Full Judgment Text
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment Reserved on: 26.11.2025
Judgment pronounced on: 08.01.2026
Judgment uploaded on: As per digital signature~
+ FAO (COMM) 109/2023
Bharat Heavy Electricals Limited ..... Appellant
Versus
Delkon India Pvt. Ltd.
..... Respondent
Advocates who appeared in this case
For the Appellant : Ms. Mani Gupta, Mr. Pranav Malhotra
and Mr. Udwipt Verma, Advocates
For the Respondent : Mr. K.S. Mahadevan and Ms. Swati
Bansal, Advocates
CORAM:
HON'BLE MR. JUSTICE V. KAMESWAR RAO
HON'BLE MR. JUSTICE VINOD KUMAR
JUDGMENT
VINOD KUMAR, J.
1. This appeal under Section 37 of the Arbitration and
Conciliation Act, 1996 (‘the Act’, hereinafter) has been filed with
the following prayers:
“(a) Set aside the Impugned Order dated 09.02.2023
passed by the Ld. District Judge in OMP (COMM) 63/21
between Bharat Heavy Electricals Limited vs. Delkon
India Pvt. Ltd. and/or
Signature Not Verified
Digitally Signed By:PRAMOD
KUMAR VATS
Signing Date:09.01.2026
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(b) Set-aside the Award dated 02.06.2021 passed by the
Ld. Sole
Arbitrator and/or
(c) Pass such other or further order(s) as this Hon'ble
Court may deem fit and proper in the facts and
circumstances of the case.”
2. For sake of convenience, the appellant would be also
referred to as ‘BHEL’ and the respondent would also be referred
to as ‘Delkon’.
3. Vide impugned award dated 02.06.2021, the arbitrator
rejected all claims of BHEL except claim no.11 which was partly
allowed. The Arbitrator however, partly allowed the counter
claims of Delkon. Aggrieved by this award, BHEL filed
objections under Section 34 of the Act before learned District
Judge (Comm-02), South District, Saket Court, New Delhi (in
short ‘District Judge’) who dismissed the same vide impugned
judgment dated 09.02.2023.
DISPUTE
4. The appellant-BHEL invited bids for execution of erection,
testing, and commissioning of two 210MW boilers at Feroz
Gandhi Thermal Power Project, Unchahar, Uttar Pradesh. The
respondent's (Delkon) bid was successful and accordingly, a
letter of intent (hereafter “LOI”) dated 21.06.1996 was issued by
the appellant. This was followed by a Contract Agreement
No.50/96 dated 12.11.1996, which contained arbitration Clause
33. The total value of works awarded to the respondent was
Rs.3,13,20,000/-. The stipulated period for the completion of this
work was 29 months, commencing 15 days subsequent to the
date of the issuance of the LOI. According to Clause 4 of the
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KUMAR VATS
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Contract, respondent was to immediately get in touch with the
Construction Manager of the appellant at the work site for further
instruction regarding the commencement of the work in order to
complete the work in time, keeping in view Clause 52 of the
contract which refers to the Time Schedule.
5. Dispute arose, when as per appellant-BHEL, the
respondent-Delkon failed to deploy agreed manpower as per the
schedule and deployment chart. Several letters were issued by the
appellant to the respondent regarding inadequate Tools & Plants
(in short T&P) alongside poor progress of respondent’s work,
subsequently, leading to the contract being terminated by the
appellant on 15.01.1997, relying on Clause 25.3 of the contract
i.e.-
“25.3 To terminate the contract after due notice and
forfeit the Security Deposit and recover the loss sustained
in getting the balance work done through other agencies
in addition to liquidated damages in the event of:
a. Contractor's continued poor progress.
b. Withdrawal from or abandonment of the work
before completion of the work.
c. Corrupt act of the contractor.
d. Insolvency of the contractor.
e. Persistent disregard of the instructions of BHEL.
f. Assignment, transfer, subletting of the contract
work without BHEL's written permission.
g. Non-fulfilment of any contractual obligations”
LOCAL COMMISSIONER
6. A petition OMP No.08/1997 dated 20.01.1997 was filed by
respondent-Delkon under Section 9 of the Act before High Court
of Delhi praying that appellant-BHEL be restrained from
encashing Delkon’s Bank Guarantees.
Signature Not Verified
Digitally Signed By:PRAMOD
KUMAR VATS
Signing Date:09.01.2026
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7. Another petition i.e. OMP No.37/1997 dated 01.03.1997
was filed by the respondent to seek the release of its T&P from
the work site held under appellant’s control. Via interim order
dated 04.03.1997, the High Court appointed a Local
Commissioner for joint inspection of the work site. Subsequently,
the Local Commissioner after inspecting the work site submitted
its report on 01.04.1997.
APPOINTMENT OF ARBITRATOR BY BHEL
8. The respondent-Delkon invoked the arbitration clause on
02.04.1997. And an award dated 06.07.2001 was passed
accordingly in the favour of the respondent. This award was set
aside by this Court in OMP No.317/2001 as it was observed that
the arbitrator was highly biased and determined to pass an award
against the appellant. Thereafter, upon a request made by the
appellant on 12.08.2009, the Sole Arbitrator was appointed by
General Manager, BHEL vide its order dated 14.08.2009 as per
arbitration clause of the agreement thereby initiating fresh
arbitration proceedings to adjudicate upon the claims and counter
claims arising out of the dispute. The Arbitrator was acceptable
to both the parties. Appellant-BHEL, being the claimant in the
arbitration proceedings, put forth Claims no. 1 to 17.
Respondent-Delkon (being the counter claimant in the
arbitration) put forth 22 claims.
9. Both parties proceeded to file their respective claims and
counter claims during the course of the arbitral proceedings.
Signature Not Verified
Digitally Signed By:PRAMOD
KUMAR VATS
Signing Date:09.01.2026
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STATEMENT OF CLAIM
10. Claimant-BHEL raised the following claims:
CLAIM
NO.
BRIEF PARTICULARS AMOUNT
CLAIMED
(in Rs.)
Loss and damage of plant materials
1.
issued to Delkon.
3,05,215
Handling charges of plant materials
2.
issued to Delkon and not erected.
59,720
Towards non-vacation of the
premises at site by the Delkon
(calculated from February 1997 to
June 1997).
25,000
3.
Towards dismantling of temporary
buildings, structures constructed at
site by Delkon.
94,900
4.
Towards loss of manpower deployed
in completing formalities of closing
the contract.
1,58,500
5.
Towards conducting the re-
measurement of work executed at
site.
33,200
6.
Towards additional expenses
7.
incurred.
23,93,500
Claim towards additional
expenditures incurred due to
deployment of BHEL manpower and
site establishment beyond
contractual period.
18,78,000
8.
9. Towards liquidated damages. 31,32,000
Towards loss on account of using
tools and plants for the extended
period.
18,34,290
10.
Towards issue of material on
11.
chargeable basis.
51,300
Towards expenses for processing of
re-award of the contract for balance
work.
84,500
12.
Signature Not Verified
Digitally Signed By:PRAMOD
KUMAR VATS
Signing Date:09.01.2026
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Towards interest on deficit turnover
of BHEL due to delay in execution
of work by M/s Delkon (India) Pvt.
Ltd.
3,47,430
13.
Claim towards extension of bank
14.
guarantee in favour of M/s NTPC.
3,38,810
Claim towards loss of goodwill. 2,00,000
15.
STATEMENT OF COUNTER CLAIM
11. Counter claimant-Delkon raised the following counter
claims:
CLAIM
NO
BRIEF PARTICULARS AMOUNT
(in Rs.)
Cost of transportation of erection
materials from BHEL Stores yard to
Site
30,526
1.
Cost for Pre-assembly Works
2. 49,384
completed for the Erection Materials
Being the cost for Pre-assembly
works completed & inspected, DPT
& Root Welding completed
3.
12,198
4. Cost of the Erection Work done 1,77,202
Cost for the completion Work done
5. 2,07,260
of erected material
Cost for the completion work for the
balance tonnages i.e. 65.728 M.T. for
which only Welding & Grouting is
balance
6.
52,846
Towards illegal withholding of the
equipment by the Claimants from
21.01.97 to 31.12.97 pursuant to
High Court Order in OMP 37/97 @
Rs. 20,0001- per day for 345 Days
7.
69,00,000
Cost for the construction of the Site
8. 76,000
Office and Stores Sheds
Signature Not Verified
Digitally Signed By:PRAMOD
KUMAR VATS
Signing Date:09.01.2026
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Cost for the construction of Staff
9. 1,12,480
Quarters
Cost for the construction of Electrical
10. 96,500
Booth
Cost towards the registration with
11. 23,225
Sales Tax Authority
12. Cost for the supply of Raw Materials 1,84,725
13. Mobilisation cost for equipments 6,04,800
14. Total Cost and Depreciation Value 6,21,062
15. Demobilisation Cost 4,48,000
16. Cost for taking Insurance Policy 22,500
Overall Profits @ 10% of the
17. 31,32,000
Contract Value of Rs.3,13,20,000/.
P.V.C. Claims Bill No. C-79/PVC/01
18. 20,270
dt. 23.09.97
Release of Security Deposit (Invoked
19. 7,86,750
Bank Guarantee)
Loss of Goodwill to the Company
due to illegal termination of the
Contract
20.
60,00,000
Refund of amount of Earnest Money
Deposit deposited in cash with
Claimants' Regional Manager
(services)
21.
20,000
(i) Interest @ 24% per annum on
Rs. 1,26,777,28/- (On all Claims
above except Cl No.7) for the
period 21.01.97 i.e. date of illegal
termination of the Contract till the
date of submission of Counter
Claim i.e. 31.01.2014 for 6216
days & future interest realisation
of payment
(ii) Interest @ 24 % on the Claim
5,18,16,410
&
2,66,34,000
22.
of Rs. 69,00,000/- on Item No. 7
as above from 01.01.98 to
31.01.2014 for 5871 days &
future interest till realisation of
payment
Signature Not Verified
Digitally Signed By:PRAMOD
KUMAR VATS
Signing Date:09.01.2026
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TOTAL CLAIM 9,80,28,138
ISSUES
12. The learned arbitrator after considering the submissions of
the parties framed the following issues:
S.No. ISSUES
1 Whether there is a breach of contractual terms of the
contract on part of Respondent.
2 Whether Claimant (BHEL) is entitled to receive any
amount towards the Claims filed before the Arbitrator.
3 Whether either party is entitled for pendent lite and
future interest on the amount awarded and, if so, at
what rate.
4 Whether there is a breach of Contract on part of
Claimant leading to its termination.
5 Whether there is any malafide on part of the Claimant
to terminate the Contract.
6 Whether unilateral and arbitrary adjustment of Rs.
20,000/- as one-time earnest money deposited by the
Respondent (Delkon) with the services section of
BHEL Noida not pertaining to this contract in any
manner is illegal and unethical.
7 Whether Respondent (Delkon) is entitled to receive
amounts from Claimant (BHEL) as per Respondents
Claim No. 1 to Claim No. 22 filed before the
Arbitrator.
Issue no. 1 to 3 is related to the claimant-BHEL’s claims while
Issue no. 4 to 7 pertained to the counter claimant-Delkon’s
claims.
FINDINGS OF THE ARBITRATOR
13. Parties led their respective evidences. After hearing, the
Arbitrator passed the impugned award. For the sake of brevity,
Signature Not Verified
Digitally Signed By:PRAMOD
KUMAR VATS
Signing Date:09.01.2026
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FAO (COMM) 109/2023 Page 8 of 38
we shall confine the findings of the Arbitrator to counter claim
no. (s) 1, 3, 5, 7, 13, 15, and 22 because these are the specific
claims that were challenged by the appellant-BHEL both in the
instant Appeal as well as in the petition filed before the learned
District Judge under Section 34 of the Act.
14. Under counter claim no. 1, relating to transportation of un-
erected material, the Arbitrator held that transportation of un-
erected material was an activity incidental to ‘work done’ and not
part of overheads. The Arbitrator in absence of any alternate
method available to him to fix the rate for the cost of
transportation of un-erected material, accepted the rate adopted
by the respondent-Delkon of 10% of the contract rate as per
Clause 57(IA)(i) of the contract. The contract rate as per the
Letter of Intent was stated to be Rs.2700/- per MT (metric tonne).
Therefore, the rate of Rs.270/- per MT was applied to the un-
erected material of 113.058 MT. Hence, the Arbitrator awarded
Rs.30,526/- for counter claim no.1.
15. In similar manner while dealing with Counter Claim no.3.
concerning the cost for pre-assembly and pre welding completed
for 12.908 MT, the Arbitrator relied upon Clause 57(1A)(i) and
fixed the rate of 12% and awarded Rs.4,182/–, considering that
only part welding had been completed.
16. With respect to counter claim no.5, dispute was over extent
of erection and alignment as conflicting measurements were
argued by parties. In face of no conclusive evidence to determine
the quantity, the Arbitrator decided to take the mean of the
Signature Not Verified
Digitally Signed By:PRAMOD
KUMAR VATS
Signing Date:09.01.2026
19:06:59
FAO (COMM) 109/2023 Page 9 of 38
parties’ respective quantities i.e. 103.379 MT. Since grouting was
admittedly not fully completed, only 47% of the contract rate i.e.
Rs.1,269/- per MT was held payable and therefore the Arbitrator
awarded Rs.1,31,188/- to Delkon.
17. Regarding the counter claim no.7, pertaining to wrongful
withholding of T&P, the Arbitrator held that the BHEL’s
disobedience of the High Court’s order contributed to the
withholding of the Delkon’s T&P. The Arbitrator rejected the
respondent’s per-day rate of Rs.20,000/- and applied
depreciation-based approach. The Arbitrator assessed the value
of withheld T&P at Rs. 40,00,000, and annual withholding
charges at 25%, which amounts to Rs.10,00,000 per year. As per
the findings, for 210 days, the respondent-Delkon’s T&P was
withheld by BHEL. Therefore, withholding charges were
calculated at Rs.5,75,342/-.
18. Under counter claim no(s).13 and 15, relating to
mobilisation and demobilisation costs of setting up machinery
and manpower at work site, the Arbitrator found that substantial
mobilisation and subsequent demobilisation had already been
carried out. Arbitrator found that the early termination prevented
the respondent-Delkon from recovering such one-time overhead
expenditure. He cited Clause 25.5 of the Contract and fixed
overheads at 5% of the total contract value of Rs.3,13,20,000/-.
The clause 25.5 of the contract is reproduced below:
“25.5 To claim compensation for losses sustained
including BHEL’s supervision charges and overheads in
case of termination of contract and to levy liquidated
Signature Not Verified
Digitally Signed By:PRAMOD
KUMAR VATS
Signing Date:09.01.2026
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FAO (COMM) 109/2023 Page 10 of 38
damages for delay in completion of work, at the rate of
1/2% of the contract value per week of delay or part
thereof subject to a ceiling of 10% of contract value.”
19. This amounted to approximately Rs.16 lakhs, and that 65%
of the overheads having been consumed, a sum of Rs.10,52,800/-
was decided towards mobilization and demobilization.
20. Counter claim no.22 pertained to the respondent’s demand
for interest at the rate of 24% per annum on all counter claim
(except no.7) from 15.01.1997 i.e., date of termination of the
contract to the date of actual payment. The Arbitrator discussed
the plea of BHEL that Clause 17 of the contract constitutes a
binding prohibition against the award of interest on all sums “ due
under the contract ” and therefore no interest can be awarded on
any of the counter claims. The Arbitrator partly agreed with this
submission and drew a distinction between the counter claims
which fell under the contract and the counter claims which arise
out of the illegal termination of the contract. It was held that in
counter claims falling in first category, the interest cannot be
awarded, whereas in counter claims falling in second category,
the Arbitrator had discretion to award pre reference and pendete
lite interest.
ARBITRAL AWARD
21. The Arbitrator inter alia found that the termination of the
contract dated 15.01.1997 was not as per the terms of the
Contract and hence, illegal. He awarded respondent-Delkon a
sum of Rs.29,42,065/- along with post-award interest of 14.15%
Signature Not Verified
Digitally Signed By:PRAMOD
KUMAR VATS
Signing Date:09.01.2026
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FAO (COMM) 109/2023 Page 11 of 38
per annum after 4 weeks from the date of the award. He also
awarded pre reference and pendente lite interest computed at
14.28% per annum amounting to Rs.66,50,560/-. The Arbitrator
summarised the award as under:
Counter
Claim
No.
Amount
accepted
for
Award in
Rupees
Date of
cause of
action from
which
interest is
payable
Period of
interest
up to
date of
Award in
Days
Amount of
Interest @
14.28% per
annum in
Rupees
Remarks
1 to 6 221993 - - 0 Awarded
amount being
as per terms of
contract,
Interest is not
payable
7 575342 01.01.1998 8551 1924768 Awarded
amount not as
per terms of
contact.
Interest period
considered
from the day
next to
removal of
T&P in
December1997
8 to 10 284980 21.01.1997 8895 991735 Awarded
amount not as
per terms of
contract.
Interest period
considered
from date of
stopping work
11 200 21.01.1997 8895 696 Awarded
amount not as
per terms of
contact.
Interest period
Signature Not Verified
Digitally Signed By:PRAMOD
KUMAR VATS
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considered
from date of
stopping work
12 0 - - 0 -
13 & 15 1052800 21.01.1997 8895 3663761 Awarded
amount no as
per terms of
contact.
Interest period
considered
from date of
stopping work.
14 0 - - 0 -
16 0 - - 0 -
17 0 - - 0 -
18 0 - - 0 -
19 786750 - - 0 Awarded
amount being
as per terms of
contract,
Interest is not
payable
20 0 - - 0 -
21 20000 21.01.1997 8895 69600 Awarded
amount not as
per terms of
contract.
Interest period
considered
from date of
stopping work
TOTAL 2942065 6650560 Rounded off to
nearest Rupee
e) Post award interest: Section 31 (7)(b) of the Arbitration and
Conciliation Act 1996 provides “A sum directed to be paid b y an arbitral
Signature Not Verified
Digitally Signed By:PRAMOD
KUMAR VATS
Signing Date:09.01.2026
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FAO (COMM) 109/2023 Page 13 of 38
award shall, unless the award otherwise directs, carry interest at the rate of
two per cent higher than the current rate of interest prevalent on the date of
award, from the date of award to the date of payment”. Accordingly, the
Tribunal awards, along with the awarded amount of Rs.29,42,065/-,
payment of simple interest on this amount for the period starting from
01.07.2021 i.e. after 4 weeks from the rate of award to the date of actual
payment. Present PLR of SBI being 12.15% per annum, rate of interest
applicable shall be 2% higher i.e. 14.15% per annum.
25. Each party shall bear its own costs of litigation.
26. Conclusion:
a) Termination of the subject contract is not as per the terms of the
contract and, hence, illegal. However, there is no malafide intention on the
part of Claimant.
b) Considering all claims and counter claims, Claimant shall pay the
awarded amount of Rs.29,42,065/- to Respondent, after adjustment of all
recoveries.
c) Claimant shall pay to Respondent an amount of Rs.66,50,560/-
towards interest pendte lite computed at rate of interest as 14.28% per
annum.
d) Claimant shall pay simple interest @ 14.15% on the awarded
amount of Rs.29,42,065/- for the period starting from 01.07.2021 i.e. after 4
weeks from the ate of award to the date of actual payment.
e) No taxes of any kind shall be paid on the awarded amount. However,
income tax rules, as prevailing on date, shall apply.
f) Each party shall bear its own costs of litigation .”
APPELLANT-BHEL CHALLENGES ARBITRAL AWARD
UNDER SECTION 34 OF THE ACT
22. The appellant-BHEL filed a petition under Section 34 of
the Act challenging the arbitral award before the learned District
Judge only on following counter claims:
Amount
Particulars
Claim
Counter
(in Rs.)
Claim
Towards transportation of un-erected
material transported
30,526
No.1
Signature Not Verified
Digitally Signed By:PRAMOD
KUMAR VATS
Signing Date:09.01.2026
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Claim
Towards cost of pre-assembly and
part welding completed
4,182
No.3
Claim
Towards costs of erection and
alignment work done
1,31,188
No.5
Claim
Towards illegal withholding of plant
and equipment
5,75,342
No.7
Towards cost of mobilization and
demobilization of tools and plant,
equipment and manpower
10,52,800
Claim
No.13&15
Claim 66,50,560
Towards interest
No.22
FINDINGS OF LEARNED DISTRICT JUDGE
23. The learned District Judge after hearing both the parties
held the amounted awarded against counter claim no. 1, 3, 5, 7,
13 and 15 to be reasonable and justified.
24. On the issue of interest i.e. counter claim no.22, learned
District Judge considered the plea of BHEL on Clause 17, which
barred interest. The respondent had contended that the bar
applied only to moneys due under the contract and not to
damages arising from illegal termination of contract. Learned
District Judge held that the Arbitrator correctly distinguished
between the two. Learned District Judge agreed with the
Arbitrator, who granted interest only on counter claims relating
to losses from wrongful termination and rejected interest on
claims falling strictly under the contract. Learned District Judge
upheld the reasoning of the Arbitrator holding that the
contractual bar was inapplicable to damages. The challenge to
interest was therefore held to be meritless.
25. Accordingly, learned District Judge dismissed the petition
under section 34 of the Act.
Signature Not Verified
Digitally Signed By:PRAMOD
KUMAR VATS
Signing Date:09.01.2026
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FAO (COMM) 109/2023 Page 15 of 38
SUBMISSIONS OF PARTIES IN THE PRESENT APPEAL
UNDER SECTION 37 OF THE ACT
26. BHEL has challenged the impugned arbitral award and the
impugned judgment on the ground that the award on the counter
claim no.1, 3, 5, 7, 13 and 15 was passed without any evidence. It
is argued by learned Counsel for the appellant-BHEL that learned
District Judge has ignored the fact that the Arbitrator has
misapplied clause 57.3 (IA)(i) of the contract as the same does
not deal with breakup of the cost but instead pertains to the
payment milestone. Regarding counter claim no.5, the plea of the
appellant is that learned District Judge ignored the fact that sole
Arbitrator, instead of relying on the admitted figure of 53.231
MT, averaged the two figures as given by the parties without any
reason and reached to a wrong conclusion. Regarding counter
claim no.7, 13 and 15, it is argued by learned counsel for the
appellant that learned District Judge ignored the fact that the
Arbitrator has passed the award on this counter claim without any
evidence. Further it is argued that on counter claim no. 22,
learned District Judge has wrongly agreed with the Arbitrator
who categorised two types of counter claims, one under the
contract and others, due to illegal termination of contract, in
awarding the pre reference and pendente lite interest on the
awarded amounts of various counter claims, which comes out to
be Rs.6650560/-. The case of appellant is that this award of
interest is in violation of clause 17 of the contract which prohibits
Signature Not Verified
Digitally Signed By:PRAMOD
KUMAR VATS
Signing Date:09.01.2026
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FAO (COMM) 109/2023 Page 16 of 38
payment of interest to the contract on any amount due to the
contractor.
27. It is argued that learned Counsel for the appellant that the
Learned District Judge has erred in not considering the case of
Ahluwalia Contract (India) Ltd. V. Union of India reported in
( 2017) SCC OnLine Del 8234, wherein it has been held that it is
incumbent on any party claiming damages to establish the loss
with reasonable certainty.
28. It is further argued by learned Counsel for the appellant
that the Learned District Judge has not considered the judgments
of National Projects Construction Corporation Ltd. V. Ambika
Engineers and consultants reported in (2018) SCC OnLine Del
11608 and India Yamaha Motor Pvt Ltd. V. Divya Ashish Jamwal
reported in (2019) SCC OnLine Del 6912 wherein it has been
held that loss of profits cannot be awarded merely upon a surmise
or a conjecture. Learned Counsel for the appellant has further
relied upon a judgment of the Supreme Court of India in
Associate Builders v. Delhi Development Authority (2015) 3 SCC
49 , in which it was held that an award would be illegal if it is
based on no evidence at all.
29. Learned Counsel for the respondent-Delkon has countered
the aforesaid submissions advanced on behalf of the appellant
submitting that where there is evidence of loss on account of
breach of contract but there is absence of evidence for calculating
compensation, the Arbitrator can proceed on guess work as to the
quantum of compensation to be allowed in given circumstances.
Signature Not Verified
Digitally Signed By:PRAMOD
KUMAR VATS
Signing Date:09.01.2026
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On counter-claim no.1, it is submitted that the appellant does not
dispute that 113.58 MT material was transported from appellant’s
store to the site and therefore, the Arbitrator has awarded
reasonable amount towards this counter claim. So far as the
application of clause 57.2 (1A)(i) of the contract is concerned, it
is submitted that Arbitrator has rightly adopted it as a standard
for determining the amount of counter claim no. 3. Regarding the
counter claim no. 5, it is submitted that in case of dispute of the
amount of work done towards erection and alignment, the
Arbitrator was fully justified in calculating the mean of the
figures provided by the Local Commissioner and the appellant.
Regarding counter claim no. 7, 13 and 15, it is argued that
reasonable compensation has been awarded. As regards the
counter claim no. 22, it is argued that the Arbitrator has rightly
distinguished between two categories of the counter claims in
awarding the pre reference and pendente lite interest.
30. We would like to analyse and discuss the submissions of
parties on counter claim no.1, 3 and 5 under one head, counter
claim no. 7 under second head and counter claim no. 13 and 15
under a third head. Counter claim no. 22 would be discussed
under a separate head. But before that, we would like to discuss
law on the question of awarding damages and compensation.
LAW ON AWARDING COMPENSATION/DAMAGES
WHERE NO EVIDNECE HAS BEEN LED TO PROVE
THE SAME
Signature Not Verified
Digitally Signed By:PRAMOD
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31. At outset, we must acknowledge that the scope of
interference of this court hearing appeal under Section 37 is
limited. A concurrent finding of Arbitrator and the court dealing
with objection under Section 34 of the Act should not be
interfered with unless the award is patently illegal and perversity
goes to the root of the award. In Associate Builders Vs. Delhi
Development Authority, (2015) 3 SCC 49, cited by learned
Counsel for the appellant, the Supreme Court had held that a
decision is perverse and irrational if no reasonable person would
have arrived at the same conclusion. It is settled law that where
the finding is based on no evidence, or an arbitral tribunal takes
into account something irrelevant to the decision which it arrives
at; or ignores vital evidence in arriving at its decision, such
decision would necessarily be perverse.
32. The gist of the other judgments cited by learned Counsel
for the appellant is also that the party claiming damages should
establish the loss with reasonable certainty and that the profit of
losses cannot be awarded merely upon a surmise or conjectures.
33. However, it has been a consistent view of the courts that
when loss of a party is proved, the arbitrator would be justified in
awarding the damages on the basis of honest guess work and
with rough and ready method. The Supreme Court in
Construction and Design Services Vs. Delhi Development
Authority, (2015) 14 SCC 263 held as under:
“ 2. The question raised for our consideration is when and
to what extent can the stipulated liquidated damages for
breach is when and what to be in the nature of penalty in
the absence of evidence of actual loss and to what extent
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the stipulation be taken to be the measure of compensation
for the loss suffered even in the absence of specific
evidence. The further question is whether burden of
proving that the amount stipulated as damages for breach
of contract was penalty is on the person committing
breach.
XXXXXXXX
14. There is no dispute that the appellant failed to execute
the work of construction of sewerage pumping station
within the stipulated or extended time. The said pumping
station certainly was of public utility to maintain and
preserve clean environment, absence of which could result
in environmental degradation by stagnation of water in
low lying areas.... In these circumstances, loss could be
assumed, even without proof and burden was on the
appellant who committed breach to show that no loss was
caused by delay or that the amount stipulated as damages
for breach of contract was in the nature of penalty. Even if
technically the time was not of essence, it could not be
presumed that delay was of no consequence. Thus, even if
there is no specific evidence of loss suffered by the
respondent-plaintiff, the observations in the order of the
Division Bench that the project being a public utility
project, the delay itself can be taken to have resulted in
loss in the form of environmental degradation and loss of
interest on the capital are not without any basis.
15. Once it is held that even in the 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 the highest limit is
stipulated instead of a fixed sum, in the 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
the party committing breach, as already observed.
XXXXXXXX
17. Applying the above principle to the present case, it
could certainly be presumed that delay in executing the
work resulted in loss for which the respondent was entitled
to reasonable compensation. Evidence of precise amount
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of loss may not be possible but in the 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 guesswork 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
.
18 . Applying the above principle to the present case, it
could certainly be presumed that delay in 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. "
34. Relying upon the aforesaid judgment, Division Bench of
this Court in Cobra Instalaciones Y Servicios, S.A. & Shyam
Indus Power Solution Pvt. Ltd. (J.V.) Vs. Haryana Vidyut
has reiterated the
Prasaran Nigam Ltd., MANU/DE/2796/2024
principle as under:
“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
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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 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 and Others vs Government of Andhra
Pradesh, MANU/SC/0020/1977: (1977) 3 SCC 590; Delhi
Development Authority vs Anand and Associates,
MANU/DE/0197/2008; Good Value Engineers vs M.M.S.
Nanda , Sole Arbitrator and Anr., MANU/DE/4668/2009:
2009:DHC:5231; National Highway Authority of India vs
ITD Cementation India Ltd., MANU/DE/0264/2010 :
2010:DHC:404; Mahanagar Gas Ltd. vs Babulal
Uttamchand and Co., MANU/MH/1550/2012; Bata India
Ltd. vs Sagar Roy, MANU/WB/0720/2014].”
35. In our opinion, there may be three situations. First, there is
no evidence of any loss to a party raising a claim. In such
situation arbitrator cannot presume any loss and award
compensation. Second, where there is evidence of loss as well as
evidence on quantum of damages. This would be an ideal
situation in awarding damages and compensation. Third is the
situation where there is evidence of loss but either there is
meager evidence or absence of evidence in support of claim of
damages. In such situation the arbitrator can use rough and ready
method by using a practical guess work to determine the damages
and compensation. But such compensation should be reasonable
in the sense that in given situation no man of prudence would call
it excessive. The third situation occurs in the present case and
therefore, while exercising very limited jurisdiction under
Section 37, we have only to see as to whether the damages/
compensation awarded to Delkon is reasonable or not.
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COUNTER CLAIM NO.1, 3 AND 5
36. On Counter claim no. 1, Learned Counsel for the appellant
has argued that learned District Judge has ignored the fact that no
evidence was led by the respondent-Delkon for claiming rate of
Rs.270/- per MT of the unerected material and therefore, it is
argued that award of Rs.30,526/- is not justified.
37. It is required to the noted here that the appellant has not
challenged that respondent had transported 113.058 MT
unerected material from the store of appellant to the site, which is
also clear from the report of Local Commissioner. The Arbitrator
adopted the formula for calculating the amount as per clause 57.3
(IA)(i) of the contract i.e. pro-rata basis. Accordingly, 10% of
contract rate of Rs.2700/- i.e. Rs.270/- per MT had been charged
and therefore, the Arbitrator held that cost of transportation of
113.058 MT of material works out to Rs.30,526/-.
38. Learned District Judge in the impugned order observed
that when the fact of transportation of material by the respondent-
Delkon is not in dispute, the respondent is entitled to be
compensated for the cost so incurred and therefore, the only
questions remain about quantifying the cost. Learned District
Judge agreed with the Arbitrator that this cost works out to
Rs.30526/-. We are of the opinion that this is bare minimum
amount awarded to the claimant and even if it is presumed that
some misapplication of the formula given in clause 57.3 (IA)(i),
we do not find any unreasonableness in the amount awarded
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towards transportation of material from the store of the appellant
to the site.
39. The counter claim no. 3 is towards cost of pre assembly
and part wielding completed. The Arbitrator had relied upon the
report of Local Commissioner and awarded lesser amount of
interest at the rate of 12% (against 15% as per clause 57.3 (1) (A)
(i) of the contract) of the contract rate as appropriate and
reasonable and held that value for 12.908 MT works out to
Rs.4182/-. In appeal the appellant submits that clause 57.2
(1A)(i) does not deal with the breakup of the cost but instead
pertains to the payment milestone. Again in our considered view,
even if the aforesaid clause is misapplied, the awarded amount of
Rs.4182/- is so meager that it has to be accepted as the cost of pre
assembly and part wielding completed.
40. Counter claim no.5 is towards cost of erection and
alignment work done. Grievance of appellant is that respondent-
Delkon had preferred a claim for alignment of 153.526 MT
whereas appellant-BHEL insisted that the quantity was 53.231
MT. The Local Commissioner had recorded the version of both
the parties in his observations and considered a midway or mean
approach as appropriate and worked out the weight alignment
done to be 103.539 MT. Calculating it as per clause 57.3 (IA)(ii)
of the contract he held that percentage payable for alignment
work is 47% of the contract rate of Rs.2700/- per MT, which
comes out to Rs.1269/- per MT and he worked out the value of
cost of work done under this claim to Rs.131188/-.
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41. The objection of appellant is on adoption of mean
approach. It is argued that the appellant had only admitted figure
of 53.231 MT and the sole Arbitrator had without any reason
averaged the two figures i.e. 53.231 MT, as admitted by the
appellant, and 153.526 MT as claimed by respondent.
42. We have considered this submission and find that the Sole
Arbitrator noted the observation of the Local Commissioner that
he could not further inspect this dispute of measurement, which
means that more work of erection and alignment was done by
respondent but it could not be ascertained by Local
Commissioner due to paucity of time. Therefore, in absence of
any other document, the Sole Arbitrator had no other way to
ascertain full quantum of this alignment activity executed by
respondent. In this fact situation, the Arbitrator adopted a mean
approach and awarded bare minimum amount of Rs.1,31,188/-.
In this fact scenario, which prevented the Local Commissioner to
take full measurements of the work done under this head, we find
no error in this approach.
43. The amounts awarded on counter claims no. 1, 3 and 5 are
meager amounts and accordingly, we are not inclined to set aside
the bare minimum cost awarded towards these counter claims.
Doing so, would actually be highly unreasonable. Accordingly,
we find no perversity or patent illegality in the approach of
Arbitrator, which is duly upheld by learned District Judge.
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COUNTER CLAIM NO.7
44. Counter claim no. 7 is towards illegal withholding of plant
and equipments (T&P). The grievance of appellant is that learned
District Judge ignored the fact that there was no evidence to
show that the appellant had wrongfully denied the respondent to
remove its T&P. However, this plea is not acceptable. Had the
appellant not withheld T&P, there was no reason for respondent-
Delkon to approach High Court. We would like to reproduce the
relevant portion of the impugned award as under:
“ Decision: From the High Court order dated 06.08.1997,
first para on page 14 of orders in OMP no. 37/97 (volume-
XII), it is clear that claimant did object, at one stage, to
removal of Respondent’s T&P from the plant. Second para
on this page states “….. with a direction hat on NTPC
issuing a clearance certificate to the petitioner to the
effect that the tools, plants or any other material belong to
the petitioner, the respondent and CISF shall permit the
removal of such goods by the petitioner”. It shows that
Claimant (respondent in the said order) indeed had a role
in withholding of Respondent’s T&P. Under these
conditions, Respondent could not use the withheld T&P at
their other projects as stated by them. Hence, Respondent
is entitled to claim withholding charges for their T&P
from Claimant”.
45. Nothing has been shown by learned Counsel for the
appellant to assail the aforesaid finding of the Arbitrator.
Arbitrator, after discussion of all the facts, held that T&P was
withheld for 210 days. He calculated this amount, assuming that
value of T&P was Rs.40 lakhs and considering its life as 4 years,
the withholding charges worked out to Rs.10 lakhs per year,
which is 25% of Rs.40 lakhs. Accordingly, he calculated
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withholding charges for 210 days @ Rs.10 lakhs per year which
worked out to be Rs.5,75,342/-.
46. The argument of learned Counsel for the appellant is that
there is no evidence on record to show that value of T&P was
Rs.40 lakhs. Further, no evidence has been led to prove
respondent’s claim on damages. Learned counsel for the
appellant assailed the method adopted by the Arbitrator for
calculating withholding charges.
47. We have considered these submissions. In order to
understand as to whether the withholding charges are reasonable
or not, it is to be ascertained as to what T&P was withheld by the
respondent. To make this issue more clear, we would like to
point out that Local Commissioner in its report dated 01.04.1997
found the following machinery to be withheld by the appellant-
BHEL :
“ 6. Following construction equipment, tools and plants
found at site:-
a) 20 T capacity coles crane 1 number
b) 8T Capacity Escorts Hydra crane 1 number
c) Escorts Tugger Tractor 1 number
d) 20T cap. trailors 2 numbers
e) 10T capacity winch M/s Electric 1 number
f) 2T capacity winch M/s. Electric 5 number
g) Hand winch M/s 5T 3 numbers
h) Welding rectifier M/s. 4 numbers
i) Welding transformer M/s 19 numbers
j) Pulling & Lifting M/s 7 numbers
k) Chain pully Blocks 4 numbers
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l) Hand grinding M/s 6 numbers
m) Wire rope pulley of various rangers 35 Numbers
n) Screw Jacks and Hydraulic Jacks 10 Numbers
o) Gas cutting set with regulators 8 numbers
p) Wire ropes, slings, turn buckets Lots
q) Power cable of various capacities Lots
r) Electrical switches of different ranges 25 numbers
s) Matador pick up van 1 numbers
Various small tools lots.
t) ”
48. Taking this value of the withheld machinery, the Arbitrator
proceeded to consider the damages in awarding Rs.5,75,342/- as
under:
“Based on the value of withheld T&P as Rs. 40,00,000/-
and considering its life as four years, the withholding
charges work out to Rs. 10,00,000/- per year which is 25%
of Rs. 40,00,000/-.
Further, the High Court order for removal of T&P is
dated 06.08.1997. But Respondent has removed T&P in
December 1997 and claimed withholding charges for 345
days from 21.01.1997 to 31.12.1997. Respondent has not
given any reason as to why they took a long period of
about 165 days to remove the T&P from the date of High
Court order. The Tribunal considers this long period as
absolutely unreasonable and, hence, does not accept it. In
fact, Respondent went to the extent of approaching the
High Court for removal of T&P. This clearly shows their
eagerness to remove the T&P at the earliest. Under these
conditions, Tribunal considers a period of 30 days after
the High Court order as sufficient and reasonable for
removal of T&P, particularly as the Respondent has stated
to possess all required and relevant documents of taking
the T&P inside the plant premises. Hence, Respondent
should have removed all T&P within 30 days of the High
Court order i.e., by 05.09.1997. Accordingly, the period
for computing withholding charges should be up to
05.09.1997 only i.e., for 210 days. Thus, T&P withholding
charges for 210 days @ Rs. 10,00,000/- per year work out
to Rs. 5,75,342 /-.”
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49. The learned District Judge concurred with the findings of
the Arbitrator concluding that the counter claim was partly
awarded upon a method of computation that is practical,
plausible and reasonable in the circumstances of the case.
50. After perusing the material available on record, we are of
the opinion that in respect of the heavy machinery, the Arbitrator
has reached to a plausible conclusion that the value of the
withheld machinery would be about Rs.40,00,000/- and the
depreciation value to be Rs.10,00,000/-. We concur with the
learned District Judge on Arbitrator’s finding on the computation
of 210 days and the methodology adopted for awarding
Rs.5,75,342/- to the respondent on account of the appellant’s
illegal withholding of T&P. In other words the Arbitrator had
some basis for calculating withholding charges of Rs.5,75,342/-,
which is not at all unreasonable if we consider the nature of T&P
which included heavy equipments/machinery including two
Cranes, one Tractor, two Trailors and one Metador Pickup Van
etc. and the duration of 210 days for which the same were
withheld. Hence, we agree with the view of Arbitrator and
learned District Judge on contract clause no. 7 being reasonable
and uphold the same.
COUNTER CLAIM NO. 13 AND 15
51. The respondent-Delkon had raised these counter claims
towards cost of mobilization and demobilization of T&P,
equipment and manpower. The appellant has drawn our attention
to the observation of Arbitrator that Delkon has not submitted
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any documents for actual expenses incurred by them in
mobilization and demobilization. Therefore, awarding a sum of
Rs.10,52,800/- is based upon mere surmises and conjectures.
52. We have considered the submissions. Learned Arbitrator
relied upon Local Commissioner’s report to say that major T&P
available at the site reasonably matches with the T&P
deployment plan. Thus, he reached to a conclusion that most
T&P had been mobilized and manpower was mobilized up to
about 62/65 persons and a considerable portion of overheads had
already been consumed for mobilization of resources. Similar
was the case with demobilization, which happened early due to
termination of the contract. Therefore, the Arbitrator was of the
opinion that 65% portion of the overheads would not be
considered unreasonable, even though no documents for actual
expenses have been submitted by the respondent-Delkon. The
Arbitrator held as under:
“Respondent has claimed an amount of Rs.6,04,800/-
towards mobilization cost and Rs.4,48,000/-- towards
demobilization, adding up to a total of Rs.10,52,800/-.
This claim amount, being only marginally higher than
65% of the 5% overheads mentioned in analysis of unit
rates, is considered reasonable and hence, accepted.”
53. We are of the opinion that even if no documents were
furnished by respondent-Delkon before the Arbitrator, the
conclusion of the Arbitrator has been arrived at on “the analysis
of unit rates”, which is Annexure –E to Tender No. BHEL:
NR(SCT):RGTTP:BLR:42. This Annexure – E forms the part of
the contract No. 50/96 between the parties. This finding of
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Arbitrator, about 65% of the overheads having been consumed in
mobilization and demobilization, is a finding on fact and
therefore we are not inclined to go deeper into it especially when
it is based upon Local Commissioner’s report. The Arbitrator has
calculated these charges on the basis of Annexure – E. Therefore,
even if no documents were filed by Delkon to prove expenditure
of this overhead, the calculation by learned Arbitrator is
reasonable and justified.
54. Learned District Judge observed that the award of amount
of Rs.10,52,800/- towards mobilization and demobilization costs
cannot be held to be without reasons or material evidence on
record and held that as long as there is sufficient material
available on record on the basis of which an estimation of
loss/expenses/costs incurred can be drawn, an award of that
estimate can be granted. We are of the opinion that view of
learned District Judge is correct on this issue especially when the
Arbitrator had based his estimation on the basis of Local
Commissioner’s report and “analysis of unit rates” which is part
of the contract. The Arbitrator adopted a rough and ready method
with reasonable and honest guess work on this issue.
Consequently, we find no infirmity in the impugned award and
the impugned judgment on this issue.
COUNTER CLAIM NO.22
55. Under this counter claim, the Arbitrator awarded the pre
reference and pendente lite interest on various claims, tabulation
of which has been reproduced in earlier part of this judgment.
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The total interest on the counter claims was calculated at
Rs.6650560/-. Learned Counsel for the appellant has relied upon
clause 17 of General Instructions to the Tenderers, which forms
part of contract between parties. This clause is reproduced as
under:
“No interest shall be payable by BHEL on Earnest Money
Deposit, Security Deposit or on any moneys due to the
contractor”.
56. It is argued by learned Counsel for appellant that despite
specific bar under Clause 17, the Arbitrator awarded pre
reference and pendente lite interest. Therefore, it is prayed that
the award on counter claim no. 22 is liable to be set aside.
57. On the other hand, learned Counsel for the respondent-
Delkon argued that the bar on awarding interest is applicable to
the amounts which are due to the contractor under the contract. It
is submitted that the Arbitrator has, therefore, not awarded pre
reference and pendente lite interest on any of the counter claims
which arose from terms and conditions of the contract. It is
submitted that he awarded pre reference and pendente lite interest
only on those claims for damages etc. which arise due to illegal
termination and breach of contract and therefore, clause 17 was
not applicable to such counter claims. Hence, it is argued that
learned District Judge was justified in upholding the award on
counter claim no. 22.
58. Before discussing the law, it would be appropriate to
reproduce the view of the Arbitrator as under:
“Seeing the counter claims, it is observed that these
claims fall under two categories. First category includes
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counter claims which are strictly as per the terms of the
contract. Counter claim nos. 1 to 6 (for the work done),
counter claim no. 18 (PVC) and counter claim no.19 (for
refund of security deposit) are as per the terms of the
contract and fall under this category, as also under first
part of the aforesaid Section 28 (3).
Second category of counter claims includes all claims
other than those in the first category. These counter claims
are not as per any terms of the contract and have arisen
entirely due to termination of the contract. In fact, these
counter claims would not have come up if the contract had
not been terminated by Claimant and the Respondent had
been allowed to complete the work. As such, these counter
claims fall under the faster part of the said Section 28(3).
For the counter claims falling in the first category as
mentioned above, in view of clause 17 of the contract
barring interest payment, arbitral tribunal does not have
the owner to award interest pendente lite under Section
31(7) of the Act. Hence, no interest pendente lite can be
awarded on these counter claims. For other counter
claims falling under second category, which are not as per
the terms of the contract, Section 31 (7) of the Act
empowers the arbitral tribunal to award, along with other
money, interest for the period between the date on which
the cause of action arose and the date on which award is
made. However, it is left to the arbitral tribunal to decide
the rate of interest as it deems reasonable, amount on
which interest is to be paid and the period for which
interest is to be paid. In the instant case, in view of the
termination of contract being held illegal, the Tribunal is
of the opinion that payment of interest pendente lite must
be considered on the amounts being awarded against
counter claims of second category.
59. Therefore, the question relating to the award of pre
reference and pendente lite interest on the counter claims of
second category falls for consideration.
60. In
Bharat Heavy Electricals Limited v. Globe Hi-Fabs
Ltd., (2015) 5 SCC 718, the Supreme Court was dealing with
clause 3.3 (ix) of the General Conditions of the Contract
governing the parties, which is reproduced as under:
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“No interest shall be payable by the employer on earnest
money, security deposit or on any money due to the
contractor by the employer.”
61. This clause is similar to the clause 17 as applicable to our
case which has already been reproduced. The Supreme Court in
the aforesaid judgment was dealing with the question about the
sweep of the words “ any amount due to the contractor by the
employer ”. The Supreme Court held that meaning of these words
cannot be restricted to the dues which are similar to earnest
money or security deposits by use of the principle of ejusdem
generis and held that the clause barring interest is very
widely worded . In other words, the Supreme Court held that bar
on payment of interest is applicable to any kind of money
payable by employer to the contractor.
62. In Garg Builders v. Bharat Heavy Electricals Limited,
Civil Appeal No. 6216 of 2021 (arising out of SLP (C) No.
16320 of 2018) decided on October 4, 2021, the Supreme Court
was dealing with Clause 17 of the contract, which is similar to
the Clause 17 relevant to the present contract. The Arbitrator in
the said case had awarded the pre reference and pendente lite
interest. This award of interest was set aside by a Single Judge of
this Court under Section 34 of the Act. A Co-ordinate Bench of
this Court upheld the view of the Single Judge in appeal under
Section 37 of the Act. Accordingly, Garg Builders filed appeal
against the said order. The Supreme Court after considering the
rival submissions relied upon relied upon Bharat Heavy
Electricals Limited v. Globe Hi-Fabs Ltd. (Supra) and held
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that when there is an express statutory permission for the parties
to contract out of receiving interest and they have done so
without any vitiation of free consent, it is not open for the
Arbitrator to grant pendente lite interest.
63. In Union of India v. Manraj Enterprises 2021 SCC
OnLine SC 1081 , the Supreme Court of India was dealing with
Clause 16 (2) of General Conditions of Contract governing the
contract between the parties, which prohibited payment of
interest. Clause 16 (2) is reproduced as under:
“ (2) No interest will be payable upon the earnest money
or the security deposit or amounts payable to the
Contractor under the Contract , but Government
Securities deposited in terms of Sub-clause (1) of this
Clause will be repayable with interest accrued thereon”.
64. This clause is also similar to the Clause 17 relevant to the
present case. The short question before the Supreme Court was in
view of the specific Clause 16 (2) of GCC, whether the
contractor was entitled to any interest pendente lite on the
amounts payable to the contractor other than upon the
earnest money or security deposit.
65. The Supreme Court while relying upon the above cited
judgments held as under:
“13. Further, heavy reliance is placed on the decision of
this Court in Pradeep Vinod Construction Co. by the
learned counsel appearing on behalf of the respondent.
The same shall not be applicable for the reason that the
said decision is by a two-Judge Bench and the contrary
view taken by this Court in Bright Power Projects (India)
(P) Ltd. Is by a three-Judge Bench. Also, in Pradeep
Vinod Construction Co., this Court has not considered the
binding decision of this Court in Bright Power Projects
(India) (P) Ltd., which is by a Bench of three Judges. Even
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otherwise, the same is prior to the decision of this Court in
Tehri Hydro Development Corpn. (India) Ltd., and the
said subsequent decision of this Court is also a three-
Judge Bench decision. Moreover, in Pradeep Vinod
Construction Co., though in Clause 16(2), THE
EXPRESSION USED IS “OR AMOUNTS PAYABLE TO
THE CONTRACTOR UNDER THE CONTRACT”, THIS
Court has only considered the non-award of interest on
earnest money and security deposit. In any case, in view of
the subsequent decisions of this Court, referred to
hereinabove and in view of Clause 16(2) of the GCC, the
arbitrator could not have awarded the interest, pendente
lite or future interest on the amount due and payable to
the contractor under the contract in the instant case.”
66. Applying the law laid down by the Supreme Court in
aforesaid judgments, we conclude that the words “any moneys
due to the contractor” as appearing in Clause 17 of General
Instructions to Tenderers are very wide worded and encompass
not only the money payable by BHEL for any work done as per
contract but also are applicable to any compensation or damages
or any kind of claim on account of breach of contract and illegal
termination of contract as happened in this case.
67. Here we would like to reproduce the relevant portion of
arbitration clause 33 of General Instructions to Tenderers as
under:
“33 ARBITRATION
All disputes between the parties to the contract arising out
of or in relation to the contract other than those for which
the decision of the Engineer or any other person is by the
contract expressed to be final and conclusive, shall after
written notice by either party to the contract to the other
party, be referred to sole arbitration of the General
manager or his nominee…..”
68. This arbitration clause indicates that claim may not only be
restricted to the contract but also on account of any issue in
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relation to the contract. It means that such claim may also pertain
to the claims on account of breach of contract. The Arbitrator has
distinguished between the claims which arise out of the contract
and the claims of damages which were awarded on account of
illegal termination of contract. We are of the opinion that
aforesaid arbitration clause envisages both type of disputes and
claims and therefore, to make a distinction between two types of
claims for awarding or not awarding the pre-reference and
pendente lite interest is not acceptable.
69. Accordingly, we set aside the impugned award and the
impugned judgment on counter claim no. 22.
CONCLUSION
70. In view of the above discussion, the impugned award and
the impugned judgment on counter claims no. 1, 3, 5, 7, 13 and
15 are upheld. However, the impugned award on counter claim
no.22 pertaining to pre-reference and pendente lite interest is
hereby set aside.
71. Accordingly, we find no infirmity in the award directing
the appellant to make payment of Rs.2942065/-. Here we have
noticed that the Arbitrator has awarded interest at the rate of
14.15 per cent on this amount with effect from 01.07.2021. It
requires some modifications. Section 31 (7) (b) of the Act makes
a provision for interest from the date of award to the date of
payment. In the present case, the award was announced on
02.06.2021 but the Arbitrator directed the appellant to pay the
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interest from 01.07.2021 i.e. after four weeks from the date of
award. We deem it appropriate to direct that the appellant shall
pay simple interest @ 14.15 per ce nt on the awarded amount of
Rs.2942065/- from the period starting from 02.06.2021 till the
date of actual payment. This modification brings the interest in
line with the mandate of Section 31 (7) (b) of the Act.
72. With these directions, the appeal is partly allowed.
73. Parties to bear their respective costs.
VINOD KUMAR, J
V. KAMESWAR RAO, J
JANUARY 08, 2026
vb
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