STATE PROJECT DIRECTOR, vs M/S. BSR INFRATECH INDIA LTD.,

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COMAP No. 487 of 2024


ST
RESERVED ON 21 JULY 2026

IN THE HIGH COURT OF KARNATAKA AT BENGALURU


TH
DATED THIS THE 16 DAY OF SEPTEMBER, 2026

PRESENT

THE HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE

AND

THE HON'BLE MRS. JUSTICE K.S. HEMALEKHA

COMMERCIAL APPEAL NO. 487 OF 2024

BETWEEN:

1. STATE PROJECT DIRECTOR
RASHTRIYA MADHYAMIKA
SHIKSHA ABHIYAN
NEW PUBLIC ANNEX BUILDING
N.T. ROAD, K.R. ROAD
BENGALURU - 560 001
…APPELLANT






(BY SRI KIRAN VASANTH RON, ADDITIONAL ADVOCATE GENERAL
A/W SRI K.S. HARISH, GOVERNMENT ADVOCATE)



AND:

1. M/S. BSR INFRATECH INDIA LTD.,
TH
NO.851, D BLOCK, 15 CROSS
SAHAKARNAGAR, BENGALURU - 560 092
REPRESNTED BY ITS DIRECTOR
SRI J. JAGPATHI CHOUDHARY

2. SRI JUSTICE K.N. KESHAVANARAYANA
SOLE ARBITRATOR,
ARBITRATION AND CONCILIATION CENTRE
BENGALURU (DOMESTIC AND INTERNATIONAL )
KANJIA BHAVANA, RACE COURSE ROAD
BENGALURU - 560 001
…RESPONDENTS


Digitally
signed by K
P SWETHA
Location:
High Court
of Karnataka

(BY SRI ZUFIKIR SHAFI, ADVOCATE FOR C/R-1)

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COMAP No. 487 of 2024


THIS COMMERCIAL APPEAL IS FILED UNDER SECTION
13(1A) OF THE COMMERCIAL COURTS ACT, 2015 READ WITH
SECTION 37(1)(c) OF THE ARBITRATION AND CONCILIATION ACT,
1996 PRAYING TO CONSEQUENTLY SET ASIDE THE JUDGMENT
DATED 18.09.2024, PASSED IN COM.A.P NO.50/2024 ON THE FILE
OF HON'BLE LXXXIV ADDITIONAL CITY CIVIL AND SESSIONS
JUDGE, AT BANGALORE & ETC.

THIS COMMERCIAL APPEAL HAVING BEEN HEARD AND
RESERVED FOR JUDGMENT, COMING ON FOR PRONOUNCEMENT
THIS DAY, JUDGMENT WAS PRONOUNCED AS UNDER:

CORAM: HON'BLE MR. VIBHU BAKHRU ,CHIEF JUSTICE
and
HON'BLE MRS. JUSTICE K.S. HEMALEKHA

C.A.V. JUDGMENT
(PER: HON'BLE MR. VIBHU BAKHRU ,CHIEF JUSTICE)

1. The appellant, the State Project Director, Rashtriya
Madhyamika Shikshana Abhiyana, has filed the present appeal
under Section 13(1A) of the Commercial Courts Act, 2015 [ CC Act ]
read with Section 37(1)(c) of the Arbitration and Conciliation Act,
1996 [ A&C Act ], impugning a judgment dated 18.09.2024
[ impugned judgment ] passed by the learned LXXXIV Additional
City Civil and Sessions Judge, Commercial Court, Bengaluru
(CCH-85) [ Commercial Court ] in Com.A.P.No.50/2024. The
appellant had filed the said petition under Section 34 of the A&C

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COMAP No. 487 of 2024


Act seeking setting aside of an arbitral award dated 10.11.2023
[ impugned award ] rendered by the learned Sole Arbitrator
[ Arbitral Tribunal ], in A.C.No.105/2021. The learned Commercial
Court found no ground to interfere with the impugned award and
accordingly passed the impugned judgment dismissing the petition.
2. Respondent No.1, M/s BSR Infratech India Ltd. [ BSR ], was
the claimant before the Arbitral Tribunal and the appellant was the
respondent. In terms of the impugned award, the Arbitral Tribunal
partly allowed BSR's claims and directed the appellant to pay a
`
total sum of 2,50,28,834/- (Rupees two crores fifty lakhs twenty-
eight thousand eight hundred and thirty-four only) together with
future interest at 9% per annum from the date of the award till
`
payment, comprising 1,59,75,852/- towards unproductive
overhead charges, as against the claim of ` 2,32,55,404/- (Claim
No.7(a)); and ` 90,52,982/- towards loss of expected profit, as
against the claim of ` 2,32,55,404/- (Claim No.8); and ` 2,00,000/-
towards costs (Claim No.12), as against the claim of ` 12,00,000/-.
3. The present appeal is one of a batch of five appeals,
(COMAP Nos.484/2024 to 488/2024), filed by the appellant against
orders passed by the learned Commercial Court dismissing the
appellant's petitions under Section 34 of the A&C Act,

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COMAP No. 487 of 2024


(Com.A.P.Nos.48/2024 to 52/2024) assailing separate Arbitral
Awards rendered by the Arbitral Tribunal constituted of a Sole
Arbitrator in respect of the contract of five packages awarded to
M/s. BSR. The arbitral awards rendered are substantially in similar
terms and the issues involved in the said five appeals are also
materially similar.
PREFATORY FACTS
4. Rashtriya Madhyamika Shikshana Abhiyana [ RMSA ] is a
centrally sponsored scheme launched in the year 2009-10 by the
Ministry of Human Resource Development, Government of India,
for enhancing access to, and the quality of, secondary education.
The Government of Karnataka [ GoK ] implemented the scheme
through the appellant and took up 2,024 civil works under 77
packages between 2009 and 2015. The said civil works involved
construction of new school buildings, Adarsha Vidyalayas [ model
schools ] and girls' hostels, and strengthening and upgradation of
existing schools at an aggregate cost of ` 1,645.70 crores. The
scheme has since been integrated with Samagra Shikshana
Karnataka in 2018-19.

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COMAP No. 487 of 2024


5. On 24.09.2012, tenders were invited on a package basis
through the e-procurement portal in respect of works spread over
thirty districts of the State, for a total of 52 packages. BSR emerged
the successful bidder in respect of five packages. The present
dispute pertains to Package A-3 - Construction of Adarsha
Vidyalayas and Girls' Hostels at Kudligi, Hospet, H.B. Halli and
Sandur Blocks, and Girls' Hostels at Siraguppa, Bellary Blocks of
Bellary District [ the subject package ] - comprising four Adarsha
Vidyalayas and six Girls' Hostels. After BSR was declared as the
lowest bidder (L1), the parties entered into negotiations, held on
20.12.2012, 21.01.2013 and 13.02.2013, pursuant to which BSR
agreed to a contract price of ` 32,58,20,153/-.
6. By Letter of Acceptance dated 18.03.2013 bearing No.
RMSA/CW/AV-GH/Bellary/2012-13 (Ex.C2), the appellant accepted
BSR's offer for the said contract price in respect of the subject
package, and called upon BSR to furnish the requisite security
deposit.
7. The parties executed a Construction Agreement [ the
Agreement ] dated 15.05.2013 (Ex.C3) for execution of the works
under Package A-3. Clause 4 of the Agreement stipulates that the
Letter of Acceptance, the Contract Data, the Conditions of

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COMAP No. 487 of 2024


Contract, and the Special Conditions of Contract, among other
documents, formed an integral part of the Agreement.
8. The notice to proceed with the work was issued on
17.05.2013 (Ex.C4) and the stipulated period of completion was
twenty months therefrom, the tender completion date being
16.01.2015. During execution, additional quantities and EIRL items
were required to be executed. Upon approval of the competent
authority, the parties entered into a Supplementary Agreement
dated 24.03.2017 for the additional work and cost.
9. There was delay in execution of the works and they were not
completed within the stipulated period. BSR attributed the delay,
inter alia , to (i) delay in handing over sites; (ii) delay in supply of
drawings; (iii) delay in approval of work slips and EIRL items; (iv)
delay in release of payments; and (v) scarcity of materials and
labour on account of the scattered nature of the work sites. BSR
invoked the price adjustment clause of the Conditions of Contract
and raised its claim towards price adjustment; none of the said bills
were paid. The appellant, on the other hand, contended that no
price adjustment clause was applicable to the Agreement in
respect of the subject works.

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COMAP No. 487 of 2024


10. In the meantime, under Government Order No. ED 49 MCD
2016 dated 16.11.2016, the GoK, while granting administrative
approval to a revised project cost, directed (i) an audit by the
Karnataka Institute of Public Auditors [KIPA] into the causes of and
responsibility for the delay; and (ii) an enquiry into the issue of price
adjustment by a committee headed by an officer of the rank of
Additional Chief Secretary. The committee reported that the price
adjustment clause incorporated in the tender documents for the
RMSA civil works of 2009-10 and 2010-11 was not duly approved
and was not binding on the GoK.
11. The said Government Order was impugned by three
contractors, namely, M/s Jampana Constructions Pvt. Ltd., M/s
NCC Ltd., and M/s KBR Infratech Pvt. Ltd., in W.P.
Nos.38613/2018, 35594/2018 and 34990/2018 respectively. By
orders dated 25.02.2019, a learned Single Judge of this Court
quashed the Government Order dated 16.11.2016 and restrained
the State from acting upon KIPA's reports and suggestions,
observing that whether the price adjustment clause was
incorporated with approval or inserted unauthorisedly is a disputed
question of fact, and relegated the petitioners to arbitration. The
intra-court appeals were disposed of by a Division Bench of this

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COMAP No. 487 of 2024


Court observing that the parties would be governed by the terms of
the contract entered into by them in respect of the various
packages awarded by the State.
12. By its letter dated 11.03.2019 (Ex.C39), BSR set out the
causes of delay and its claims and sought favourable consideration
thereof, and sought to invoke the dispute resolution mechanism
under Clause 23 of the Conditions of Contract read with Clause 4
of the Special Conditions of Contract; and by legal notice dated
08.05.2019 (Ex.C40), it invoked the arbitration agreement,
attributing breach of contract to the appellant.
13. The appellant responded by reply dated 11.06.2019
(Ex.C41), contending, inter alia , that the reference to arbitration
was premature in view of the pendency of the intra-court writ
appeals.
14. BSR filed an application under Section 11 of the A&C Act,
being C.M.P.No.261/2019, seeking appointment of an Arbitrator.
This Court allowed the same by an order dated 05.11.2020 and a
Sole Arbitrator to adjudicate the disputes between the parties.
15. In the meanwhile, by Government Order No.EP 89 YYK 2020
dated 30.09.2020 (Ex.R1), the GoK, adopted the recommendations

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COMAP No. 487 of 2024


of the Technical Advisory Committee in supersession of the KIPA
report, ordered that (i) for computing extension of time and penalty,
each work site in a package be treated as a separate unit; (ii) the
administration be held responsible for delays occasioned by
causes beyond the contractor's control; and (iii) price adjustment
be allowed in respect of the 25 packages whose tender conditions
contained the price adjustment clause. Admittedly, the sums due to
BSR were released only thereafter and were received in full before
29.03.2021. By an order dated 13.01.2021, extension of time was
granted to BSR without levy of penalty.
ARBITRAL PROCEEDINGS
16. BSR filed its Statement of Claims before the Arbitral Tribunal
claiming an amount of ` 80,03,19,726/- (Rupees eighty crores three
lakhs nineteen thousand seven hundred and twenty-six only) under
twelve heads, together with interest at 24% per annum from the
date of the claim petition till payment, and costs. The summary of
claims as set out in the statement of claims is reproduced below:
Claims Particulars Amount (Amt. in Rs.)
Claim No.1 Payment of Price 4,53,24,186
Adjustment/Escalation Bill
Claim No.2 Payment of equitable
enhanced rates executed
beyond tender completion
period.
Claim No.3 Payment of equitable
2,91,75,505

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COMAP No. 487 of 2024


enhanced rates executed
beyond Tender Completion
Period for extra Items.
Claim No.4 Payment of equitable
enhanced rates executed
beyond Tender Completion
Period for quantities of
125%
Claim No.5 Refund of Excess Royalty 19,81,068
Charges
Claim No.6 Payment towards idle men,
machinery and
establishment during original
tender period.
7,47,95,600
Claim No.7(a) Payment of unproductive 2,32,55,404
overhead charges.
Claim No.7(b) Payment of additional 56,37,903
overhead charges.
Claim No.8 Payment towards loss of
expected profit on the
balance work as on original
tender completion date.
2,32,55,404
Claim No.9(a) Loss of expected profit due
to non-receipt of profit by
tender completion period.
11,62,77,020
Claim No.9(b) Loss of expected profit due
to non-receipt of profit by
actual completion period.
2,73,72,950
Claim No.10 Payment towards additional
Bank Guarantee charges
beyond original agreement
period
5,98,370
Claim No.11 Payment towards interest on
claim amount calculated up
to 31.12.2020 at the rate of
24%.
45,08,47,944
Claim No.12 Payment of Rs. 12,00,000/-
(Rupees Twelve Lakhs
Only) towards Cost of
Litigation.
12,00,000
TOTAL 80,03,19,726

17. It was BSR's case that after it was declared the successful
bidder, it had reduced its rates by factoring in the price escalation
clause and the economies of scale. BSR claimed that the appellant
did not hand over the sites within the stipulated period despite
various requests, and delayed approval of drawings, work slips and

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COMAP No. 487 of 2024


EIRL items, thereby preventing BSR from completing the contract
within time and prolonging the execution of the works. BSR alleged
that the appellant also withheld amounts due to it, which compelled
BSR to seek reference of the disputes to arbitration.
18. The appellant contended that no price adjustment clause
was applicable to the Agreement in respect of the subject works,
and that, in any event, the notice inviting tender required the price
variation clause to be treated as deleted, such that the appellant
was not bound by it. The appellant further contended that the
delay, if any, had been suitably compensated by extension of time
granted without imposition of penalty, and that the claims,
`
aggregating 80,03,19,726/-, were fictitious, unsubstantiated and
beyond the scope of arbitration.
19. On the basis of the pleadings between the parties, the
Arbitral Tribunal framed the following issues:
"1. Whether Claimant proves that non
completion of the works under the contract
within the stipulated period was for the
reasons solely attributable to Respondent,
resulting in breach of contract by
Respondent, as such, the delay in
completion of the works was solely
attributable to Respondent?

2. Whether for the reasons set out in SOC
which were beyond the control of Claimant,

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COMAP No. 487 of 2024


he was prevented from completing the entire
scope of work within the scheduled contract
period?

3. Whether Respondent proves that the
delay in completion of the works under the
contract within the original period stipulated
under the contract was solely attributable to
Claimant?

4. Whether Respondent proves that as the
requirements of Clause 38.4 of Conditions of
Contract have not been complied with by
Claimant, none of the claims put-forth in
SOC is tenable?

5. Whether the Claimant is entitled for
payment of amounts claimed under various
heads as put-forth under claim Nos.1 to 10
of SOC?

6. Whether the Claimant is entitled for
payment towards past interest on the
amounts claimed up to 31-12-2020 at 24%
PA as claimed under claim No.11 of SOC?

7. Whether Claimant is entitled for current
and future interest at 24% PA on the amount
claimed?

8. Whether Claimant is entitled for cost of
this arbitral proceeding?

9. To what order and award the parties are
entitled to?"

20. The Arbitral Tribunal, after examining the evidence and
materials placed on record, found that the non-completion of the
contract within the stipulated period was, in substantial part, for

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reasons attributable to the appellant, while also finding that BSR
was partly responsible in certain respects. The Arbitral Tribunal
further rejected the appellant's contention that non-compliance with
Clause 38.4 of the Conditions of Contract rendered the claims not
tenable. However, on a consideration of the material placed on
record, the Arbitral Tribunal did not find merit in BSR's claim for
price adjustment and rejected the same in its entirety.
21. The Arbitral Tribunal partly allowed Claim Nos. 7(a), 8 and
12. The Arbitral Tribunal also awarded future interest and costs but
rejected the remaining claims, being Claim Nos.1 to 6, 7(b), 9(a),
9(b), 10 and 11, in their entirety.
22. The dispositive part of the impugned award is set out below:
"The claims of Claimant as put forth in
Statement of Claim are allowed in part as
under:

(1) Claim Nos.7(a) is allowed in part in a
sum of Rs.1,59,75,852/- as against claim of
Rs.2,32,55,404/-;

(2) Claim No.8 is allowed in part in a sum of
Rs.90,52,982/- only as against the claim of
Rs.2,32,55,404/-;

(3) Respondent is directed to pay to
Claimant a total sum of Rs.2,50,28,834/- as
per Sl.No.(1) and (2) above together with
future interest at the rate of 9% per annum
from the date of this Award till the date of
payment;

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COMAP No. 487 of 2024



(4) Claim No.12 is allowed in part in a sum
of Rs.2,00,000/- only as against claim of
Rs.12,00,000/-. Respondent is directed to
pay to Claimant this amount within a period
of 3 months from the date of this award
failing which the said amount shall carry
interest at the rate of 9% per annum from
the date of award till the date of payment;

(5) Claim Nos.1 to 6, 7(b), 9(a), 9(b), 10
and 11 are rejected in their entirety;

(6) Claimant shall pay requisite stamp duty
on this award payable as per Karnataka
Stamp Act.
With the pronouncement and publication of
Award, this Arbitral Proceeding stand
terminated as per Section 32(1) of the Act."

23. The impugned award was assailed by the appellant before
the learned Commercial Court in Com.A.P.No.50/2024 under
Section 34 of the A&C Act. The learned Commercial Court, by the
impugned judgment dated 18.09.2024, found no infirmity
warranting interference with the impugned award and dismissed
the petition, giving rise to the present appeal.
24. As noted above, the learned Arbitral Tribunal had partly
allowed Claim No.7(a), which was towards unproductive overhead
charges. The learned Arbitral Tribunal had noted that there were no
averments made in the claim statement to support the said claim.
Further, even in the affidavit tendered by BSR's witness (P.W.1)

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COMAP No. 487 of 2024


had not stated anything in this regard. Paragraph 121 of the
impugned award reads as under:
"121. Respondent in its SO has contended
that these claims are beyond the original
tender period and the overhead charges
are inbuilt for the finished items of works
and that there is no provision in the
agreement for payment of unproductive
overhead charges beyond the original
tender period, therefore, these claims are
beyond the scope of arbitration as such
Claimant is not entitled for these claims."

25. Although the statement of claims was bereft of any
particulars or the methodology used for quantification of Claim
No.7(a), the learned Arbitral Tribunal partly allowed the claim by
applying the Hudson Formula and assuming that the overheads
charges constituted 10% of the contract price. It is material to note
that BSR had made no such claim. The learned Arbitral Tribunal
relied on the cross-examination of P.W.1 during which a suggestion
was put to the witness that the overhead charges were included in
the item rates. In absence of any averments justifying the said
claim and any evidence led by BSR in this regard, the award for
unproductive overhead imposed is unsustainable.
26. The learned Arbitral Tribunal also allowed the claim for loss
of profits (Claim No.8), inter alia , referring to the decision in the

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COMAP No. 487 of 2024


case of the Supreme Court in A.T.Brij Paul Singh and Others v.
1
State of Gujarat . On the said basis, the learned Arbitral Tribunal
accepted that the expected profit was 10% of the contract price.
However, in the present case, the contract was fully performed and
it is evident that BSR had realized the profit as included in the
contract price. Notwithstanding the same, the learned Arbitral
Tribunal awarded 10% per annum of the expected profits included
in the value of work executed after the execution date. BSR had
made no claim on such basis. It had led no evidence as to the
quantum of loss of profits. We find no basis for awarding 10% p.a
of the assured profits as loss of profits for the prolongation of
contract. In this view, the award against claim No.8 is
unsustainable.
27. Claim No.12 is for costs. The award of costs, is premised on
BSR succeeding in Claim Nos.7 and 8. Since the award against
claim Nos.7 and 8 is set aside, the award against claim No.12 is
also unsustainable.
28. The impugned award is in the similar terms as the arbitral
award which was subject matter of challenge in COMAP
No.54/2025. The said appeal was allowed by this court by an order

1

(1984) 4 SCC 59

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COMAP No. 487 of 2024


dated 18.08.2026. The reasons set out in the said order fully cover
the issues involved in the present appeal as well. For the sake of
brevity, the same are not repeated in this order but may be read as
a part of the present order as well.

29. In view of the above, the impugned award insofar as it
awards claim Nos.7(a), 8 and 12 and interest thereon, is set aside.

30. The appeal is allowed in the aforesaid terms.

Sd/-
(VIBHU BAKHRU)
CHIEF JUSTICE


Sd/-
(K.S. HEMALEKHA)
JUDGE






KPS