Karnataka High Court sets aside ₹21.89 crore in delay-related awards against BDA, citing a contract clause excluding overheads and lost profits and lack of proof of loss.

The Bangalore Development Authority (BDA) engaged NCC Limited to renovate and reconstruct the Puttanna Kanagal Theatre and adjoining shopping complexes under an agreement dated 27 June 2012. The works covered four blocks; Blocks 2–4 were to be made available after completion and rehabilitation of Block 1. Delays in completing Block 1 and relocating occupants prevented NCC from proceeding with the remaining blocks.

In arbitration, the tribunal awarded amounts under several claims, including for idle plant and machinery, site overheads, and loss of profit (claims 7–9), and interest on deferred payments (claim 2).

The Commercial Court dismissed BDA’s application under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act); BDA appealed under Section 37.

1. Whether the awards for idle plant and machinery, site overheads, and loss of profit were sustainable despite clause 7 of the Special Conditions of Contract (SCC), which restricted compensation for delay and liability for overheads and profits.

2. Whether the awards under claims 7–9 had an adequate evidentiary basis, particularly the 10% allowance for loss of profit on unexecuted work.

3. Whether BDA was liable for interest on the deferred payment notwithstanding its 2017 request that NCC furnish a bank guarantee before receiving that payment.

Under Sections 34 and 37 of the A&C Act, judicial review of an arbitral award is limited and does not permit routine reappreciation of evidence; however, an award may be interfered with where it disregards an express contractual term or is patently illegal.

Section 28(3) requires the tribunal to take the contract’s terms into account.

Ssangyong Engineering and Construction Ltd. v. National Highways Authority of India establishes that an arbitrator cannot award contrary to an express contractual term.

Oil and Natural Gas Corporation v. Wig Brothers Builders and Engineers Pvt. Ltd. likewise holds that an arbitrator exceeds jurisdiction by awarding compensation contrary to an express bar.

A loss-of-profit claim is not established merely by applying a percentage or formula: the claimant must prove the factual basis and quantum of loss.

An express contractual exclusion must be applied according to the parties’ bargain and cannot be rewritten by the tribunal.

Clause 7 barred compensation for losses arising from delay, including overheads and profits except where the contract specifically provided otherwise. The tribunal awarded under claims 7–9 without first reaching a sustainable finding that the clause did not apply; those claims therefore conflicted with the express contractual exclusion.

Independently, the awards for idle machinery and overheads lacked evidence establishing actual idling or additional expenditure, while the 10% loss-of-profit award lacked evidence that NCC suffered that margin of loss on this contract.

By contrast, the principal deferred payment was undisputed, and BDA’s resolutions and communication requesting a bank guarantee did not establish a basis to avoid the consequences of delayed payment; the interest award under claim 2 was therefore left undisturbed.

The appeal was partly allowed. The Court set aside the Commercial Court’s judgment and the arbitral award insofar as they upheld claims 7, 8, and 9; future interest was correspondingly limited to the amounts that survived. The award of costs was not disturbed.