J.M.SWAMY vs GOVERNMENT OF INDIA

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COMAP No. 330 of 2025

IN THE HIGH COURT OF KARNATAKA AT BENGALURU
TH
DATED THIS THE 17 DAY OF OCTOBER 2026


PRESENT

THE HON'BLE MR. JUSTICE D K SINGH

AND

THE HON'BLE MR. JUSTICE H.SHANTHI BHUSHAN

COMMERCIAL APPEAL NO. 330 OF 2025

BETWEEN:

J.M.SWAMY
AGED ABOUT 60 YEARS,
TH
NO.20, 8 'B' MAIN,
RAJAMAHAL VILAS EXTENSION,
BANGALORE-560 080.
…APPELLANT
(BY SRI. MANUCHANDRA SEKHAR.P.,ADVOCATE)

AND:

GOVERNMENT OF INDIA
CENTRAL PUBLIC WORK DEPARTMENT
REP BY ITS THE EXECUTIVE ENGINEER
BCD III, CPWD, KENDRIYA SADAN,
KORAMANAGALA, BANGALORE 560 034.
…RESPONDENT
(BY SRI. KUMAR M.N.,ADVOCATE)

THIS COMAP FILED UNDER SECTION 13(1-A) OF THE
COMMERCIAL COURT ACT, 2015 PRAYING TO 1) ADMIT THE
PRESENT COMMERCIAL AND CALL FOR THE RECORDS OF THE
LOWER COURT IN COM.AP NO.156/2024 VIDE ORDER DATED
19.04.2025 PASSED BY THE LXXXV ADDITIONAL CITY CIVIL
AND SESSIONS JUDGE, AT BENGALURU (CCH-86) JUDGMENT
MADE IN COMAP NO.156/2024 (ANNEUXRE -A) AND ETC.,

THIS APPEAL HAVING BEEN HEARD AND RESERVED FOR
JUDGMENT ON 24.09.2026 AND COMING ON FOR
PRONOUNCEMENT THIS DAY, HON'BLE MR. JUSTICE
H.SHANTHI BHUSHAN DELIVERED THE FOLLOWING:

CORAM: HON'BLE MR. JUSTICE D K SINGH
AND
HON'BLE MR. JUSTICE H.SHANTHI BHUSHAN












Digitally signed
by MALA K N
Location: HIGH
COURT OF
KARNATAKA

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COMAP No. 330 of 2025

CAV JUDGMENT

(PER: HON'BLE MR. JUSTICE H.SHANTHI BHUSHAN)

The present Commercial Appeal under Section
13(1-A) of the Commercial Courts Act, 2015, has been filed
impugning the judgment and order dated 19.04.2025 passed in
Commercial A.P.No.156/2024 by the LXXXV Additional City Civil
& Sessions Judge at Bengaluru (CCH-86) (‘ Commercial Court ’
for brevity) whereby the Commercial Court has set aside the
award dated 23.07.2024 passed by the Sole Arbitrator in
A.C.No.456/2022.

2. For the sake of convenience, the parties herein are
referred to as per their ranking before the Arbitral Tribunal.

I. Facts and contentions of the claimant:
3. The claimant, J.M. Swamy, is a Class-I civil
contractor who was awarded the work of construction of a 350
KLD sewage treatment plant using MBBR technology, together
with electromechanical components, at the STC, BSF Campus,
Yelahanka, Bengaluru, by the respondent, Government of
India, represented by the Executive Engineer, Building
Construction Division-III, CPWD. The claimant’s tender, being
the lowest, was accepted for Rs.1,26,01,150/-. The work order

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COMAP No. 330 of 2025

was issued on 23.01.2017 and the agreement bearing
No.16/SE/BCD-III/2016-17 was executed on 15.02.2017. The
stipulated period of completion was eight months, with the
work commencing on 12.02.2017 and the stipulated date of
completion being 12.10.2017. The claimant contended that,
though he had undertaken the work in terms of the agreement
and its General Conditions of Contract, the progress was
affected by circumstances attributable to the respondent.

4. The claimant contended that the delay was
occasioned by delayed approval of structural drawings, changes
required in the foundation on account of the slushy condition of
the site, heavy rains and accumulation of rainwater and sewage
water, delay in making raw sewage available for commissioning
and testing, and delayed decisions regarding extra items and
deviation rates. According to him, these matters prevented
completion within the original contractual period and required
extension of time under Clause 5 of the General Conditions of
Contract. The respondent had granted extensions and
ultimately extended the period up to 30.11.2019 without levy
of compensation. The claimant relied upon the departmental
correspondence, including the extension granted by the
respondent, to contend that the delay could not subsequently

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be attributed to him without considering the very circumstances
on account of which the extensions had been granted.

5. The claimant stated that the civil work was
completed on 10.06.2019 and that the operation and
maintenance of the plant was completed on 27.11.2019.
Though the final bill was submitted on 18.11.2019, payment
was made only subsequently, and the claimant protested
against the settlement of the bill by his letter dated
19.05.2020. By letter dated 22.05.2020, he sought settlement
of the amounts allegedly due under the contract, invoking
Clause 25 of the General Conditions of Contract, which provided
for resolution of disputes between the parties. The claims
included amounts towards extra items, interest on delayed
payments, reimbursement of GST, additional overhead charges
and loss of profit, bank guarantee commission, idle manpower
and machinery, escalation in the cost of equipment and
commodities, and interest on the security deposit and
performance guarantee. The claimant relied upon Sections 51
to 55 and Section 73 of the Indian Contract Act, 1872, in
support of his contention that the respondent’s alleged failure
to perform its contractual obligations had resulted in additional
expenditure and financial loss.

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6. The claimant further contended that the
respondent, by letter dated 03.09.2020, sought to levy
compensation of Rs.12,60,115/- under Clause 2 of the
agreement, notwithstanding the extensions of time already
granted. By his letter dated 07.09.2020, the claimant disputed
the levy, contending that the respondent could not disregard its
own extensions and the recorded reasons for delay and
thereafter recover compensation from him. He had already
approached the Commercial Court in Com.A.A.No.75/2020
under Section 9 of the Arbitration and Conciliation Act, 1996,
seeking interim protection against recovery from his bills,
security deposit and bank guarantees. After obtaining interim
protection, he pursued the contractual dispute-resolution
mechanism under Clause 25 and sought appointment of an
independent arbitrator, ultimately approaching this Court in
CMP No.168/2021 under Section 11 of the Arbitration and
Conciliation Act, 1996.

7. Pursuant to the appointment of the sole arbitrator
by order dated 11.08.2022, the claimant submitted his
statement of claim on 26.09.2022, seeking payment under the
aforesaid heads, interest at 18% per annum and costs of the
proceedings. He maintained that the amounts claimed

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represented expenditure incurred during the prolonged
execution of the work and losses resulting from delayed
payments and decisions by the respondent. He also sought a
declaration that the levy of compensation under Clause 2 was
unjustified and that the respondent was not entitled to recover
Rs.12,60,115/-. The claimant relied upon the contractual
provisions, the correspondence exchanged during execution of
the work and the evidence adduced before the arbitrator to
seek the reliefs claimed.

II. Defence of the respondent:

8. The respondent, Government of India, represented
by the Executive Engineer, CPWD, admitted the tender
transaction and the execution of the agreement but disputed
the claimant’s entitlement to the amounts sought. The
respondent maintained that the claims were required to be
examined in accordance with the agreement, the General
Conditions of Contract and the documentary material produced
by the parties. It disputed the contention that the entire delay
was attributable to the department and maintained that the
extensions granted under Clause 5 did not, by themselves,
extinguish the right reserved to the Government under Clause
2 to levy compensation for delay in completion of the work.

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9. The respondent relied upon its departmental
correspondence and the assessment of delay recorded in the
letter dated 03.09.2020. Its contention was that the extension
of time had been granted without prejudice to the
Government’s contractual right to recover compensation under
Clause 2 and that the claimant could not treat the extension as
an unconditional waiver of that right. The respondent
accordingly sought to justify the levy of Rs.12,60,115/- on the
ground that the work had not been completed within the
stipulated period and that the extension granted to the
claimant did not preclude the department from taking action in
accordance with the terms of the agreement.

10. The respondent disputed the claimant’s claims for
additional amounts towards extra items, GST, interest on
delayed payments and other contractual heads. It contended
that the claimant was required to establish the actual execution
of extra work, the amounts payable for such work and the
supporting documents necessary for reimbursement. In respect
of the additional claim for extra items, the respondent relied
upon the amount of approximately Rs.2.48 lakhs already
acknowledged and paid and disputed the further amount
claimed in the absence of supporting material. The respondent

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similarly resisted reimbursement of GST and interest thereon
on the ground that the claimant had to establish the payment
of GST and his entitlement to reimbursement under the
contract.

11. The respondent also contested the claims for
additional overhead charges and loss of profit, bank guarantee
commission, idle manpower and machinery, escalation in prices
and interest on the security deposit and performance
guarantee. Its case was that the claimant could not obtain
reimbursement merely by asserting that the contract period
had been prolonged, but had to establish the contractual basis
and evidentiary foundation for each claim. The respondent
opposed the claim for interest at 18% per annum and the claim
towards legal expenses of Rs.4,00,000/-, maintaining that the
amounts claimed were not automatically payable and had to be
supported by evidence and justified under the terms of the
agreement and the applicable provisions of the Arbitration and
Conciliation Act, 1996.

12. In its statement of defence and counterclaim, the
respondent sought recovery of Rs.12,60,115/- towards
compensation under Clause 2 of the agreement, together with
interest at 12% per annum. The respondent maintained that

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the levy was contractually permissible notwithstanding the
extensions granted and that the claimant was not entitled to
the monetary reliefs claimed. The dispute was adjudicated by
the sole arbitrator after the claimant was examined as PW-1
and the respondent’s witness was examined as RW-1, with
documents marked on both sides. The respondent sought
rejection of the claimant’s claims and acceptance of its
counterclaim in accordance with the contractual terms and the
applicable law.

III. Reasons recorded by the arbitrator in the award:

13. The sole arbitrator, after considering the oral
evidence and the documentary record, held that the claimant
had established that delays had occurred on the respondent's
side. Particular reliance was placed on the extensions of time
granted by the department, the admissions elicited from RW-1
and the respondent's letter dated 03.09.2020. The arbitrator
found that the work had been extended up to 30.11.2019 and
that the respondent's own correspondence disclosed various
reasons for the delay. The arbitrator accordingly held that the
respondent could not sustain the levy of compensation of
Rs.12,60,115/- in the circumstances established before the
tribunal.

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14. The arbitrator did not accept every monetary claim
merely because the claimant had established delay. The claim
towards further payment for extra items was rejected for want
of documentary proof beyond the extra work already
acknowledged and paid for by the respondent. The GST claim
was allowed subject to production of evidence of payment of
GST to the Government, but the claim for interest on GST was
not allowed. The claims for interest on delayed payments,
overhead charges and loss of profit, bank guarantee
commission, idle manpower and machinery, escalation in prices
and interest on the security deposit and performance guarantee
were considered with reference to the evidence and the
circumstances of the contract.

15. The arbitrator further held that the claimant was
not entitled to the claimed amount of Rs.4,00,000/- towards
legal expenses, as the actual expenditure had not been
established by supporting material. The claim for compensation
against the respondent was also rejected for want of proper
quantification and supporting basis. The arbitrator, however,
allowed the claim for costs of arbitration, holding that the
proceedings had become necessary on account of the dispute
concerning levy of compensation. The counterclaim of the

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respondent for recovery of Rs.12,60,115/- with interest at 12%
per annum was rejected.

16. The sole arbitrator, upon consideration of the
pleadings, oral evidence and documentary material placed on
record, answered Issue Nos. 1, 3, 4, 5 and 11 in the
affirmative; Issue Nos. 2, 6, 9 and 12 in the negative; and
Issue No. 10 partly in the affirmative. By award dated
23.07.2024 in A.C. No.456/2022, the sole arbitrator partly
allowed the claimant's claims. Claims Nos.1, 4, 5 and 13 were
dismissed; Claim No.2 towards interest on delayed payment
was allowed; Claim No.3 towards GST reimbursement was
allowed subject to production of proof of payment of GST; and
Claims Nos.6, 7, 8, 9 and 10, relating respectively to overhead
charges, bank guarantee commission, idle manpower and
machinery, escalation of prices and interest on the security
deposit and performance guarantee, were allowed. The
respondent was held not entitled to levy compensation of
Rs.12,60,115/-, and its counterclaim was dismissed. Interest at
18% per annum was allowed on the successful claims from
19.11.2019, subject to the terms of the award. The award
recorded the monetary claims allowed as aggregating to
Rs.2,16,98,950/- inclusive of interest up to 17.10.2024, subject

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to correction as the individual amounts had not been quantified
in the manner required.

17. Aggrieved by the award dated 23.07.2024 passed in
A.C. No.456/2022, the Government of India, represented by
the Executive Engineer, CPWD, instituted
Com.A.P.No.156/2024 before the Commercial Court under
Section 34 of the Arbitration and Conciliation Act, 1996,
seeking to set aside the award.

IV. Comp AP No 156/2024:
18. The Government of India challenged the award on
the specific ground that the Sole Arbitrator had awarded
interest at 18% per annum contrary to Clauses 6A, 7 and 9 of
the agreement, which prescribed the contractual conditions and
rate of interest; allowed GST reimbursement without proof of
the actual differential tax liability or compliance with the
Department’s Circular dated 29.09.2020; and awarded
overheads and loss of profit contrary to Clause 2(x) of Schedule
F, which prescribed 15% towards overheads and profit. The
petitioner further contended that the claims for bank guarantee
commission, idle manpower and machinery, and escalation
were allowed without proper evidentiary support, despite
escalation payments already made under the agreement and

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the respondent’s own admission that he had stopped the work
during the relevant period. In particular, the escalation claim of
Rs.24,90,000/- was challenged on the ground that the
difference reflected in the quotations relied upon by the
respondent was only Rs.9,85,197/-, without any proper basis
or calculation to justify the higher amount.

19. The petitioner further contended that the award of
interest on the security deposit and performance guarantee was
contrary to Clause 1A of the General Conditions of Contract and
unsupported by the actual dates and amounts of deduction and
refund. The award restraining levy of compensation under
Clause 2 was also challenged on the ground that the delay was
attributable to the respondent and that Clause 5 of the General
Conditions of Contract preserved the contractual obligation to
complete the work within the stipulated period. The petitioner
alleged that the Arbitrator had failed to quantify the delay
attributable to each party, particularly for the period from
28.01.2018 to 27.11.2019, and had not adequately considered
the respondent’s admissions, the completion of civil works, or
the absence of hindrances attributable to the Department
during substantial periods. It was also contended that the
Arbitrator had granted overlapping benefits by awarding

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extension of time, overheads and loss of profit, escalation and
interest.

20. Lastly, the Government of India contended that the
award was based on surmises and conjectures, without cogent
reasons or adequate documentary evidence to establish the
alleged departmental delay. It was specifically alleged that the
respondent had failed to provide particulars identifying the
decisions allegedly delayed by the Department, the dates on
which such decisions were required and actually taken, and the
periods during which the work was prevented from proceeding.
The petitioner also questioned the Arbitrator’s reliance on the
departmental correspondence and records without considering
them alongside the other contemporaneous documents, and
alleged suppression of material departmental records by the
respondent. On these grounds, the petitioner asserted that the
Arbitrator had travelled beyond the terms of the contract,
committed an error of jurisdiction, and rendered an award
contrary to the agreement, the evidence on record and the
applicable provisions of the Arbitration and Conciliation Act,
1996.

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V. Objections by claimant/respondent in Com.AP.No.
156/2024:

21. The respondent filed objections to the petition filed
by the Government of India, refuting the contentions raised
therein and reiterating the claims advanced before the learned
Sole Arbitrator. He contended that the award had been passed
after considering the material placed on record and that none
of the grounds urged by the Government of India warranted
interference under Section 34 of the Arbitration and Conciliation
Act, 1996. He therefore sought dismissal of the petition and
prayed that the arbitral award be allowed to stand.

22. The respondent further contended that the Court,
while exercising jurisdiction under Section 34, could not
interfere with the award merely because another view of the
facts or a different interpretation of the terms of the contract
was possible. According to him, the Court was required to
exercise restraint and defer to the view taken by the Arbitrator,
and the adequacy of the reasoning or the possibility of arriving
at a different conclusion would not, by themselves, justify
setting aside the award. He submitted that interference was
permissible only where the award suffered from the legally
recognized grounds under Section 34, including patent illegality

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or perversity, and that the Court could not undertake a fresh
examination of the dispute or probe the internal process by
which the Arbitrator had arrived at his conclusions.

23. In the above circumstances, the respondent
maintained that the Government of India had failed to establish
any ground under Section 34 of the Act for setting aside the
arbitral award. He accordingly sought dismissal of the petition,
contending that the findings recorded by the Arbitrator ought
not to be disturbed merely because the petitioner disputed the
appreciation of evidence or the interpretation of the contract.

VI. Order in Com.AP.No.156/2024:
24. The principal question for consideration is whether
the arbitral award dated 23.07.2024, passed in A.C.
No.456/2022 arising out of Agreement No.16/SE/BCD-
III/2016-17 dated 15.02.2017, can be sustained in the light of
the specific objections raised by the Government of India under
Section 34 of the Arbitration and Conciliation Act, 1996. The
contract was for execution of the sewage treatment plant work
for a sum of Rs.1,26,01,150/-. The petitioner has specifically
questioned the award of Rs.54,34,256/- towards overheads and
loss of profit and Rs.24,90,000/- towards escalation, apart from
the other monetary claims. The objection is not merely that

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another view could have been taken by the Arbitrator; it is that
the amounts awarded have not been reconciled with the
contractual provisions, the payments already made and the
material relied upon by the parties. The respondent's
contention that the Court cannot substitute its own
interpretation of the contract is well founded as a general
proposition, but it does not answer the specific objections
where the award is alleged to have disregarded express
contractual stipulations and material evidence.

25. The award of Rs.54,34,256/- towards overheads
and loss of profit requires particular scrutiny. Clause 2(x) of
Schedule F, as relied upon by the petitioner, prescribed 15%
towards overheads and profit. The petitioner also asserted that
escalation of approximately Rs.7.16 lakh had already been paid
under the contract. In these circumstances, the Arbitrator was
required to demonstrate the contractual and evidentiary basis
for awarding the additional amount, particularly when the claim
was calculated for 23 months and the respondent had admitted
that he had stopped the work during a portion of the relevant
period. Similarly, the claim of Rs.24,90,000/- towards
escalation was challenged with reference to the quotation
difference of Rs.9,85,197/- relied upon by the petitioner. The

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award does not satisfactorily reconcile this difference or
disclose the calculation by which the higher amount was arrived
at. The award of idle manpower and machinery charges of
Rs.5,03,676/- also calls for examination in the light of the
specific contention that the respondent had stopped work from
08.02.2018 to 26.11.2018 and that the civil work had already
been completed. These are not minor discrepancies in
computation; they go to the basis on which the claims have
been allowed.

26. The award of interest at 18% per annum, when the
petitioner relied upon Clauses 6A, 7 and 9 prescribing different
contractual conditions and a rate of 7.5%, has also not been
adequately reconciled with the agreement. The same is true of
the award of interest on the security deposit and performance
guarantee, particularly when the petitioner contended that the
security deposit was deducted and released on dates different
from those assumed in the claim calculation, and that Clause
1A of the General Conditions of Contract did not permit interest
as awarded. The award of GST reimbursement was challenged
for want of proof of the actual differential tax liability and
compliance with the Department's Circular dated 29.09.2020.
More importantly, the Arbitrator's conclusion that the delay was

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attributable to the Department and that compensation under
Clause 2 could not be levied had to be considered alongside the
admitted completion of civil works, the respondent's own
evidence regarding stoppage of work, and the petitioner's
contention that no departmental hindrance had been
established for substantial periods after completion of the civil
works. The award does not sufficiently address these specific
matters or quantify the delay attributable to each party. The
cumulative effect of these defects is material, particularly when
the monetary claims have been allowed without a clear
reconciliation with the agreement and the evidence on record.
Having regard to the above, this Court is of the view that the
objections raised by the Government of India are not confined
to a request for re-appreciation of evidence or substitution of
one possible view for another. The challenge concerns the
award of substantial sums without an adequately demonstrated
basis under the contract, including the award of escalation
beyond the amount reflected in the quotations relied upon,
overheads and loss of profit despite the contractual stipulation
and prior escalation payments, and idle charges for a period
during which the respondent's own conduct was in issue. To the
extent that these findings disclose patent illegality going to the
root of the award within the meaning of Section 34(2A) of the

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Arbitration and Conciliation Act, 1996, the award cannot be
sustained. The petition filed by the Government of India is
accordingly allowed, and the arbitral award dated 23.07.2024
passed in A.C. No.456/2022 is set aside.

27. Aggrieved by the judgment dated 19.04.2025
passed by the Commercial Court, allowing the petition filed by
the Government of India under Section 34 of the Arbitration
and Conciliation Act, 1996, and setting aside the arbitral award
dated 23.07.2024 in A.C.No.456/2022, the claimant has
preferred the present commercial appeal under Section 13(1-A)
of the Commercial Courts Act, seeking to set aside the
judgment passed in the arbitration suit and to restore the
arbitral award.

28. We have heard Sri.Manuchandra Sekhar.P., learned
counsel for the appellant/claimant and Sri.Kumar M.N., learned
counsel for the respondent.

VII. Grounds in the present appeal:
29. The claimant in this appeal contends that the
Commercial Court failed to appreciate the findings of the
learned Sole Arbitrator, who, after considering the pleadings,
documentary evidence and oral evidence of both parties, had

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concluded that the delay in execution of the work was
attributable to the respondent and that the levy of
compensation was unjustified. It is further contended that the
Commercial Court exceeded the limited scope of interference
under Section 34 of the Arbitration and Conciliation Act, 1996,
by interfering with the arbitral award without properly applying
the principles laid down by the Hon’ble Supreme Court.
According to the claimant, the impugned judgment does not
adequately deal with the reasons recorded by the Arbitrator on
the issues in dispute and fails to appreciate the contractual
extensions granted for completion of the work and the evidence
relied upon in support of the claims.

30. The claimant also asserts that the Commercial
Court failed to properly examine the evidence relating to the
period of delay and the justification for the claims allowed by
the Arbitrator, and that the impugned judgment, by setting
aside the award, has caused serious prejudice to the claimant.
On these grounds, the claimant seeks setting aside of the
judgment dated 19.04.2025 and restoration of the arbitral
award dated 23.07.2024.

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VIII. Reasons and conclusion:
31. Having considered the grounds urged in the appeal,
the judgment passed by the Commercial Court in Com.A.P.
No.156/2024, the arbitral award dated 23.07.2024 and the
evidence on record, the question that arises for our
consideration is,
“Whether the award could have been sustained in
the face of the specific objections raised by the
Government of India?”

32. The agreement dated 15.02.2017 was for execution
of the 350 KLD sewage treatment plant at the STC, BSF
Campus, Yelahanka, Bengaluru, for ₹1,26,01,150/-, with the
stipulated period of completion ending on 12.10.2017. Though
the respondent extended the period up to 30.11.2019 without
penalty, the extension by itself did not establish that the entire
delay was attributable to the Department or that every
monetary claim made for the extended period was payable. The
civil work was recorded as completed on 10.06.2019 and the
final bill, submitted on 18.11.2019, was paid on 27.08.2020.
The respondent thereafter disputed the settlement of the bill
and pursued claims under Clause 25 of the General Conditions
of Contract. The Arbitrator was required to examine each claim
with reference to the contractual terms, the period for which it
was made and the evidence establishing the loss. The

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Commercial Court, in examining those matters, did not merely
substitute its view for that of the Arbitrator, but considered
whether the award could be sustained within the parameters of
Section 34 of the Arbitration and Conciliation Act, 1996.

33. The evidence of the claimant himself is relevant to
the question of delay, though it is not the sole basis for
deciding the appeal. In cross-examination, the claimant
admitted that preparation and submission of drawings formed
part of his responsibility (Point No.3), that he was familiar with
CPWD procedure (Point No.5), and that the work had to
proceed in sequence, including installation of electro-
mechanical components and subsequent operation of the plant
for three months (Points Nos.10 and 25). The record further
shows that PCC work of 200 mm thickness commenced on
02.06.2017, while the request for revision of thickness was
made on 07.06.2017 (Points Nos.23 and 26), and that the RCC
work was completed by 27.01.2018 (Point No.35). The claimant
admitted that the work was stopped from 08.02.2018 and that
no further bills were submitted during the stoppage, while the
record does not disclose a written direction from the
Department requiring the work to be stopped (Points Nos.37
and 38). The approval of makes of electro-mechanical

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equipment was sought only on 19.09.2018 (Point No.36).
These facts had to be considered along with the claimant’s case
regarding non-payment of bills, delayed approvals and site
conditions. They do not permit the entire period after February
2018 to be treated as departmental delay without a clear
finding identifying the particular hindrance, its duration and its
effect on the work. The Commercial Court was justified in
examining whether the Arbitrator had undertaken that exercise
before accepting the claims.

34. The award of ₹54,34,256/- towards overheads and
loss of profit, calculated for a period of 23 months, is not
supported by a satisfactory reconciliation with the contract and
the evidence. Clause 2(x) of Schedule ‘F’ was relied upon by
the Department as prescribing 15% towards overheads and
profit, and escalation of approximately ₹7.16 lakh had already
been paid under the contract. The Arbitrator was required to
explain how the additional amount was computed, what period
of delay was attributable to the Department and how the
payments already made had been accounted for. The claim for
idle manpower and machinery of ₹15,03,676/- also required
proof of the period during which the resources were kept idle at
the instance of the Department and the expenditure actually

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incurred. Similarly, the claim for escalation of ₹24,90,000/- was
disputed with reference to the quotations relied upon by the
claimant, the difference stated by the Department to be
₹9,85,197/-, and the absence of a satisfactory calculation
supporting the higher figure. The fact that the contract
continued beyond the original completion date could not,
without more, establish entitlement to these amounts. The
award did not adequately reconcile the claims with the
contractual provisions, the work actually completed, the
admitted stoppage and the escalation already paid. The
Commercial Court was therefore justified in finding that the
monetary awards, on these heads, could not be sustained.

35. The objections concerning GST reimbursement,
bank guarantee commission and interest also required
consideration on their individual merits. GST reimbursement
had to be supported by proof of the additional tax liability
actually borne and compliance with the Department’s circular
dated 29.09.2020. The bank guarantee commission claim had
to be examined in the light of the terms governing the
performance guarantee. As regards interest, the Department
relied upon Clauses 6A and 7 of the agreement, contending
that the applicable contractual rate was 7.5% per annum,

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whereas the Arbitrator awarded interest at 18% per annum.
The claimant sought to justify the award by referring to the
financial burden of borrowing funds and the Department’s
alleged breach of contract. However, the award of interest
under Section 31(7)(b) of the Arbitration and Conciliation Act,
1996 had to be considered alongside the contractual provisions
and the nature of the amounts awarded. The same applies to
interest on the security deposit and performance guarantee,
which required consideration of Clause 1A and the actual dates
of deduction and release. The Commercial Court was not
required to accept the figures merely because they had been
claimed and allowed by the Arbitrator; it had to determine
whether the award disclosed a legally sustainable basis for the
amounts granted. The objections in this regard were directed to
the contractual entitlement and computation of the claims, and
not merely to the adequacy of the Arbitrator’s reasoning.

36. The claimant has relied upon the principle that, a
Court exercising jurisdiction under Section 34 cannot reassess
the evidence as if hearing an appeal on facts, and that a
different interpretation of the contract is not, by itself, a ground
for setting aside an award. That principle is not in dispute. The
question, however, is whether the defects identified by the

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Commercial Court fall within the statutory grounds for
interference. In the present case, the claims for overheads and
loss of profit, idle machinery and manpower, escalation and
interest were substantial and required a clear connection
between the amounts awarded, the terms of the agreement
and the delay actually attributable to the Department. The
evidence concerning completion of the RCC work by
27.01.2018, stoppage from 08.02.2018, the request for
approval of equipment makes on 19.09.2018, the extension up
to 30.11.2019 and the payments already made could not be
ignored while determining that liability.

37. On examining the reasons recorded by the
Commercial Court, we find that its decision was founded on the
contractual provisions and the material bearing on the claims,
and not on a mere preference for another possible view. The
claimant has not demonstrated that the Commercial Court
exceeded the permissible scope of Section 34 or committed an
error warranting interference under Section 37 of the
Arbitration and Conciliation Act, 1996. Accordingly, we pass the
following;

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ORDER

(i) This Commercial Appeal is dismissed;

(ii) The judgment and order dated 19.04.2025 passed in
Com.A.P.No.156/2024 by the Commercial Court, setting aside
the award dated 23.07.2024 passed by the Sole Arbitrator in
A.C.No.456/2022 is hereby affirmed.

Sd/-
(D K SINGH)
JUDGE


Sd/-
(H.SHANTHI BHUSHAN)
JUDGE


KNM