M/S KMV PROJECTS vs STATE PROJECT DIRECTOR

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COMAP No. 87 of 2025



ST
RESERVED ON 1 SEPTEMBER 2026

IN THE HIGH COURT OF KARNATAKA AT BENGALURU


TH
DATED THIS THE 28 DAY OF OCTOBER, 2026

PRESENT

THE HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE

AND

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

COMMERCIAL APPEAL NO. 87 OF 2025

BETWEEN:

1. M/S KMV PROJECTS
REGIONAL OFFICE SITUATED AT NO.302
RD
3 FLOOR, EAST PARK ROAD
KUMARA PARK (E)
BENGALURU - 560 020
REPRESENTED BY ITS VICE-PRESIDENT
MR. D. TARANATH DASARI
…APPELLANT








(BY SRI ZULFIKIR KUMAR SHAFI, ADVOCATE)

AND:

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

2. SRI K.N. KESHAVANARAYAN
FORMER JUDGE
HIGH COURT OF KARNATAKA
ARBITRATION AND CONCILIATION CENTRE -
BENGALURU (DOMESTIC AND INTERNATIONAL)
III FLOOR, EAST WING

Digitally signed
by VEERENDRA
KUMAR K M
Location: High
Court of
Karnataka

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COMAP No. 87 of 2025



"KHANIJA BHAVAN"
RACE COURSE ROAD
BENGALURU - 560 001
…RESPONDENTS
(BY SRI KIRAN V. RON, AAG A/W
SMT. NILOUFER AKBAR, AGA FOR R-1)

THIS COMMERCIAL APPEAL IS FILED UNDER SECTION 13
(1-A) OF COMMERCIAL COURT ACT, 2015 READ WITH SECTION 37
OF THE ARBITRATION AND CONCILIATION ACT, 1996 PRAYING TO
SET ASIDE THE IMPUGNED ORDER DATED 05.12.2024 IN COM.A.P.
NO.99/2024 PASSED BY THE LXXXIV ADDITIONAL CITY CIVIL AND
SESSIONS JUDGE, (COMMERCIAL COURT) (CCH-85), AT
BENGALURU AND ETC.

THIS COMMERCIAL APPEAL HAVING BEEN HEARD AND
RESERVED FOR JUDGMENT, COMING ON FOR PRONOUNCEMENT
THIS DAY, JUDGMENT WAS PRONOUNCED AS UNDER:
CORAM: HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE
and
HON'BLE MRS. JUSTICE K.S. HEMALEKHA

C.A.V. JUDGMENT
(PER: HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE)
1. The appellant, M/s KMV Projects [ KMV ], has filed the
present appeal under Section 13(1A) of the Commercial Courts
Act, 2015 [ CC Act ] read with Section 37(1)(c) of the Arbitration and
Conciliation Act, 1996 [ A&C Act ], impugning a judgment dated
05.12.2024 [impugned order] passed by the learned LXXXIV
Additional City Civil and Sessions Judge, Commercial Court,

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Bengaluru (CCH-85) [ Commercial Court ] in Com.A.P.No.99/2024.
The appellant had filed the said petition under Section 34 of the
A&C Act seeking setting aside of an arbitral award dated
10.11.2023 [ impugned award ] rendered by the learned Sole
Arbitrator [ Arbitral Tribunal ]. The learned Commercial Court found
no ground to interfere with the impugned award and accordingly
dismissed the petition.
2. Respondent No.1, the State Project Director, Rashtriya
Madhyamika Shikshana Abhiyana [ SPD ], was the respondent
before the Arbitral Tribunal and KMV was the claimant. In terms of
the impugned award, the Arbitral Tribunal partly allowed KMV's
claims and directed the SPD to pay a total sum of ₹61,61,668/-
(Rupees sixty-one lakhs sixty-one thousand six hundred and sixty-
eight only) together with future interest at 9% per annum from the
date of the award till payment, comprising ₹38,51,050/- towards
unproductive overhead charges [Claim No.6(a)]; and ₹23,10,618/-
towards loss of expected profit [Claim No.7], as against the claim of
₹38,51,028/-. The learned Arbitral Tribunal further awarded
₹2,00,000/- towards costs [Claim No.11], as against the claim of
₹12,00,000/-.

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3. The impugned award herein is also the subject matter of
COMAP No.61/2025, one of a batch of nine appeals (COMAP
Nos.53/2025 to 61/2025) filed by the SPD. Whilst SPD challenged
the impugned award to the extent of the claims awarded in favour
of KMV, the present appeal is confined to the impugned award to
the extent it rejects KMV’s Claim for Payment of the Price
Adjustment/Escalation Bill [Claim No.1].
PREFATORY FACTS
4. Rashtriya Madhyamika Shikshana Abhiyana [ RMSA ] is a
centrally sponsored scheme launched in the year 2009-10 by the
Ministry of Human Resource Development, Government of India,
for enhancing access to, and the quality of, secondary education.
The Government of Karnataka [ GoK ] implemented the scheme
through the SPD and took up 2,024 civil works under 77 packages
during 2009-10 and 2013-14. The said civil works involved
construction of new school buildings, Adarsha Vidyalayas [ model
schools ] and girls' hostels, and strengthening and upgradation of
existing schools at an aggregate cost of ₹1,645.70 crores. The
scheme has since been integrated with Samagra Shikshana
Karnataka in 2018-19.

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5. On 24.09.2012, tenders were invited on a package basis
through the e-procurement portal in respect of works spread over
thirty districts of the State, for a total of 52 packages. KMV
emerged the successful bidder in respect of nine packages
comprising 406 scattered work sites. The present dispute pertains
to Package B-7 - Construction of New School Buildings for
Upgradation and Additional Rooms for Strengthening of Existing
Government High Schools at various places in Bidar District [ the
subject package ]. After KMV was declared as the lowest bidder
(L1), the parties entered into negotiations, held on 20.12.2012,
21.01.2013 and 13.02.2013, pursuant to which KMV reduced its
quoted rates.
6. By Letter of Acceptance dated 18.03.2013 bearing No.
RMSA/CW/UP-ST/BIDAR/2012-13/34 (Ex.C4), SPD accepted
KMV's revised offer for a contract price of ₹2,417.83 lakhs for the
subject package and called upon KMV to furnish the requisite
security deposit.
7. The parties executed a Construction Agreement [ the
Agreement ] dated 15.05.2013 (Ex.C5). Clause 4 of the Agreement
stipulates that the Letter of Acceptance, the Contract Data, the

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Conditions of Contract, and the Special Conditions of Contract,
among other documents, formed an integral part of the Agreement.
8. The notice to proceed with the work was issued on
17.05.2013 and the stipulated period of completion was sixteen
months therefrom. During execution, additional quantities and Extra
Item Rate List [ EIRL ] items were required to be executed. Upon
approval of the competent authority, the parties entered into a

Supplementary Agreement dated 17.03.2017 for ₹332.42 lakhs.

9. There was delay in execution of the works and they were
not completed within the stipulated period. KMV attributed the
delay, inter alia , to (i) delay in handing over sites; (ii) delay in
supply of drawings; (iii) delay in approval of work slips and EIRL
items; (iv) delay in release of payments; (v) non-availability of water
and power; and (vi) scarcity of sand and materials on account of
the ban on mining. KMV invoked the price adjustment clause of the
Conditions of Contract and raised its claim towards price
adjustment; none of the said bills were paid. SPD, on the other
hand, contended that no price adjustment clause was applicable to
the Agreement in respect of the subject works.

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

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court appeals on 20.10.2020, observing that the parties would be
governed by the terms of the contract entered into by them in
respect of the various packages awarded by the State.
12. By its letter dated 12.03.2019, KMV set out the causes of
delay and its claims. KMV invoked the dispute resolution
mechanism under Clause 23 of the Conditions of Contract read
with Clause 4 of the Special Conditions of Contract. Subsequently,
by legal notice dated 08.05.2019 (Ex.C75), it invoked the arbitration
agreement, attributing breach of contract to the SPD.
13. SPD responded by reply dated 11.06.2019 (Ex.C76),
contending, inter alia, that the reference to arbitration was
premature in view of the pendency of the intra-court writ appeals.
14. KMV filed an application under Section 11 of the A&C Act,
being C.M.P.No.254/2019, seeking appointment of an Arbitrator.
This Court allowed the same by an order dated 05.11.2020 and
appointed a Sole Arbitrator to adjudicate the disputes between the
parties.
15. The GoK issued Government Order No. EP 89 YYK 2020,
dated 30.09.2020, accepting the recommendations of the Technical
Advisory Committee and superseding the KIPA report. It ordered

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that (i) for the purpose of computing extension of time and penalty,
each work site in a package be treated as a separate unit; (ii) the
administration be held responsible for delays caused by factors
beyond the contractor's control; and (iii) price adjustment be
allowed in respect of the 25 packages whose tender conditions
contained the price adjustment clause. Admittedly, the sums due to
KMV were released only thereafter and were received in full before
29.03.2021. By an order dated 13.01.2021, an extension of time
was granted to KMV without penalty.
ARBITRAL PROCEEDINGS
16. KMV filed its Statement of Claim before the Arbitral
Tribunal claiming an amount of ₹46,60,34,334/- (Rupees forty-six
crores sixty lakhs thirty-four thousand three hundred and thirty-four
only) under eleven heads, together with interest at 24% per annum
from the date of the claim petition till payment, and costs. The
summary of claims as set out in the statement of claims is
reproduced below:
Claims Particulars Claim Amount
(Amt. in Rs.)
Claim No.1 Payment of Price Adjustment/Escalation Bill 2,33,19,736
Claim No.2 Payment of equitable enhanced rates executed 1,15,04,148
beyond tender completion period.
Claim No.3 Payment of equitable enhanced rates executed
beyond Tender Completion Period for extra
Items.

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Claim No.4 Payment of equitable enhanced rates executed
beyond Tender Completion Period for quantities
more than 125%
Claim No.5 Payment towards idle labour charges 7,23,46,508
Claim No.6(a) Payment of unproductive overhead charges. 38,51,028
Claim No.6(b) Payment of additional overhead charges. 72,86,168
Claim No.7 Payment towards loss of expected profit on the
balance work as on original tender completion
date.
38,51,028
Claim No.8(a) Loss of expected profit due to non-receipt of 1,99,35,144
profit by tender completion period.
Claim No.8(b) Loss of expected profit due to non-receipt of 2,66,88,176
profit by actual completion period.
Claim No.9 Payment towards interest on claim amount 24,13,04,467
calculated upto 31.12.2020 at the rate of 24%.
Claim No.10 Payment towards additional Bank Guarantee 9,10,194
charges beyond original agreement period
Claim No.11 Payment of Rs. 12,00,000/- (Rupees Twelve 12,00,000
Lakhs Only) towards Cost of Litigation.
Total 46,60,34,334


17. It was KMV's case that after it was declared the successful
bidder, it had reduced its rates by factoring in the price escalation
clause and the economies of scale. KMV claimed that the SPD did
not hand over the sites within the stipulated period despite various
requests and delayed approval of drawings, work slips, and EIRL
items, thereby preventing KMV from completing the contract on
time and prolonging execution of the works. KMV alleged that the
SPD also withheld amounts due to it, which compelled KMV to
refer the disputes to arbitration.
18. SPD disputed that the price adjustment clause was
applicable to the Agreement in respect of the subject works. The
tender documents required the price variation clause to be treated

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as deleted. Therefore, SPD was not bound by it. SPD further
contended that the delay, if any, had been suitably compensated
by extension of time granted without imposition of penalty, and that
the claims, aggregating ₹46,60,34,334/-, were fictitious,
unsubstantiated and beyond the scope of arbitration.
19. On the basis of the pleadings between the parties, the
Arbitral Tribunal framed the following issues.
"1. Whether Claimant proves that non completion
of the works under the contract within the
stipulated period was for the reasons solely
attributable to Respondent, resulting in breach of
contract by Respondent, as such, the delay in
completion of the works was solely attributable to
Respondent?
2. Whether for the reasons set out in SOC which
were beyond the control of Claimant, he was
prevented from completing the entire scope of
work within the scheduled contract period?
3. Whether Respondent proves that the delay in
completion of the works under the contract within
the original period stipulated under the contract
was solely attributable to Claimant?
4. Whether Respondent proves that as the
requirements of Clause 38.4 of Conditions of
Contract have not been complied with by
Claimant, none of the claims put-forth in SOC is
tenable?
5. Whether the Claimant is entitled for payment of
amounts claimed under various heads as put-forth
under claim Nos.1 to 8 of SOC?
6. Whether the Claimant is entitled for payment
towards past interest on the amounts claimed up

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to 31-12-2021 at 24% PA as claimed under claim
No.9 of SOC?
7. Whether Claimant is entitled for current and
future interest at 24% PA on the amount claimed?
8. Whether Claimant is entitled for cost of this
arbitral proceeding?
9. To what order and award the parties are
entitled to?"


20. After examining the evidence and materials placed on
record, the Arbitral Tribunal found that the delay in completion of
works within the stipulated period was solely attributable to the
SPD. The Arbitral Tribunal further rejected the SPD's contention
that non-compliance with Clause 38.4 of the Conditions of Contract
rendered the claims not tenable. However, the Arbitral Tribunal
rejected KMV’s claim for price adjustment on the ground that (i) the
Agreement did not contain the Price Variation Clause; and (ii) that
KMV failed to prove that the amount claimed was payable.


21. The Arbitral Tribunal partly allowed Claim Nos.6(a), 7 and
11. The Arbitral Tribunal also awarded future interest and costs but
rejected the remaining claims, being Claim Nos.1 to 5, 6(b), 8(a),
8(b), 9 and 10, in their entirety.

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22. The dispositive part of the impugned award is set out
below:
"The claims of Claimant as put forth in Statement
of Claim are allowed in part as under:

(1) Claim No.6(a) is allowed in a sum of
Rs.38,51,050/-;
(2) Claim No.7 is allowed in part in a sum of
Rs.23,10,618/- only as against the claim of
Rs.38,51,028/-;
(3) Respondent is directed to pay to Claimant a
total sum of Rs.61,61,668/- as per Sl.No.(1) and
(2) above together with future interest at the rate
of 9% per annum from the date of this Award till
the date of payment;
(4) Claim No.11 is allowed in part in a sum of
Rs.2,00,000/- only as against claim of
Rs.12,00,000/-. Respondent is directed to pay to
Claimant this amount within a period of 3 months
from the date of this award failing which the said
amount shall carry interest at the rate of 9% per
annum from the date of award till the date of
payment;
(5) Claim Nos.1 to 5, 6(b), 8(a), 8(b), 9 and 10 are
rejected in their entirety;
(6) Claimant shall pay requisite stamp duty on this
award payable as per the Karnataka Stamp Act.
With the pronouncement and publication of the
Award, this Arbitral Proceeding stands terminated
as per Section 32(1) of the Act."


23. KMV filed an application under Section 33 of the A&C Act
on 15.12.2023, inter alia , praying for an additional award in respect
of Claim No.1. KMV stated that, by inadvertent error, it had filed old
and obsolete tender documents which had ceased to exist. It

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claimed that, by oversight, it had failed to produce and prove the
revised tender document. The Arbitral Tribunal held that the same
did not constitute a clerical error which could be rectified under
Section 33 of the A&C Act and accordingly, rejected the application
by an order dated 05.03.2024.
24. KMV assailed the impugned award before the learned
Commercial Court by filing an application to set aside the
impugned award (Com.A.P.No.99/2024) under Section 34 of the
A&C Act. By the impugned order dated 05.12.2024, the learned
Commercial Court found no ground to set aside the impugned
award and dismissed Com.A.P.No.99/2024, giving rise to the
present appeal.
REASONS AND CONCLUSIONS
25. We note, at the outset, that KMV confined its challenge to
the impugned award to the denial of its claim for price
adjustment/escalation. The learned Arbitral Tribunal rejected the
said claim on the ground that price adjustment clause did not form
part of the contract between the parties and, in any event, KMV
had failed to place evidence to establish the amounts claimed. The
learned Commercial Court found no grounds to interfere with the

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learned Arbitral Tribunal’s decision to reject the claim for want of
necessary evidence.
26. The learned counsel for KMV earnestly contended that the
SPD did not dispute the quantum of the claim; thus, KMV had no
occasion to establish the said measure. He contended that the
principal dispute in Claim No. 1 was essentially confined to whether
the price adjustment clause was part of the contract between the
parties or was specifically excluded. The SPD's case was that the
tender document expressly stated that the price adjustment clause
would not apply and, therefore, any claim under the said clause
was not maintainable.
27. While addressing the question, it is relevant to refer to the
averments made by KMV in its statement of claims. KMV claimed
that, at the stage of negotiations, it had brought to the SPD's
attention that the sites were located in remote villages and were
scattered. Thus, the cost of transporting material, mobilising
labourers, and other establishment charges would be substantially
higher than if the works were carried out at a single location. KMV
claimed that, notwithstanding this, it had offered discounted rates
during the negotiations, after factoring in the provision relating to
price escalation and economies of scale, which would enable KMV

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to perform its work within the negotiated amount. It averred that
there was delay in execution of the works on several grounds,
including (a) delay in supply of agreement copies and signing of
conditions of contract; (b) delay in handing over of site; (c) delay in
performance of pooja; (d) delay in supply of drawings; (e) non-
availability of water and power sources; (f) scarcity of sand; (g)
increase in quantities; (h) delay in payment; (i) delay in approval of
work slips/EIRL; (j) increase in cost of material due to shortage; (k)
posting of technical staff; (l) loss of working season; and (m)
extension of BGs.
28. KMV claimed that all the impediments stated above were
beyond its control and that several were caused by acts of
omission and commission on the part of the SPD, for which KMV
was entitled to compensation. In the aforesaid background, KMV
claimed that it was entitled to the claims as set out in a tabular
statement, which is set out hereinbefore.
29. Apart from the aforesaid statement, the Statement of
Claims contained no averment as to how the Claim No.1 for a sum
of ₹2,33,19,736/- was computed.
30. We may, at this stage, refer to Clause 39 of the Conditions
as contract, which is set out below:

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"39. Price Adjustment:

39.1 Contract price shall be adjusted for
increase or decrease in rates and prices of
labour, materials, fuels and lubricants in
accordance with the following principles and
procedures and as per formulae given in the
Contract Data.

(a)The price Adjustment shall apply for the
work done from the date of commencement
up to the end of original period of completion
or extensions granted by the Employer and
shall not apply to work carried out beyond the
stipulated period of completion for reasons
attributable to the Contractor;

(b) Price Adjustment shall be admissible from
the date of opening of tenders (original or
extended).

(c) The price adjustment shall be determined
during each quarter from the formulae given
in Contract Data.

(d) Following expressions and meanings are
assigned to the work done during the quarter.

R = Total value of work done during the
quarter. It will exclude value for works
executed under variations for which price
adjustment (if any) will be worked out
separately based on the terms mutually
agreed.

39.2 To the extent that full compensation for
any rise or fall in costs to the contractor is not
covered by the provisions of this or other
Clauses in the Contract, the unit rates
included in the contract shall be deemed to
include amounts to cover the contingency of
such other rise or fall in costs."

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31. As is evident from the above, in terms of Clause 40.1 (c),
the price adjustment is required to be determined on the basis of
the formulae as set out in the ‘Contract Data’ (which is one of the
documents forming part of the contract). Separate formulae are
provided for adjustment for the labour component, adjustment for
the cement component, adjustment for the steel component,
adjustment for the fuel and lubricant component, adjustment for
plant and machinery spare components and adjustment for other
materials.
32. The tender documents contained a notation to the effect that
the Price Adjustment / Variation Clause Sl.No.39 may be treated as
deleted. Hence, the Price Adjustment /Variation is not applicable to this
Tender.
33. KMV contends that the Arbitral Tribunal erred in proceeding
on the basis of a notation in the tender documents that expressly
deleted the price adjustment/price variation clause.
34. The learned counsel for KMV contended that the Arbitral
Tribunal erred in not permitting KMV to produce the relevant tender
documents that formed part of the agreement signed between the
parties. The said note did not exist in the said documents.

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35. KMV’s claim for a sum of ₹2,33,19,736/- as Price
Adjustment/escalation was premised on the basis that the contract
between the parties included a Price Adjustment Clause, in terms
of which the price of the contract was required to be adjusted by
applying formulae as set out in a document named Contract Data,
which formed a part of the contract between the parties.
36. The question of whether the price adjustment/escalation
clause existed as part of the agreement between the parties is a
contentious issue.
37. According to the SPD the said clause was deleted in the
tender documents and therefore the claim for price adjustment on
the basis of formulae as set out in Contract Data, was not
sustainable. KMV claimed the contrary. It claimed that in the post-
tender negotiations, it had agreed to a certain reduction in the
value on the basis that it would be entitled to price variation and
therefore, the documents signed between the parties did not
include the note deleting the said clause. However, admittedly, the
relevant documents produced by KMV clearly indicate that they
included a note expressly stating that the price adjustment/variation
clause was deleted.

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38. The Arbitral Tribunal, on the basis of the document (Ex.C1),
as produced by KMV, found that the agreement between the
parties included the notation, whereby the price
adjustment/variation clause was deleted. Accordingly, the Arbitral
Tribunal concluded that there was no price variation clause. The
relevant extract of the impugned award is set out below:
“190. Thus, apparently, as could be seen from
Clause 39 of Conditions of Contract which is part of
Ex.C1 and deemed to be part of Agreement, it deals
with Price Adjustment for increase or decrease in
rates and prices of Labour, Materials, Fuels and
Lubricants. As per Clause 39.1 Price Adjustment has
to be worked out as per the Formulae given in the
Contract Data. Contract Data which is part of Ex.C1,
sets out Price Adjustment Formulae. However, there
is a Note at the end of Price Adjustment Formulae in
the Contract Data which reads as under:
"NOTE: The Price Adjustment / Variation
Clause Sl.No.40 may be treated as deleted.
Hence, the Price Adjustment /Variation is
not applicable to this Tender. The
Contractors/ Bidders are requested to
study the tender in detail and quote their
rates".
191. In the light of the NOTE contained in Contract
Data which specifically states that the Price
Adjustment /Variation Clause at Sl.No.40 be treated
as deleted and further stating that the Price
Adjustment / Variation is not applicable to this
Tender, there is force in the contention of
Respondent that Price Adjustment clause is not part
of the Agreement relating to this Package. As could
be seen from the NOTE in Contract Data, it is clear
that 'Price Adjustment' clause is not part of the
agreement relating to this Package and the said
clause had been treated as 'deleted'. From this it is
further clear that at the earliest point of time itself

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even at the stage of Invitation for Tenders, the
Contractors/Bidders had been clearly informed that
'Price Adjustment/Variation Clause' is not applicable
to the Package in question and the Bidders had been
requested to keep this fact in mind while quoting their
rates. Under these circumstances, it is not open to
Claimant to contend that Price Adjustment / Variation
Clause is part of the Contract relating to the Package
in question.
192. No doubt, Ex.C2 and C3 were written by
Claimant offering revised price after the negotiation
meetings held on 21.01.2013 and on 13.02.2013 and
they contain acknowledgments for having delivered
the cover at the office of Respondent. As per the
contents of Ex.C2, Claimant offered revised price
based on the outcome of the negotiation meeting and
considering the inclusion of Price Adjustment Clause.
Even in Ex.C3, Claimant has stated that they are
ready to execute the project considering the inclusion
of Price Adjustment Clause at price of
Rs.24,17,82,796/-. Of course, thereafter the
Respondent issued LOA dated 18.03.2013 as per
Ex.C4 for the contract price of Rs.2417.83 lakhs.
193. Of course, Respondent has not produced any
evidence to show that on receipt of Ex.C2 and Ex.C3,
any reply was sent. However, when at the earliest
point of time itself even in the Invitation for Tenders
which contained Contract Data in which it had been
made clear by a specific NOTE that Price Adjustment
/ Variation clause is not applicable to the Package in
question, there was no obligation on the part of
Respondent to respond to the statement of Claimant
with regard to Price Adjustment Clause. In the light of
the specific Note in Contract Data, as noticed supra,
the fact that Respondent did not respond to the
statement made in Ex.C2 and C3 cannot be a
circumstance to draw any adverse inference against
Respondent. Claimant has not placed any evidence
before this Tribunal to show that in the Negotiation
Meetings held there were discussions regarding Price
Adjustment Clause and that in the said meeting
Respondent agreed to include the Price Adjustment
Clause.

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194. In paragraph 36 of his affidavit evidence, RW1
has clearly stated that Price Adjustment Clause stand
deleted as mentioned in Clause 39 of Conditions of
Contract and NOTE in Section 5 of Contract Data. In
this regard, he has been cross-examined by the
learned counsel for Claimant on 10.01.2023 wherein
at paragraph 76 it is elicited from the witness as
under:
"It is true that Respondent is required to follow
standard procurement tender format. It is true
that the work involved in this case falls under
KW-4 format. It is not correct to suggest that
the Respondent has no power to alter the terms
of the general conditions of the contract. There
may be document under which the Respondent
was empowered to change the terms of general
conditions of the contract. After verifying, if it
available I can produce the same before this
Tribunal on the subsequent dates of hearing. I
agree that in KW-4 format, there is a clause
regarding price adjustment. In the tender
pertaining to this case (package B-7), the
clause regarding price adjustment is deleted. It
is true that in the tender document Ex.Cl the
price adjustment clause is found at clause
No.39. It is true that the letter of acceptance
Ex.C3 is signed by the State Project Engineer.
It is true that Ex.C5 Notice to Proceed with the
work is signed by the State Project Engineer. It
is true that the agreement Ex.C4 bears the
signature of State Project Engineer also".
195. Thus, even in the cross examination, RW1 has
asserted that in the tender pertaining to the package
in question clause regarding Price Adjustment' has
been deleted. May be as elicited from RW1, the
standard format as per KW4, would have price
adjustment clause and Respondent is required to
follow standard tender format i.e., KW4. RW1, has
denied the suggestion that Respondent, has no
power to alter the terms of standard format. There is
nothing on record to indicate that the terms of
standard format cannot be altered under any
circumstances. The conditions of Contract which is
part of Ex.C1 no doubt contains price adjustment

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COMAP No. 87 of 2025



clause under clause 39 as per the standard format.
However, the Contract Data which is also part of
Ex.C1 and which has priority over the Conditions of
Contract, has expressly provided that in relation to
the works under the package in question "Price
Adjustment/Variation Clause be treated as deleted
and therefore, the said clause is not applicable to this
package. In the light of the specific "Note" in the
Contract Data" regarding deletion and non-
applicability of Price Adjustment clause in relation to
the package in question, unless it is established by
cogent and acceptable evidence that the said 'Note'
in Contract Data was subsequently either dropped or
not acted upon by the parties, Claimant is bound by
the terms of contract in this regard. Claimant has not
produced any evidence to show that the said 'Note' in
Contract Data was subsequently given up by
Respondent or to show that Respondent, agreed to
provide benefit of Price Adjustment.

206. In view of the above discussions, this Tribunal
holds that Price Adjustment clause had been treated
as deleted and therefore, the said clause is not part
of the contract in relation to the package in question
and Claimant is bound by the same. Therefore,
Claimant has no right to seek payment of any amount
from Respondent towards Price Adjustment.”

39. It is KMV's contention that it erroneously failed to produce
the relevant documents (the revised tender document, sought to be
produced as Ex.C.79) in which the note deleting the price variation
clause had been dropped.

40. Admittedly, KMV failed to establish that the price variation
clause was part of the agreement between the parties. KMV having

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COMAP No. 87 of 2025



failed to produce the documents which it now seeks to rely on, the
Arbitral Tribunal's decision in this regard cannot be faulted.

41. Concededly, the Arbitral Tribunal's conclusion was based on
the contract documents as proved by KMV. And those documents
clearly indicated that the price variation clause was deleted. It is
also relevant to note that the question of whether the note deleting
the price variation clause had in fact been dropped during
negotiations was stoutly contested by SPD. SPD also led evidence
establishing that the price variation clause had been deleted.

42. Given the limited scope of examination under Section 34 of
the A&C Act, we cannot accept that the Arbitral Tribunal's
conclusion warrants any interference in these proceedings.

43. It is material to note that the Arbitral Tribunal also found that
KMV had not produced any evidence to establish the amounts
payable towards price adjustment in respect of various components
of cost – labour, cement, steel, fuel and lubricants, and Plant and
Machinery, Spares and other materials.

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44. Thus, even if it was accepted that the agreement included a
price variation clause, as claimed by KMV, no amount could be
awarded in the absence of KMV establishing the quantum of the
amount claimed to support the claim. The relevant extract of the
impugned award regarding the said finding is set out below:

“208. As could be seen from clause 39 of Conditions
of Contract, benefit of price adjustment for increase
or decrease in rates and prices are permitted only in
relation to components such as labour, materials
such as cement, steel, fuel and lubricants, plant and
machinery spares and the mode of arriving at the
price adjustment is as per the formulae stipulated
under contract data in respect of each of the
components.
209. In the light of the formulae specified in the
Contract Data, in order to establish the amount
payable towards price adjustment in relation to
permissible components, Claimant is required to
place evidence showing details of the quantum of
work carried out, and evidence showing the average
consumer price index for industrial workers published
by the Labour Bureau, Ministry of Labour,
Government of India for quarter preceding the date of
opening the tender as also for the quarter under
consideration in relation to labour component; All
India Average Wholesale Price Index for cement for
the quarter preceding the date of opening the tender
as also for the quarter under consideration published
by Office of Economic Adviser, Ministry of Commerce
and Industry, Government of India, in relation to
Cement component; All India Average Wholesale
Price Index for Steel (Rebar) for quarter preceding
the date of opening the tender as also for the quarter
under consideration published by Office of Economic
Adviser, Ministry of Commerce and Industry,
Government of India in relation to steel component;
The Official Retail Price of High Speed Diesel at the

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IOC/HPCL/BPL or Consumer Pump at Bangalore on
the day 30 days prior to the opening of the bids and
th
for the 15 day of the middle calendar month of
quarter under consideration in relation to fuel and
lubricant component; All India Average Wholesale
Price Index for construction machinery and parts for
the quarters preceding the date of opening of bids
and for the quarter under consideration as published
by the Office of Economic Adviser, Ministry of
Commerce and Industry, Government of India in
relation to plant and machinery spares components
and for other materials All India Average Wholesale
Price Index for all commodities for the quarters
preceding opening of the bids and the quarter under
consideration as published by Office of Economic
Adviser, Ministry of Commerce and Industry,
Government of India.
210. However, Claimant has not produced either a
calculation sheet indicating all the relevant factors for
deriving the amounts payable for each of the
permitted components supported by required
documents or produced any documentary evidence
to substantiate the total claim of Rs.2,33,19,736/-
towards price adjustment. Claimant has also not
placed any evidence to show as to how he has
arrived at the said figure towards price adjustment
claim. In the absence of any evidence to establish the
escalation in prices of the various permitted
components, even if it is assumed for the purpose of
argument that priced adjustment clause is part of the
contract in relation to Package in question, Claimant
is not entitled for the amount claimed under claim
No.1.”

45. We cannot accept that the Arbitral Tribunal's findings in
regard to Claim No. 1 suffer from any patent illegality that vitiates
the impugned award. To succeed in its claim for damages, KMV
was required not only to establish its entitlement to such
compensation, but also the measure of such damages.

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46. In our view, the Commercial Court rightly declined to interfere
with the impugned award insofar as it rejected KMV’s Claim No.1.

47. The present appeal is unmerited and is accordingly,
dismissed.

Sd/-
(VIBHU BAKHRU)
CHIEF JUSTICE


Sd/-
(K.S. HEMALEKHA)
JUDGE



KMV