Arbitral Award Granting Prolongation Costs Based on Recognized Formulae and Plausible Contract Interpretation Is Not Patently Illegal

DMRC (Petitioner) invited bids for the design and construction of elevated stations and viaducts for Line 1 Extension (Phase-III MRTS Project) on 05.08.2014

The Respondent (GYT TPL JV) was awarded the contract for ₹665.87 Crores on 09.12.2014, with a completion period of 30 months

The project was completed on 05.02.2019, with a delay of 19 months

Disputes regarding prolongation costs, statutory tax variations (GST), minimum wage increases, and environmental charges led to the constitution of a three-member Arbitral Tribunal

On 28.04.2021, the Tribunal passed a Majority Award allowing several claims in favor of the Respondent

DMRC challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996, primarily contending that the awards were based on assumptions and contravened negative contractual clauses

1. Whether the Arbitral Tribunal’s determination of prolongation costs and adoption of industry formulae for overheads constituted "patent illegality" under Section 34

2. Whether the award of GST reimbursement and minimum wage escalation violated express contractual bars (Clauses 11.1.4 and 6.2 of the GCC)

3. Whether Environmental Compensation Charges (ECC) are "statutory levies" barred from adjustment under the contract

The Court applied the restrictive scope of Section 34 of the Arbitration and Conciliation Act, 1996, which limits interference to "patent illegality," contravention of "fundamental policy of Indian law," or "basic notions of justice"

It relied on McDermott International Inc. v. Burn Standard Co. Ltd., establishing that the choice of formula for quantifying damages falls within the arbitrator's exclusive domain

It followed Associate Builders v. DDA and Ssangyong Engineering v. NHAI, holding that a "possible view" or "plausible interpretation" by a Tribunal cannot be substituted by the Court’s own view, even if an alternative interpretation exists

The principle from P.M. Paul v. Union of India was applied to justify compensation for escalation during extended periods when delay is attributable to the employer

The High Court observed that the Petitioner’s challenges essentially sought a re-appreciation of evidence, which is barred under Section 34

Regarding prolongation costs, the Court found the Tribunal's adoption of a 10% parameter for overheads and recognized industry formulae was a reasonable quantification based on the evidence of CW-1 and CW-2, even if mathematical precision was lacking

On the issue of GST and Minimum Wages, the Court upheld the Tribunal’s interpretation that contractual bars (Clauses 11.1.4 and 6.2) do not apply to delays solely attributable to the employer (Petitioner), as the contractor cannot be forced to bear the burden of statutory changes during a prolongation period caused by the employer

Regarding ECC, the Court accepted the Tribunal’s finding that these were not traditional "taxes/levies" but specific charges arising from Apex Court orders, thus making them reimbursable under the general "claims" procedure of Clause 17.1

It held that the Tribunal's findings were based on a "plausible and reasoned construction" of the contract and the evidence

The Court affirmed that even if a dissenting award exists, the majority view prevails if it is a possible view

The challenge to the awarded interest and taxes on the principal was also rejected as a natural legal consequence

No order as to costs was passed