Karnataka HC Upholds Order Setting Aside Contractor’s Nearly ₹2.17-Crore Award Against CPWD Over Claims Unreconciled With Contract and Evidence

The Government of India, through CPWD, engaged J.M. Swamy to construct a sewage treatment plant for ₹1,26,01,150, with completion stipulated by 12 October 2017.

The completion period was extended to 30 November 2019 without levy of compensation.

Swamy claimed that departmental delays and other impediments caused additional costs and losses; the arbitrator partly allowed his claims, awarded interest at 18% per annum, and rejected the Government’s counterclaim for compensation under Clause 2.

The Commercial Court set aside the award under Section 34, finding that substantial claims had not been adequately reconciled with the contract and evidence.

Swamy appealed, seeking restoration of the award.

Section 34 of the Arbitration and Conciliation Act, 1996 permits a court to set aside an award on the statutory grounds, including patent illegality under Section 34(2A); it does not permit a merits review merely because another view of the evidence or contract is possible.

Section 31(7)(b) governs post-award interest, which must be considered alongside the parties’ contractual provisions.

In an appeal under Section 13(1-A) of the Commercial Courts Act, 2015, the appellate court considers whether the Commercial Court exceeded the permissible limits of intervention.

The agreement’s relevant provisions included Clauses 1A, 2, 5, 6A, 7 and 9, and Clause 2(x) of Schedule F.

No judicial precedents were identified in the judgment.

The Court held that the extension of time, by itself, did not establish that all delay was attributable to the Department or entitle the contractor to every claimed amount.

The claimant’s admissions and the record concerning the sequence of work, stoppage, equipment approvals and completion of civil works required the arbitrator to identify the specific departmental hindrances, their duration and their effect; the award did not adequately do so.

The Court also found insufficient reconciliation of the overhead and loss-of-profit, idle-resource and escalation claims with the contractual terms, work completed and payments already made.

The objections concerning GST, bank-guarantee commission and interest likewise raised issues of contractual entitlement and computation, including the applicable interest clauses and the dates of deduction and release.

In the Court’s view, these deficiencies went beyond a disagreement over factual appreciation and disclosed grounds for the Commercial Court’s intervention.

It dismissed the appeal and affirmed the order dated 19 April 2025 setting aside the arbitral award dated 23 July 2024.