A contractual bar cannot absolutely exclude damages for employer-caused prolongation.

The Union of India awarded M/s Navayuga Engineering Co. Ltd. a contract for construction of the Naraina T-Point flyover, New Delhi, under Agreement No. 21/EE/DS & CM/PWD/06-07.

The stipulated completion period was 21 months, from 14 March 2007 to 13 December 2008. The project was ultimately extended until 15 January 2013 through six extensions, without levy of liquidated damages.

The contractor alleged that the prolongation resulted from delays attributable to the Union of India and claimed compensation for additional expenditure, including idling of machinery, site establishment and expenses, bank-guarantee extensions, head-office overheads, inspection facilities, and interest on mobilisation advance.

The learned Sole Arbitrator awarded Rs.1,07,02,697 under Claim No. 1; rejected Claim No. 2; awarded Rs.45,51,450 under Claim No. 3(a); and awarded Rs.1,70,45,681 collectively under Claims 3(b) to 3(g).

The Union of India challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996, principally insofar as it allowed Claims 3(a) to 3(g).

Whether the arbitral tribunal could award compensation for prolongation-related expenditure despite Special Conditions Clauses 3.18 and 3.52, which were relied upon as barring claims for idle establishment, labour, machinery, equipment and tools?

Whether the tribunal’s quantification of compensation under Claims 3(a) to 3(g) was unsupported by evidence, arbitrary or perverse because it did not separately calculate the loss attributable to the 568 days of delay assigned to the Union of India?

Whether the tribunal acted within the permissible scope of arbitral assessment by adopting percentage-based estimates, having rejected the contractor’s claimed figures as exaggerated?

A Section 34 court does not sit in appeal over an arbitral award, reappreciate evidence, or substitute its own view for that of the tribunal; interference is permissible only on recognised statutory grounds, including patent illegality, perversity, conflict with contractual terms, or conclusions unsupported by the record.

The Court relied on DMRC Ltd. v. Delhi Airport Metro Express (P) Ltd., PSA Sical Terminals (P) Ltd. v. V.O. Chidambaranar Port Trust, State of Chhattisgarh v. Sal Udyog Pvt. Ltd., and Associate Builders v. Delhi Development Authority.

Under Sections 23, 55 and 73 of the Indian Contract Act, 1872, a contractual term that absolutely extinguishes a substantive right to claim damages for breach may be unlawful and void, while compensation may be awarded for loss caused by breach, subject to proof and mitigation.

The Court relied on Asian Techs Ltd. v. Union of India, Simplex Concrete Piles (India) Ltd. v. Union of India, and MBL Infrastructure Ltd. v. Delhi Metro Rail Corporation Ltd. for the principle that clauses restricting prolongation claims do not necessarily bar an arbitrator from adjudicating damages claims and cannot render the injured party remediless.

The tribunal has latitude to select a reasonable method for quantifying damages where precise computation is impracticable; some estimation based on industry standards, CPWD schedules or MORTH data may be permissible.

An award need not resemble a judicial judgment or explain every reasoning step, provided its reasoning is intelligible when read as a whole.

The Court held that the tribunal had expressly considered Clauses 3.18 and 3.52 and had found that they could not operate as an absolute bar to damages under Sections 23, 55 and 73 of the Indian Contract Act.

The tribunal also examined the contractual extensions, shifting of milestones, absence of liquidated damages and the parties’ respective responsibility for delay; therefore, it had not ignored the contractual provisions or exceeded its jurisdiction.

On quantification, the Court acknowledged that the tribunal could have separately apportioned the loss according to the 568 days attributable to the Union of India.

However, the tribunal had found the contractor’s figures exaggerated, considered deficiencies in the evidence, recognised that the contractor had also contributed to the delay, and assessed only a reduced amount rather than awarding the claimed sums in full.

For Claim 3(a), it awarded 5% of the amount claimed.

For Claims 3(b) to 3(g), it considered CPWD and MORTH overhead percentages and, after the Union of India failed to provide the requested weighted average, awarded 15% of the aggregate sub-claims—approximately 1.74% of the tendered amount.

The Court found that these percentages were reasoned estimates and not arbitrary guesswork.

The absence of a separate day-wise calculation did not, by itself, establish perversity or patent illegality.

It held that Clauses 3.18 and 3.52 did not constitute an absolute bar to the contractor’s claims for damages arising from prolongation attributable to the employer.

The tribunal’s percentage-based assessment under Claims 3(a) to 3(g), read with its findings on exaggerated claims, mitigation and shared delay, was neither perverse nor patently illegal.

The challenge to Claims 3(a) to 3(g) was rejected, the petition under Section 34 was dismissed, and all pending applications were disposed of.