M/S Sanmati Builders vs Union Of India

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* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on: 07.10.2026
Judgment pronounced on: 29.10.2026
Judgment uploaded on: 29.10.2026
# CNR No. DLHC010141642023
+ FAO (COMM) 95/2023
M/S SANMATI BUILDERS .....Appellant
Through: Mr. Bhupesh Narula, Ms.
Rinku Narula, Advs.

versus

UNION OF INDIA .....Respondent
Through: Mr. S.C. Rajpal, Mr. Varun
Rajpal, Ms. Deepika Rajpal
Grover, Advs.
CORAM:
HON'BLE MR. JUSTICE ANIL KSHETARPAL
HON'BLE MR. JUSTICE BHARAT PARASHAR
J U D G M E N T
ANIL KSHETARPAL, J.:
1. Through the present Appeal, the Appellant seeks to assail the
judgment and order dated 14.11.2022 [hereinafter referred to as
“impugned judgment”] passed by the learned Commercial Court in
OMP (COMM) No. 16/2021, whereby the learned Commercial Court
set aside the Arbitral Award dated 27.01.2021 passed by the learned
Sole Arbitrator in the disputes between the parties.
2. The principal controversy arising in the present Appeal
concerns the interpretation and application of Clause 16(4)(a) of the
General Conditions of Contract, 2014 [hereinafter referred to as
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“GCC-2014”], governing the time available to a successful bidder for
furnishing a Performance Bank Guarantee, and the legality of the
Respondent’s decision to terminate the contract and forfeit the Earnest
Money Deposit. The Appeal also raises issues concerning the extent to
which a Court exercising jurisdiction under Section 34 of the
Arbitration and Conciliation Act, 1996 [hereinafter referred to as
“A&C Act”] may interfere with the Arbitral Tribunal’s interpretation
of the contractual provisions, its assessment of the evidence
supporting the monetary claims, and its determination of costs.
FACTUAL MATRIX:
3. In order to appreciate the controversy involved in the present
Appeal, the relevant facts, in brief, are required to be noticed.
4. The Respondent, acting on behalf of the President of India,
invited tenders vide Tender Notice No. 128-W/280-NIT-2016-17-W-
V dated 22.09.2016 for the work described as “Improvement to
Platform surface of Platform No. 2, 3, 4 & 5, Hazrat Nizamuddin
Railway Station”, falling within the jurisdiction of the Senior Section
Engineer (Works), Hazrat Nizamuddin, under the Assistant Divisional
Engineer, Hazrat Nizamuddin, New Delhi. The tenders were
scheduled to be opened on 01.11.2016.
5. The Appellant submitted its bid for a sum of Rs.1,49,51,535/-
and deposited an Earnest Money Deposit [hereinafter referred to as
“EMD”] of Rs.2,40,000/- in the form of a Fixed Deposit Receipt. The
Respondent communicated acceptance of the Appellant’s bid vide its
letter/communication dated 27.01.2017, bearing No. 128-
W/280/245/16-17/W-V, and directed the Appellant to contact the
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concerned railway authorities for commencing the work. The work
was stipulated to be completed within ten months.
6. Thereafter, a detailed award/acceptance letter bearing the same
reference number, dated 01.02.2017, was delivered to the Appellant
on 10.02.2017. The Appellant’s case was that, while the earlier
communication dated 27.01.2017 had conveyed acceptance of its bid,
the detailed letter introduced two additional conditions under Notes 1
and 2, which had not formed part of the original tender conditions or
the Appellant’s offer.
7. The aforesaid notes related to restrictions on the rates and
quantities of certain items under Schedules A and B of the contract. In
substance, the conditions contemplated restrictions on the future
variation of quantities of specified items and prescribed consequences
in relation to the rates at which payment would be made if the
quantities were varied beyond the stipulated limits. The Appellant
objected to the introduction of these conditions and, vide its
communication dated 10.02.2017, requested the Respondent either to
issue a corrected acceptance letter or to refund the EMD if the
additional conditions were not withdrawn.
8. The Appellant did not furnish the Performance Bank Guarantee
[hereinafter referred to as “PBG”] of Rs.7,47,600/-, representing five
per cent of the contract value. The Respondent, on the other hand,
maintained that the contract had been concluded upon acceptance of
the bid and that the Appellant was obliged to comply with the
contractual requirements, including the furnishing of the PBG and
commencement of the work.
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9. In the meantime, the Respondent issued a communication dated
27.02.2017 recording that the Appellant had not commenced the work
despite reminders. By a further communication dated 28.02.2017, the
Respondent called upon the Appellant to deploy labour and material
within seven days, failing which action under the relevant provisions
of the GCC would be taken. The Appellant, however, continued to
maintain its objection to the additional conditions introduced in the
detailed acceptance letter. It addressed further communications dated
06.03.2017 and 05.04.2017, seeking withdrawal of the directions
issued by the Respondent, while the Respondent, vide its
communication dated 23.03.2017, called upon the Appellant to
withdraw its objection and complete the requisite formalities.
10. Ultimately, vide communication dated 06.04.2017, the
Respondent terminated the contract by invoking Clause 16(4)(a) of
GCC-2014 and forfeited the EMD of Rs.2,40,000/-. The provision, as
relied upon by the parties, required the successful bidder to furnish the
PBG within thirty days from the date of issuance of the Letter of
Acceptance. It further contemplated an extension, at the discretion of
the competent authority, up to sixty days from the date of issuance of
the Letter of Acceptance, subject to penal interest for the delay beyond
the initial thirty-day period. In the event of failure to furnish the PBG
even after sixty days, the contract could be terminated, with forfeiture
of the EMD and other dues, and the contractor could be debarred from
participating in the retender.
11. The dispute between the parties principally arose from their
disagreement over the date from which the period stipulated for
furnishing the PBG was required to be reckoned, as well as the effect
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of the additional conditions incorporated in the detailed acceptance
letter. The Appellant contended that the termination dated 06.04.2017
was premature and contrary to the contractual stipulation, apart from
being founded upon its refusal to accept conditions that had not
formed part of its original offer. The Respondent, in contrast,
maintained that the contract had already been concluded and that the
Appellant’s failure to furnish the PBG justified termination and
forfeiture of the EMD.
12. The Appellant initially approached this Court by filing W.P.(C)
No. 10827/2017 on 04.12.2017. The proceedings were subsequently
withdrawn on 14.12.2017, with the dispute being pursued through
arbitration. Upon the Appellant’s request for appointment of an
arbitrator not resulting in an appointment by the Respondent, the
Appellant instituted a petition under Section 11(6) of the A&C Act.
By order dated 17.05.2019, this Court appointed Shri Raj Kumar
Sarkar, Retired Chief Engineer, Northern Railway, as the Sole
Arbitrator to adjudicate the disputes between the parties.
13. Before the learned Sole Arbitrator, the Appellant raised, inter
alia , claims seeking a declaration that the termination dated
06.04.2017 was illegal; refund of the EMD of Rs.2,40,000/- with
interest; compensation of Rs.12,48,625/- towards loss of profit,
overheads and other alleged losses arising from the termination;
Rs.18,00,000/- towards advances allegedly rendered irrecoverable on
account of the termination; pre-suit, pendente lite and future interest;
and Rs.5,00,000/- towards costs incurred and to be incurred in
pursuing the dispute.
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14. The Respondent contested the claims, maintaining that the
contract had been validly terminated owing to the Appellant’s failure
to furnish the PBG and commence the work. It disputed the factual
basis and evidentiary support for the monetary claims and also raised
objections concerning the arbitrability of the disputes and the
contractual provisions governing interest and costs. The Respondent
additionally raised a counterclaim of Rs.65,34,901/-, representing the
alleged difference between the original contract value and the amount
at which the work was subsequently awarded to another agency.
15. By the Arbitral Award dated 27.01.2021, the learned Sole
Arbitrator held, inter alia , that the termination of the contract had
been effected before the expiry of the period available for furnishing
the PBG, reckoned from the detailed acceptance letter as considered
by the Tribunal. The Tribunal consequently found the termination to
be premature. It rejected the Respondent’s objection to its jurisdiction
and proceeded to adjudicate the claims on their merits.
16. In the operative portion of the Award, the learned Sole
Arbitrator awarded Rs.2,40,000/- towards refund of the EMD;
Rs.12,09,000/- against the claim of Rs.18,00,000/- for alleged
irrecoverable advances; and Rs.2,50,000/- towards costs. The claim
for loss of profit and other damages was rejected. The Tribunal further
directed payment of simple interest at the rate of eleven per cent per
annum on the awarded amount, excluding the EMD, for the period
specified in the Award, and prescribed post-award interest at the same
rate until payment. The Respondent’s counterclaim of Rs.65,34,901/-
was rejected. The total principal amount awarded in favour of the
Appellant, excluding interest, was Rs.16,99,000/-.
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17. Aggrieved by the Award, the Respondent instituted proceedings
under Section 34 of the A&C Act, registered as OMP (COMM) No.
16/2021, seeking its setting aside. By impugned judgment dated
14.11.2022, the learned Commercial Court allowed the challenge and
set aside the Arbitral Award, holding, as recorded in the present
Appeal, that the Award was perverse and contrary to the terms and
conditions of GCC-2014. It is this judgment and order that has been
assailed by the Appellant in the present proceedings.
CONTENTIONS OF THE PARTIES:
18. Contentions on behalf of the Appellant:
18.1. It was submitted that the learned Commercial Court exceeded
the scope of interference under Section 34 of the A&C Act by
substituting its own interpretation of the contractual correspondence
and reappreciating the evidence considered by the learned Sole
1
Arbitrator. Reliance was placed on MMTC Ltd. v. Vedanta Ltd. .
18.2. It was contended that the detailed acceptance letter dated
01.02.2017 introduced two additional conditions, which the Appellant
had expressly rejected vide its letter dated 10.02.2017. Relying on
Padia Timber Company (P) Ltd. v. Board of Trustees of
2
Visakhapatnam Port Trust , learned counsel submitted that
acceptance subject to additional conditions constitutes a counter-
proposal requiring assent. The Respondent’s circular dated 03.10.2017
was also relied upon in support of this submission.
18.3. Learned counsel submitted that the learned Commercial Court

1
(2019) 4 SCC 163
2
(2021) 3 SCC 24
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erred in reckoning the period for furnishing the PBG from the initial
acceptance communication dated 25/27.01.2017, without adequately
considering the subsequent detailed letter and the Appellant’s
objection to the additional conditions. It was contended that the
termination dated 06.04.2017 was premature and that the
consequential forfeiture of the EMD could not, therefore, be sustained.
Reliance was also placed on J.G. Engineers (P) Ltd. v. Union of
3
India , in support of the arbitrability of the dispute concerning
contractual breach.
18.4. With respect to Claim No. 4, it was submitted that the learned
Commercial Court incorrectly proceeded on the basis that no
documentary evidence had been produced, despite the Tribunal’s
reference to vendor particulars, expenditure statements, bank
statements, vouchers, income-tax returns and audited financial
statements. The Appellant contended that the Tribunal’s assessment of
this material could not be displaced through reappreciation of
evidence under Section 34, and that the claim concerned advances
allegedly rendered irrecoverable rather than payment for work
executed.
18.5. Learned counsel further challenged the setting aside of interest
and costs. It was submitted that the prohibition under Clause 64(5) of
GCC-2014 concerning pre-award interest did not, by itself, resolve the
issue of post-award interest under Section 31(7)(b) of the A&C Act.
Reliance was placed on Morgan Securities and Credits Pvt. Ltd. v.
4
Videocon Industries Ltd . As regards costs, reliance was placed on

3
(2011) 5 SCC 758
4
Civil Appeal No. 5437/2022 decided on 01.09.2022
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Section 31A of the A&C Act and Union of India v. Om Vajrakaya
5
Construction Company , to contend that Clause 64(6) could not
automatically bar an award of costs.
18.6. Lastly, it was submitted that the learned Commercial Court had
set aside the rejection of the Respondent’s counterclaim without
adequately examining the Tribunal’s reasoning. Relying on Gayatri
6
Balasamy v. ISG Novasoft Technologies Ltd. , the Appellant
contended that any defect in a severable component of the Award
could not, by itself, justify setting aside the entire Award.
19. Contentions on behalf of the Respondent:
19.1. Per contra , learned counsel for the Respondent submitted that
the initial Letter of Acceptance dated 25/27.01.2017 concluded the
contract, while the detailed letter dated 01.02.2017 merely clarified
the consequences of quantity variations in respect of certain items. It
was contended that Notes 1 and 2 did not introduce any new
contractual conditions and that the Appellant was bound to comply
with the terms of the accepted bid.
19.2. It was further submitted that the Appellant neither furnished the
PBG within the period stipulated under Clause 16(4)(a) of GCC-2014
nor commenced the work. The termination dated 06.04.2017 and
forfeiture of the EMD were, therefore, justified. The Respondent
maintained that the Tribunal had erred in holding the termination to be
premature and in directing refund of the EMD.
19.3. With respect to Claim No. 4, learned counsel submitted that the

5
2021 SCC OnLine Del 5434
6
2025 INSC 605
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work had never commenced and that the Appellant had failed to
establish its entitlement to the amount awarded towards allegedly
irrecoverable advances. The Respondent supported the learned
Commercial Court’s reliance on Clauses 51-A and 62(2)(c) of GCC-
2014 and contended that the award of Rs.12,09,000/- was unsupported
by sufficient evidence and contrary to the contractual provisions.
19.4. The Respondent also supported the setting aside of interest and
costs. Relying on Clauses 16(3) and 64(5) of GCC-2014, Sections
28(3) and 31(7) of the A&C Act, and Union of India v. Manraj
7
Enterprises , it was contended that the Tribunal could not award
interest contrary to the parties’ agreement. It was further submitted
that the award of costs contravened Clause 64(6) of GCC-2014, which
required the parties to bear their respective arbitration costs.
ANALYSIS & FINDINGS:
20. This Court has carefully considered the submissions advanced
on behalf of the parties and perused the material on record.
21. The scope of interference under Section 37 of the A&C Act, in
an appeal against an order setting aside an arbitral award under
Section 34, is necessarily circumscribed by the limits of the latter
provision. The Court is not required to undertake a fresh adjudication
of the disputes or substitute its own interpretation of the contract
merely because another view may be possible. In MMTC Ltd. ( supra ),
the Supreme Court reiterated that an award founded on a plausible
view of the contractual terms and the material on record is not liable

7
(2022) 2 SCC 331
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to be interfered with by reappreciation of evidence. At the same time,
the statutory limitations on judicial review do not preclude
interference where the award suffers from a ground expressly
recognised under Section 34.
22. Examined against this standard, the impugned judgment
requires consideration of whether the learned Commercial Court
identified a legally sustainable ground for setting aside the Award, or
whether it displaced the conclusions of the learned Sole Arbitrator by
reassessing the contractual correspondence and the evidence
independently. The principal findings in the impugned judgment
concern the date from which the period for furnishing the PBG was to
be reckoned, the refund of the EMD, the award under Claim No. 4,
interest, costs and rejection of the counterclaim. Each of these aspects
must be examined in the context of the reasons actually recorded by
the learned Sole Arbitrator and the grounds on which the Award was
set aside.
A. Termination of the contract and forfeiture of the EMD:
23. The dispute concerning termination turns substantially on the
effect of the communications dated 27.01.2017 and 01.02.2017. The
learned Commercial Court proceeded on the basis that the initial
communication accepting the bid concluded the contract and that the
detailed acceptance letter did not alter the parties’ contractual position.
The learned Sole Arbitrator, on the other hand, considered the detailed
letter and the circumstances in which it was delivered, including the
additional conditions contained in Notes 1 and 2 and the Appellant’s
immediate objection thereto. The said conditions are reproduced as
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under:
“(A) Rates of NS-1,2,3,4,5 & 6 of Schedule B --- If decreased,
recovery of difference amount of LAR & accepted rates for the
quantity decreased will be recovered.
(B) Rates of USSOR chapter-9 of schedule-A is considered on much
higher side ….will be paid @ LAR i.e. 3.34% below.”
24. The Appellant’s case was not merely that it had received the
detailed letter at a later date. Its objection was that the detailed letter
introduced conditions concerning the rates and quantities of specified
items which, according to it, did not form part of the original tender or
its bid. The Appellant communicated its objection on 10.02.2017 and
sought either withdrawal of the additional conditions or refund of the
EMD. Despite being afforded an opportunity, learned counsel for the
Respondent was unable to establish that the two conditions
incorporated in the communication dated 01.02.2017 formed part of
the original terms and conditions of the tender document or the GCC-
2014. The Respondent, however, did not accept the Appellant’s
objection and instead called upon it to complete the contractual
formalities and commence the work. In these circumstances, the issue
that arises is whether a concluded contract came into existence
between the parties, having regard to the Appellant’s objection to the
additional conditions and the absence of any demonstrated consensus
on those terms. A concluded contract necessarily requires a meeting of
minds on the essential terms governing the parties’ rights and
obligations. If the additional conditions materially altered the terms of
the original offer and were not accepted by the Appellant, the
existence of a concluded contract on those terms would be seriously in
question.
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25. In this regard, the principle stated by the Supreme Court in
Padia Timber Company ( supra ) is relevant. An acceptance which
materially varies the terms of an offer does not, merely by being
described as an acceptance, establish the other party’s assent to the
additional terms. Whether Notes 1 and 2 merely explained the tender
conditions or materially altered the terms on which the bid had been
accepted was, therefore, a question requiring consideration of the
tender documents, the bid and the two communications, read together.
26. The learned Commercial Court, however, treated the initial
acceptance as conclusive without adequately addressing the substance
of the Appellant’s objection to the subsequent conditions. The mere
fact that the Appellant did not furnish the PBG or commence the work
does not, by itself, answer the anterior question as to whether there
was a contract which stood concluded. The correspondence was
required to be examined as a whole, rather than the initial
communication being treated as determinative without consideration
of the subsequent letter and the Appellant’s prompt protest.
27. The fact that the detailed letter was received on 10.02.2017, by
itself, would not override the express language of Clause 16(4)(a).
Nevertheless, the question before the learned Sole Arbitrator was not
confined to the arithmetic computation of sixty days. It also concerned
the legal effect of the two additional conditions which were added
without concurrence of the Appellant in the Letter dated 01.02.2017.
The learned Commercial Court was required to assess whether the
Tribunal’s approach to that dispute was one which could lawfully be
displaced under Section 34.
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28. The learned Sole Arbitrator’s conclusion that the termination
was premature was based on its consideration of the correspondence
and the contractual circumstances. The learned Commercial Court did
not demonstrate that the Tribunal had adopted an interpretation that
was impossible on the record; rather, it preferred its own conclusion
that the initial acceptance alone governed the period for furnishing the
PBG. In the absence of a demonstrated ground under Section 34, the
substitution of one plausible interpretation for another could not
justify setting aside the Award.
29. The Appellant has also contended that the termination was
effected without an adequate prior notice of the proposed action. It is
unnecessary to determine that contention as an independent ground in
the abstract. The correspondence, including the communications
calling upon the Appellant to commence work and the Appellant’s
replies maintaining its objection to the additional conditions, forms
part of the factual context in which the termination was effected. The
decisive question for present purposes remains whether the learned
Commercial Court was justified in setting aside the Tribunal’s finding
while assuming that a concluded contract came into existence with
communication dated 27.01.2017.
30. The direction to refund the EMD was consequential upon the
Tribunal’s conclusion concerning absence of a concluded contract.
The learned Commercial Court set aside that direction principally on
the premise that the termination was valid and that the contractual
provisions authorised forfeiture. Once the foundation on which that
conclusion rested is found unsustainable, the consequential setting
aside of the refund of the EMD cannot independently be sustained on
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the same reasoning.
B. Award under Claim No. 4: alleged irrecoverable advances:
31. The learned Commercial Court also set aside the amount of
Rs.12,09,000/- awarded under Claim No. 4, which related to advances
allegedly rendered irrecoverable following the termination. Two
principal reasons were recorded: first, that Clause 62(2)(c) of GCC-
2014 concerned amounts attributable to work actually executed and
did not apply where the work had not commenced; and second, that
the Appellant had failed to produce the documents contemplated by
Clause 51-A to establish the expenditure claimed.
32. The first consideration required the Tribunal’s claim to be
examined according to its actual nature. The Appellant did not seek,
under Claim No. 4, payment for measured work executed at the site. It
claimed compensation for advances allegedly made to labour,
suppliers and machinery providers in preparation for performance of
the contract, which it asserted had become irrecoverable because of
the Respondent’s breach. Whether such expenditure was in fact
incurred, whether it was attributable to the contract, and whether it
was proved to have become irrecoverable were matters requiring
assessment of the evidence and the contractual framework.
33. Clause 62(2)(c), as referred to by the parties, deals with the
determination and certification of amounts earned or accrued in
respect of work done and the value of specified materials, plant and
temporary works in the circumstances contemplated by that clause.
The Tribunal relied upon the provision in considering the
consequences of rescission. Whether the clause, properly construed,
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independently authorised the entire amount awarded under Claim No.
4 is a question distinct from whether the claim could be rejected solely
because no physical work had commenced. The absence of executed
work does not, without examination of the nature of the claim and the
evidence, establish that preparatory expenditure or advances could not
have been incurred.
34. More significantly, the learned Commercial Court proceeded on
the premise that the Appellant had not produced statements of
account, bank statements, income-tax returns, bills or vouchers. This
premise does not accord with the Award, which expressly records that
the Appellant had produced particulars of vendors, a summary of
miscellaneous expenditure, bank-account statements, vouchers, an
income-tax return for Assessment Year 2017–18, the profit and loss
account for the year ending 31.03.2017, an audited balance sheet as of
that date, and a bifurcation of the claim of Rs.18,00,000/-. The
Tribunal further recorded that these documents showed some of the
expenditure incurred in support of the claim.
35. The fact that documents were produced does not, by itself,
establish that every amount claimed was proved or that the amount
awarded was necessarily the only permissible quantification. It does,
however, materially distinguish a case in which the claim was
unsupported by evidence from one in which the Tribunal considered
documentary material and awarded only part of the amount claimed.
The learned Commercial Court could not treat the claim as wholly
unsupported by documentary evidence without addressing the material
expressly noticed in the Award.
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36. The Tribunal awarded Rs.12,09,000/- against a claim of
Rs.18,00,000/-, rather than allowing the claim in full. The question
before the learned Commercial Court was whether the Tribunal’s
determination disclosed a ground for interference under Section 34,
not whether the Court itself would have assessed the documents
differently. The impugned judgment does not adequately engage with
the evidence identified in the Award or explain why the Tribunal’s
assessment of that material crossed the threshold for setting aside an
arbitral award.
37. In these circumstances, the setting aside of Claim No. 4 cannot
be sustained on the ground that no documentary evidence was
produced. Nor can the fact that the work had not commenced,
standing alone, dispose of a claim specifically advanced for
preparatory expenditure and alleged irrecoverable advances. The
relevant questions of proof, causal connection and quantification had
to be assessed in light of the material before the Tribunal. The learned
Commercial Court’s contrary conclusion rests on an incomplete
consideration of the reasons recorded in the Award and amounts to an
impermissible reassessment of the claim.
C. Interest:
38. The issue of interest requires separate discussion. The Tribunal
awarded simple interest at eleven per cent per annum on the amount
awarded, excluding the EMD, for the pre-award period specified in
the Award, and also directed payment of post-award interest at the
same rate until realisation. The learned Commercial Court set aside
the interest directions by relying, inter alia , on Clauses 16(3) and
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64(5) of GCC-2014 and the decision of the Supreme Court in Manraj
Enterprises (supra).
39. Clause 64(5) expressly provides that, where the arbitral award
is for payment of money, no interest shall be payable on the whole or
any part of the amount for any period until the date on which the
award is made. The effect of this provision upon the Tribunal’s award
of pre-award interest must be considered in light of the binding
decision in Manraj Enterprises ( supra ). The Tribunal’s authority to
award interest cannot be exercised contrary to an express contractual
prohibition applicable to the claim in question. Accordingly, the pre-
award interest direction cannot be sustained to the extent that it is
contrary to Clause 64(5).
40. This conclusion does not, however, justify treating all questions
of interest as indistinguishable. The prohibition in Clause 64(5) is
expressed by reference to the period before the award is made. Post-
award interest is governed by Section 31(7)(b) of the A&C Act,
subject to the applicable contractual terms and the governing legal
principles. The learned Commercial Court was required to examine
the Tribunal’s post-award direction separately rather than assume that
the conclusion concerning pre-award interest automatically disposed
of every component of the interest award.
41. The award of interest on the EMD also stands on a distinct
footing, as the Tribunal excluded the EMD from the pre-award
interest calculation. The operative directions must therefore be
understood in accordance with the Award itself, rather than by treating
interest as having been awarded uniformly on every component of the
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principal sum. The impugned judgment’s broad setting aside of the
Award does not obviate the need for this component-wise analysis.
42. Consequently, while the learned Commercial Court was entitled
to examine whether the contractual prohibition precluded pre-award
interest, its conclusion on that aspect cannot, without a separate
analysis, sustain the setting aside of the substantive amounts awarded
or the Tribunal’s determination of costs. The interest component must
be dealt with in accordance with Clause 64(5), Clause 16(3), Section
31(7) of the A&C Act and the applicable binding precedent.
D. Costs:
43. The Tribunal awarded Rs.2,50,000/- towards costs, taking into
account, inter alia, the Appellant’s case that it had been compelled to
approach this Court for appointment of an arbitrator. The learned
Commercial Court set aside the award of costs on the ground that
Clause 64(6) of GCC-2014 required each party to bear its own
arbitration costs and that the Tribunal had not given sufficient reasons
to depart from that stipulation.
44. Section 31A of the A&C Act confers discretion upon the Court
or arbitral tribunal to determine costs, while sub-section (5) addresses
the validity of an agreement allocating costs where such agreement
was not made after the dispute had arisen. In Om Vajrakaya
Construction Company ( supra ), this Court considered the effect of
Clause 64(6) of the GCC in the context of Section 31A and held that
the contractual provision requiring parties to bear their respective
costs could not override the statutory regime where the agreement had
not been entered into after the dispute arose.
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NARAYAN
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45. In view of the aforesaid principle, Clause 64(6) could not, by
itself, be treated as an absolute bar to the Tribunal exercising the
discretion conferred by Section 31A. The Tribunal recorded a reason
for awarding costs, namely, the circumstances in which the Appellant
had to seek appointment of an arbitrator through proceedings under
Section 11(6) of the A&C Act. The learned Commercial Court’s
conclusion that the award of costs was impermissible merely because
of Clause 64(6) is, therefore, not sustainable. No sufficient ground has
been shown to set aside the Tribunal’s determination of costs under
Section 34.
E. Rejection of the counterclaim:
46. The Respondent’s counterclaim was for Rs.65,34,901/-,
claimed as the alleged difference between the original contract value
and the amount at which the work was subsequently awarded to
another agency. The Tribunal rejected the counterclaim. The learned
Commercial Court described that rejection as perverse and contrary to
public policy, but did not undertake a substantive examination of the
basis of the counterclaim, the evidence supporting it, or the Tribunal’s
reasons for rejecting it.
47. A finding cannot be characterised as perverse. The Court must
identify the relevant defect in the award and explain how it falls
within the grounds of interference under Section 34. In the present
case, the impugned judgment does not sufficiently explain why the
Tribunal’s rejection of the counterclaim met that threshold. Nor does
the fact that the Tribunal rejected the counterclaim in its operative
determination, without more, establish that the decision was contrary
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NARAYAN
Signing Date:29.10.2026
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to public policy.
48. The counterclaim was founded on the Respondent’s allegation
that the Appellant’s default necessitated the subsequent award of the
work at a higher price. Its determination was therefore connected with
the parties’ dispute concerning concluded contract having come into
existence subsequent to its termination and the consequences said to
flow from it. Once the learned Commercial Court’s interference with
the Tribunal’s assessment of the termination and the principal
monetary claim is found unsustainable for the reasons discussed
above, the rejection of the counterclaim could not be set aside by a
bare conclusion that it was perverse. The impugned judgment
discloses no adequate independent basis for interfering with that part
of the Award.
CONCLUSION:
49. Accordingly, the Appeal is allowed to the aforesaid extent. The
impugned judgment dated 14.11.2022 passed by the learned
Commercial Court in OMP (COMM) No. 16/2021 is set aside insofar
as it sets aside the Award in respect of termination, refund of the
EMD, Claim No. 4, costs and rejection of the Respondent’s
counterclaim.
50. The Award dated 27.01.2021 is restored in respect of those
determinations. The direction awarding pre-award interest shall stand
modified to the extent it is contrary to Clause 64(5) of GCC-2014. The
question of post-award interest shall be governed by the applicable
contractual terms and Section 31(7)(b) of the A&C Act, consistently
with the observations made herein.
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NARAYAN
Signing Date:29.10.2026
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51. In the facts and circumstances of the case, the parties shall bear
their own costs of the present Appeal.
52. The present Appeal stands disposed of.
ANIL KSHETARPAL, J.

BHARAT PARASHAR, J.
OCTOBER 29, 2026
jai/pal

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NARAYAN
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