Arbitral interpretation of contract and extension of time precludes judicial review and price adjustment levies.

The Petitioner (IOCL) awarded an Engineering, Procurement, Construction and Commissioning (EPCC) contract to the Respondent Consortium for its Naphtha Cracker Project at Panipat

While the effective date was May 25, 2006, Mechanical Completion (MC) was achieved on February 28, 2010—beyond the stipulated 38-month period

IOCL granted an extension of time (EOT) up to the actual MC date but imposed a 10% price reduction (discount) for the delay

The Respondents challenged this deduction and other recoveries in arbitration

IOCL challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996

1. Whether the Arbitral Tribunal had jurisdiction to adjudicate claims that were allegedly not "Notified Claims" or included in the Final Bill as per Clause 9.1.0.0.

2. Whether the Petitioner was entitled to levy a 10% price adjustment/discount for delay despite granting an extension of time up to the date of Mechanical Completion.

The court applied the narrow standards of "Public Policy of India" under Section 34(2)(b)(ii) of the Arbitration and Conciliation Act, 1996, noting that for international commercial arbitrations, "patent illegality" is not a ground for challenge

It relied on Associate Builders v. DDA and Ssangyong Engineering v. NHAI to affirm that courts cannot review merits, reappreciate evidence, or interfere with a "plausible view" of a contract

Regarding damages, it referenced Section 74 of the Indian Contract Act, 1872, and Fateh Chand v. Balkishan Dass, which require proof of loss for the enforcement of penal stipulations

The court found the Tribunal’s jurisdictional finding plausible, agreeing that the disputes fell under the "second category" of Clause 9.1.0.0—disputes arising from amounts claimed by the Owner (IOCL) against the Contractor via deductions—which do not require prior "notification"

The court reasoned that since IOCL granted an EOT till the actual MC date (Feb 28, 2010) and Clause 4.3.6.0 only allows EOT if "satisfied of grounds justifying the delay," the starting date for discount calculation automatically shifted to that date, leaving zero period for slippage

The court rejected IOCL’s reliance on IOCL v. LT (EPCC-4 case), noting the Supreme Court had deemed it irrelevant to this specific matter

The court held that even if the clauses were penal, IOCL failed to prove actual loss, a requirement under Section 74 as held in IOCL v. Fiberfill Engineers

The court held that the Arbitral Tribunal correctly exercised jurisdiction and that the price discount was not leviable because the extension of time effectively wiped out the delay for calculation purposes

The bank guarantees furnished by the Respondents were ordered to be discharged after four weeks