M/S Richa Construction Co. vs M/S N.B.C.C. (I) Ltd.

$~82 & 83
* IN THE HIGH COURT OF DELHI AT NEW DELHI

% Date of decision: 04.05.2026

+ O.M.P. (COMM) 481/2018
M/S RICHA CONSTRUCTION CO. .....Petitioner
Through: Ms. Madhumita Bhattacharjee
& Mr. Keshav Bansal, Advs.
versus

M/S N.B.C.C. (I) LTD. .....Respondent
Through: Ms. Kanika Singh, Adv.

+ O.M.P. (COMM) 355/2019
NBCC INDIA LTD. .....Petitioner
Through: Ms. Kanika Singh, Adv.
versus

RICHA CONSTRUCTION LTD. .....Respondent
Through: Ms. Madhumita Bhattacharjee
& Mr. Keshav Bansal, Advs.
CORAM:

HON'BLE MR. JUSTICE AVNEESH JHINGAN

AVNEESH JHINGAN, J. (ORAL)
1. These two petitions are filed under Section 34 of the Arbitration
and Conciliation Act, 1996 (for short „the Act‟) against the award
dated 28.06.2018.
2. The brief facts are that the Naval Dockyard, Mumbai awarded a
contract for construction of technical buildings for central machine
shop at Naval Dockyard, Mumbai to the respondent/ National
Building Construction Corporation Limited (for short „NBCC‟) for an
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O.M.P. (COMM) 481/2018 & O.M.P. (COMM) 355/2019 Page 1 of 9
Signed By:HONEY
ARORA
Signing Date:07.05.2026
17:15:23

amount of Rs.5,96,37,170/-. The NBCC invited bids for sub-
contracting the work awarded. The bid of the petitioner- M/s Richa
Construction Company (for brevity „RCC‟) was accepted and on
09.09.1999, the letter of intent awarding the contract at
Rs.5,54,60,367/-. was issued. The work was to be completed by
08.07.2001 i.e., within twenty-two months but was actually completed
on 22.11.2002. RCC wrote letters dated 06.06.2004 and 20.06.2005
for release of the final payments and amount of Rs.6,27,79,826/- was
received on 31.03.2007. Vide communication dated 23.07.2007, RCC
raised an issue of wrong deduction of the Work Contract Tax (for
short „WC Tax‟) and by letter dated 13.08.2007 sought payment of
Rs.12,00,000/- for extra work done. The clause 14 of the agreement
provided for dispute resolution through arbitration. NBCC appointed
the sole arbitrator on 26.04.2011, the arbitrators were substituted and
the present arbitrator was appointed by the NBCC on 23.12.2016. The
proceedings culminated in the impugned award. Two preliminary
objections, claim raised was beyond the period of limitation and
beyond the jurisdiction of the tribunal were decided against the
NBCC. The RCC made twelve claims. The claims and the outcome is
tabulated below:

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Signed By:HONEY
ARORA
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3. Learned counsel for the RCC argues that the arbitrator without
appreciating the contentions and considering the evidence on record
erred in holding that the RCC had agreed to a further rebate of 1.35%
on the initial bid. It is contended that the case set up that the tampering
is writ large in the document relied upon to prove that the further
rebate of 1.35% was agreed is not dealt by the arbitrator.
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Signed By:HONEY
ARORA
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3.1 The grievance is that the security deposit for the project was not
refunded upon completion of the work and was unilaterally adjusted
towards another project thereby entitling the RCC to interest on the
security deposit.
3.2 The submission is that the arbitrator erred in not considering
trade circular dated 14.03.2000 (Document-34) to the effect that WC
tax is not to be deducted from the sub-contractor.
3.3 The contention is that claim for refund of Rs. 1,25,000/- paid
for procurement of steel windows, which were not supplied due to a
subsequent change in decision of getting to aluminium windows
instead of iron and steel was wrongly rejected.
3.4 Lastly, it is pleaded that the arbitrator erred in awarding partial
amounts awarded towards claims for underutilization of labour,
overheads, and centering and shuttering.
4. Per contra, the claim nos. 7 & 9 have been illegally allowed in
absence of evidence of actual loss suffered or a case being set up that
it was not possible to prove the actual loss. The submission is that the
arbitrator departed from the settled principles under Section 73 of the
Indian Contract Act, 1872 (for short „the Contract Act‟) and instead
relied upon personal knowledge and experience to compute the
amounts.
4.1 The contention is that even delay attributable to the NBCC was
not proved but, on sheer guesswork the arbitrator attributed sixty
percent of delay to NBCC.
4.2 It is argued that the claim for balance payment of the final bill
was wrongly allowed despite the RCC having failed to submit the
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Signed By:HONEY
ARORA
Signing Date:07.05.2026
17:15:23

final bill. The grievance is that the arbitrator instead of relying on the
evidence on record to quantify the balance amount payable, if any
devised its own method of quantification that to without confronting it
to the NBCC and giving a reasonable opportunity to object to it.
4.3 It is canvassed that the claims raised by the RCC were barred by
limitation and that this objection was not adjudicated in accordance
with law.
4.4 Lastly, the award is defended to the extent the claims of the
RCC were rejected and only partially allowed.
5. The claim nos. 1 & 2 before the arbitrator pertaining to payment
of the balance amount of the final bill and rebate for deviation
respectively, are intrinsically linked. RCC objected that no further
rebate of 1.35% was agreed to, rather NBCC relied on
forged/tampered letter dated 03.08.1999 by inserting „1‟ before „0.35‟
percent. The original document remained in possession of NBCC and
was not produced during the arbitral proceedings. RCC relied upon
Exhibit C-2, C-6 & C-9 wherein the RCC agitated the issue of rebate
of 1.35% whereas NBCC denied receipt of the the exhibits relied upon
by RCC stating them to be forged letters.
6. The arbitrator without discussing the issues or appreciating the
evidence on record accepted the case set up by NBCC that RCC gave
further rebate of 1.35%. The conclusion for claim no. 2 reflects
absence of proper reasoning and is reproduced below:
“The contention of the Respondent is correct as per the
record filed before the AT and as such, the claim of the
Claimant is unjustified. Accordingly, I reject the same.”

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Signed By:HONEY
ARORA
Signing Date:07.05.2026
17:15:23

7. Section 31(3) of the Act mandates a reasoned award. The law is
well settled that the requirement of Section 31(3) of the Act is not a
mere formality. The reasoning in an appropriate case can be implied
upon a fair reading of the award and the documents referred to therein.
Reference is to the decision of the Supreme Court in Dyna
Technologies Pvt. Ltd. v. Crompton Greaves Ltd. (2019) 20 SCC 1
wherein it was held as under:
“34. The mandate under Section 31(3) of the Arbitration
Act is to have reasoning which is intelligible and
adequate and, which can in appropriate cases be even
implied by the courts from a fair reading of the award
and documents referred to thereunder, if the need be.
The aforesaid provision does not require an elaborate
judgment to be passed by the arbitrators having regard
to the speedy resolution of dispute.”

8.1 In Som Datt Builders Ltd. v. State of Kerala (2009) 10 SCC
259 it was held as follows:
“25. The requirement of reasons in support of the award
under Section 31(3) is not an empty formality. It
guarantees fair and legitimate consideration of the
controversy by the Arbitral Tribunal. It is true that the
Arbitral Tribunal is not expected to write a judgment
like a court nor is it expected to give elaborate and
detailed reasons in support of its finding(s) but mere
noticing the submissions of the parties or reference to
documents is no substitute for reasons which the
Arbitral Tribunal is obliged to give......”
(emphasis supplied)
8. The issue striking at the root of all the claims made is, what was
the bid amount quoted by the RCC but this was dealt with in a shoddy
manner. This very issue has a fall out on the claim made by the RCC
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Signed By:HONEY
ARORA
Signing Date:07.05.2026
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for payment of the balance amount due of the final payment. The
arbitrator without considering that whether the bid of RCC vis-a-vis
NBCC was less by 7% or 5.73% inspite of taking note of the fact that
the final bill was not issued by RCC, proceeded to compute the
payable amount by reducing 7% from the amount received by the
NBCC.
9. The claims of underutilization of labour force, overheads and
shuttering, were allowed without adducing proof of actual loss by the
RCC and without establishing a case that it was not possible to prove
the actual loss suffered. The damages awarded are contrary to the
settled principles as per Section 73 of the Contract Act.
10.1 The Supreme Court in Unibros v. All India Radio , 2023 SCC
OnLine SC 1366 opined that for claiming damages under Section 73
of the Contract Act actual loss has to be proved. The relevant
paragraph of Unibros v. All India Radio (supra) is as under:
“19. The law, as it should stand thus, is that for claims
related to loss of profit, profitability or opportunities to
succeed, one would be required to establish the following
conditions : first, there was a delay in the completion of
the contract; second, such delay is not attributable to the
claimant; third, the claimant's status as an established
contractor, handling substantial projects; and fourth,
credible evidence to substantiate the claim of loss of
profitability. On perusal of the records, we are satisfied
that the fourth condition, namely, the evidence to
substantiate the claim of loss of profitability remains
unfulfilled in the present case.”
(emphasis supplied)
10. Before proceeding further it would be relevant to reproduce the
pleadings in the statement of claims vis-a-viz these two claims.
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ARORA
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“Claim No.7 Underutilization of Labourforce

Claimant mobilized adequate labour force for
completion of contracted work within the contracted
period of completion. Completion of work prolonged
for no any fault on part of Claimant. Claimant suffered
financial loss of Rs. 78,91,152.40 on this account.
Claimant need not have suffered said financial loss, if
Claimant would have been allowed to complete the
work unhindered within contracted period of
completion. Claimant is entitled to be compensated on
this account. Claimant, therefore, claims
Rs.78,91,152.40 from respondent on this account and
prays the Hon'ble Sole Arbitrator to be pleased to
Award Rs. 78,91,152.40 payable to the Claimant by the
Respondent.

Claim No.9 Underutilization of Overheads
Claimant engaged adequate staff for home supervision
of contracted work within the contracted period of
completion. Completion of work prolonged for no any
fault on part of Claimant. Claimant suffered financial
loss Rs. 39,45;568.00 on this account Claimant need
not have suffered said financial loss, if he would have
been allowed to complete the work unhindered within
contracted period of completion. Claimant is entitled to
be compensated on this account. Claimant, therefore,
claims Rs.39,45,568.00 from Respondent on this
account and prays the Hon'ble Sole Arbitrator to be
pleased to Award Rs. 39,45,568.00 payable to the
Claimant by the Respondent.”

11. The RCC had neither adduced evidence to substantiate the
actual loss suffered nor pleaded that the actual loss cannot be proved.
The arbitrator despite of the settled legal position for awarding
damages under Section 73 of the Contract Act and the law laid down
by the Supreme Court, awarded damages based on personal
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Signed By:HONEY
ARORA
Signing Date:07.05.2026
17:15:23

knowledge and experience. The claim awarded is against the
provisions of the Contract Act, and is violative of statutory provisions.
12. In view of the above discussion, the award is in the teeth of
Section 31(3) and Section 28(3) of the Act and is against public
policy, consequently is set aside.
13. The other issues raised to challenge the award need not be gone
into.
14. The petitions are allowed. The impugned award is set aside.

15. The parties shall be at liberty to avail fresh arbitration in
accordance with law.


AVNEESH JHINGAN, J
MAY 04, 2026/ ‘JK’

Reportable:- Yes
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O.M.P. (COMM) 481/2018 & O.M.P. (COMM) 355/2019 Page 9 of 9
Signed By:HONEY
ARORA
Signing Date:07.05.2026
17:15:23