Grant of extensions does not waive liquidated damages if contractual rights are expressly reserved.

Lalitpur Power Generation Company Limited (LPGCL) awarded a Balance of Plants (BOP) package to the Respondent, who then sub-contracted the supply and services for transformers and reactors to the Petitioner (BHEL) via Letters of Award dated 29.08.2012

The Petitioner faced significant delays in supply, which it attributed to the Respondent’s failure to provide Project Authority Certificates (PAC) and CEA Certificates within the contractual 6-month window

Consequently, the Respondent de-scoped seven 110MVAR reactors and procured them from Alstom under "Risk-Cost" measures

After the Petitioner invoked arbitration for outstanding dues (Claim No. 1), the Arbitral Tribunal awarded Liquidated Damages (LD) and Risk-Cost expenses to the Respondent (Counter-Claims 1, 3, and 4)

The Petitioner challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996, alleging perversity and conflict with public policy

1. Whether the grant of extensions by the Respondent and the Tribunal’s finding that "time was not of the essence" precluded the levy of Liquidated Damages

2. Whether the delay in providing PAC/CEA certificates by the Respondent absolved the Petitioner of liability for delayed supply

3. Whether Counter-Claims 3 and 4 (Risk-Cost) were barred by limitation or contractually impermissible without formal termination of the contract

The Court applied Section 34(2)(b)(ii) and Section 34(2-A) of the Arbitration and Conciliation Act, 1996, regarding the limited grounds for setting aside awards, including "patent illegality" and "fundamental policy of Indian law"

It relied on ONGC v. Saw Pipes Ltd. and Construction & Design Services v. DDA for the principle that Liquidated Damages (Section 74, Contract Act) are enforceable as a genuine pre-estimate of loss without strict proof of actual loss

The court further applied the "Business Efficacy" doctrine and the principle of mitigation under Section 73 of the Contract Act to interpret Risk-Cost procurement

Finally, it applied the doctrine of severability as established in Gayatri Balasamy v. M/s ISG Novasoft Technologies Ltd.

The Court held that the Tribunal’s finding that "time was not of the essence" did not waive the right to LD, as the Respondent expressly reserved its rights in extension letters

Regarding the PAC/CEA certificates, the Court upheld the Tribunal's finding that there was no "causal link" to the delay because Clause 5(VI) allowed the Petitioner to proceed with imports by paying duties and seeking reimbursement

On limitation, the Court affirmed the Tribunal’s view that the cause of action was continuing until the extended completion date of 31.03.2019

Critically, the Court agreed that Clause 26(3) allowed for Risk-Cost procurement "without prejudice" to other rights, meaning formal termination was not a mandatory prerequisite for de-scoping default work

The Court found these interpretations to be "plausible views" within the arbitrator's domain

The Petition is partly allowed. Counter-Claims 6, 10, 11, and 12 were set aside based on the Respondent’s concession that it would not contest those specific challenges; Petitioner’s challenge to the rejection of Claim No. 2 was dismissed as not pressed; no order as to costs was made.