach of the contract and what it would have been if the
contract had been performed and not the sum which it would
cost to perform the contract, though in particular cases the
result of either mode of calculation may be the same. The
measure of compensation depends upon the circumstances of
the case. The complained loss or claimed damage must be
fairly attributed to the breach as a natural result or
consequence of the same. The loss must be a real loss or
actual damage and not merely a probable or a possible one.
When it is not possible to calculate accurately or in a
reasonable manner, the actual amount of loss incurred or
when the plaintiff has not been able to prove the actual loss
suffered, he will be, all the same, entitled to recover nominal
damages for breach of contract. Where nominal damages
only are to be awarded, the extent of the same should be
estimated with reference to the facts and circumstances
involved. The general principle to be borne in mind is that
the injured party may be put in the same position as that he
would have been if he had not sustained the wrong.”

(emphasis supplied)

12. The Supreme Court in Gayatri Balasamy v. ISG Novasoft
Technologies Ltd. , (2025) 7 SCC 1 held that while an arbitral award cannot
be modified under Section 34 of the Act, a severable part of the award may
be set aside. The relevant paragraphs are quoted below:
“32. In the present controversy, the proviso to Section
34(2)(a)(iv) is particularly relevant. It states that if the
decisions on matters submitted to arbitration can be separated
from those not submitted, only that part of the arbitral award
which contains decisions on matters non-submitted may be
set aside. The proviso, therefore, permits courts to sever the
non-arbitrable portions of an award from arbitrable ones.
This serves a twofold purpose. First, it aligns with Section 16
of the 1996 Act, which affirms the principle of kompetenz-
kompetenz , that is, the arbitrators' competence to determine
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ARORA
Signing Date:14.05.2026
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their own jurisdiction. Secondly, it enables the Court to sever
and preserve the “valid” part(s) of the award while setting
aside the “invalid” ones. [The “validity” and “invalidity”, as
used here, does not refer to legal validity or merits
examination, but validity in terms of the proviso to Section
34(2)(a)(iv) of the 1996 Act.] Indeed, before us, none of the
parties have argued that the Court is not empowered to
undertake such a segregation.
33. We hold that the power conferred under the proviso to
Section 34(2)(a)(iv) is clarificatory in nature. The authority
to sever the “invalid” portion of an arbitral award from the
“valid” portion, while remaining within the narrow confines
of Section 34, is inherent in the Court's jurisdiction when
setting aside an award.
34. To this extent, the doctrine of omne majus continet in se
minus —the greater power includes the lesser—applies
squarely. The authority to set aside an arbitral award
necessarily encompasses the power to set it aside in part,
rather than in its entirety. This interpretation is practical and
pragmatic. It would be incongruous to hold that power to set
aside would only mean power to set aside the award in its
entirety and not in part. A contrary interpretation would not
only be inconsistent with the statutory framework but may
also result in valid determinations being unnecessarily
nullified.
13. The grant of counter-claim of the respondent by a non-reasoned award
is severable, not dependent or intricately connected to other claims.
14. For the reasons recorded above, the impugned award being
unreasoned is against public policy and is set aside qua the counter-claim
no.1. All pending applications are also disposed of.


AVNEESH JHINGAN, J
MAY 12, 2026/Pa/vs
Signature Not Verified
Signed By:HONEY
ARORA
Signing Date:14.05.2026
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