### Non-Approval of Recommended Extensions Sets Time at Large and Renders Contract Termination for Delay Illegal Key Findings: * Termination Legality: Failure by the Employer to act on the Engineer’s recommendations for Extension of Time (EOT) for over 3.5 years set time at large, making termination for slow progress illegal. * Waiver of Claims: A contractor’s failure to contemporaneously protest the Engineer’s rejection of prolongation costs during EOT recommendations constitutes acquiescence, barring subsequent recovery. * Unpaid Work: Findings on work completion (76.41%) based on the Employer’s own progress documents are plausible and do not warrant judicial interference. * Evidence Standard: Arbitral awards for confiscated machinery and overheads without supporting evidence or proof of actual loss are patently illegal and perverse. * Loss of Profits: Consequent to illegal termination, the contractor is entitled to loss of profits on the balance work at the standard rate of 10%.

In brief

The question

1. Whether the termination of the contract by NHAI was illegal and void due to failure to grant EOTs.

The court held

The Respondent's entitlement to overheads and prolongation costs was rejected based on the principle of waiver.

It also directed

The court allowed the appeal in part. It set aside the Single Judge’s judgment and the Arbitral Award with respect to Claims 6, 7, 8, and 9.

The court upheld the award for Claims 1 and 11, as they were based on plausible interpretations of facts and the finding of illegal termination.

01Facts

The Appellant (NHAI) entered into a contract with the Respondent (Progressive Constructions) on 08.09.2005 for highway widening in Assam.

p. 2

Delays occurred, and while the "Engineer" recommended seven Extensions of Time (EOTs) citing governing delays by NHAI and concurrent delays by the Respondent, the Appellant only formally approved EOTs up to 06.03.2011.

p. 60

NHAI terminated the contract on 14.03.2016 citing non-performance.

p. 6

The Arbitral Tribunal (AT) issued an award on 20.02.2019, declaring the termination illegal and allowing 15 of the Respondent's claims.

pp. 7-8

The Single Judge of the High Court partially set aside the award but upheld Claims 6 and 8.

pp. 8-10

The Appellant challenged the decision regarding specific claims (1, 6, 7, 8, 9, and 11) under Section 37 of the Arbitration and Conciliation Act, 1996.

p. 55

02Issues

i.1. Whether the termination of the contract by NHAI was illegal and void due to failure to grant EOTs.

¶ 12.3.2.7 / p.69

ii.2. Whether the Arbitral Tribunal was justified in awarding Claim No. 1 for unpaid work based on financial progress percentages derived from NHAI's own documents.

p. 72, 78

iii.3. Whether the contractor was entitled to Claims 6, 7, and 8 (Overheads and Prolongation costs) despite the Engineer’s recommendation rejecting such costs due to concurrent delay.

pp. 83-85

iv.4. Whether Claim 9 (Confiscated Machinery) was based on sufficient evidence or was patently illegal due to depreciated value.

pp. 89-91

03Law Applied

The court applied the narrow scope of judicial review under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, as established in Somdatt Builders NCC-NEC v. NHAI and MMTC Ltd. v. Vedanta Ltd., which prohibits re-appreciation of evidence unless the award is "patently illegal" or "perverse".

pp. 56-57

It applied Section 23(3) of the Act regarding the amendment of claims.

p. 74

Regarding damages, it considered the Hudson Formula for overheads.

p. 81

Principles of "Acquiescence and Waiver" and the requirement for "Contemporaneous Records" under Clause 53.4 of the COPA.

pp. 23, 84-85

It further relied on Associate Builders v. DDA for the "no evidence" test of perversity.

p. 91

Provisions in the judgment · 7 · Linked ones open on LawLens

Arbitration and Conciliation Act, 1996 Section 16 Section 21 Section 23 Section 34 Section 37 Section 43 Section 67

04Reasoning

The court upheld the AT's finding on illegal termination, noting that NHAI’s failure to act on EOT recommendations for 3.5 years set "time at large".

p. 61, 70

On Claim 1, the court found the AT’s reliance on NHAI’s own progress reports (R-132, R-134) to calculate unpaid work (76.41% completion) was a "plausible view" based on record.

pp. 78-79

Regarding Claims 6, 7, and 8, the court found the AT committed a patent illegality by ignoring the fact that the Respondent had accepted EOTs for years where the Engineer specifically denied prolongation costs due to concurrent delays; the Respondent's failure to protest at the time constituted acquiescence.

pp. 84-85

On Claim 9, the court found the award "perverse" as the AT awarded ₹7.70 crore for 8-year-old machinery without considering NHAI’s plea that the depreciated value was nil, effectively granting the claim without evidence of actual value.

pp. 90-92

Claim 11 (Loss of Profit) was upheld as a logical consequence of illegal termination.

p. 92