Prolongation damages require proof of employer-attributable delay and actual loss; unsupported estimates are unsustainable.

The respondent was engaged by the Delhi Development Authority (“DDA”) under an agreement dated 10/11 September 2009 for construction of slip roads, footpath and cycle track, and remodelling of the cloverleaf at Noida Mor Flyover, Phase-I. Although completion was stipulated for 10 May 2010, the work was completed on 25 February 2011 and the final bill was submitted on 30 September 2011.

Disputes arose concerning the final bill, rates for deviated and additional items, escalation, withheld amounts and losses allegedly suffered due to prolongation of the contract.

The learned sole arbitrator awarded amounts under Claims 1, 2, 4, 5, 6, 8, 9 and 10. DDA challenged those awards under Section 34 of the Arbitration and Conciliation Act, 1996; Claims 3, 7 and 11 were not challenged.

Claim 6, concerning refund of the security deposit of Rs.43,81,836/-, had already been satisfied and therefore became infructuous.

1. Whether the arbitrator’s interpretation of the contractual provisions governing the final bill and rates for deviated quantities under Claim 1 disclosed any ground for interference under Section 34?

2. Whether the award for alternative cutting, drilling and rebarring work under Claim 2 was unsupported by the contract or evidence, or otherwise liable to be set aside?

3. Whether escalation awarded under Clauses 10C and 10CA under Claim 4 was contrary to the contract, particularly in respect of work executed during the extended period?

4. Whether the award of Rs.1,00,000/- under Claim 5, withheld in connection with the extension-of-time proceedings, was sustainable?

5. Whether the award of prolongation expenses under Claim 8 was sustainable in view of the no-claim undertaking, the absence of a clear causal allocation of delay and the alleged lack of proof of actual expenditure?

6. Whether the award of Rs.19,353/- under Claim 9 was impermissible because the underlying quality-control determination was an excepted matter under Clause 25-B?

7. Whether interest under Claim 10 was barred by the contractual provisions and, if not, whether it survived in respect of the claims whose principal amounts were set aside?

8. Whether the invalid portions of the arbitral award could be severed while preserving the independently quantified and sustainable portions?

The Court applied Section 34 of the Arbitration and Conciliation Act, 1996 as it stood before the 2015 amendments, including the pre-amendment standards of “public policy of India” and patent illegality explained in ONGC Ltd. v. Saw Pipes Ltd. and Associate Builders v. DDA.

Section 34 does not confer appellate jurisdiction; contractual interpretation is primarily for the arbitrator, and a plausible interpretation supported by the record cannot be substituted merely because another interpretation is possible, as recognised in NHAI v. ITD Cementation India Ltd. and Sutlej Construction Ltd. v. Union Territory of Chandigarh.

However, an arbitrator cannot travel beyond the contract, adjudicate an excepted matter, or award damages unsupported by the essential evidence of entitlement, causation and loss.

Contractual determinations expressly made final or excluded from arbitration cannot be reopened, consistent with Vishwanath Sood v. Union of India and Mitra Guha Builders (India) Co. v. ONGC.

A no-claim undertaking may be disregarded only where coercion, undue influence or economic duress is established on a credible factual foundation, as stated in Union of India v. Master Construction Co.

Damages for prolongation require proof of loss and cannot be awarded merely because delay occurred; the computation must be connected to established loss, as explained in Unibros v. All India Radio and Batliboi Environmental Engineers Ltd. v. Hindustan Petroleum Corporation Ltd.

Under Section 31(7)(a), interest remains subject to contractual restrictions.

A legally and practically severable invalid portion of an award may be set aside while the independent valid portions are preserved, as recognised in J.G. Engineers (P) Ltd. v. Union of India and Gayatri Balasamy v. M/s ISG Novasoft Technologies Ltd.

The Court held that the arbitrator’s findings on Claims 1, 2 and 4 were based on plausible interpretations of the contractual machinery and contemporaneous material.

For Claim 1, the arbitrator had considered Clauses 12.2 and 12.3, the rates paid in the running bills and DDA’s correspondence, and reasonably concluded that DDA had not properly invoked the contractual mechanism for adopting reduced rates for excess quantities.

Claim 2 was supported by evidence of actual execution through a specialised agency, departmental consent, DDA’s request for a rate analysis and proof of payment to the agency.

In Claim 4, the arbitrator did not grant escalation for all post-completion increases; he restricted the entitlement to increases operative up to the stipulated completion date and applied the relevant indices, which constituted a possible contractual interpretation.

Claim 5 was also sustainable because the arbitrator relied on the correspondence concerning rectification of defects and the subsequent sanction of extension of time.

Claim 8 failed because the arbitrator did not adequately establish that the no-claim undertaking was procured by coercion, did not reconcile the competing causes of delay or connect the entire nine-month period to DDA’s responsibility, and adopted Rs.1,05,000/- per month without identifying salary records, vouchers, attendance records or other evidence of actual expenditure.

Claim 9 was set aside because DDA had specifically invoked Clause 25-B, yet the arbitrator neither rejected the jurisdictional objection nor determined whether the balance amount was independent of the allegedly final quality-control determination.

Interest survived only for the sustainable principal claims because the contractual bar relied upon by DDA was not shown to apply to Claims 1, 2, 4 and 5; interest attributable to Claims 8 and 9 necessarily failed once those principal awards were set aside.

The Court found the affected portions capable of severance from the independently determined claims.

The awards under Claim 1 for Rs.25,20,573/-, Claim 2 for Rs.6,67,920/-, Claim 4 for Rs.20,63,543/- and Claim 5 for Rs.1,00,000/- were upheld.

Claim 6 was treated as infructuous because the security deposit had already been released.

The award under Claim 8 for Rs.9,45,000/- and Claim 9 for Rs.19,353/- was set aside.

Claim 10 was set aside only insofar as it awarded interest on Claims 8 and 9; interest on the surviving awards under Claims 1, 2, 4 and 5 remained operative in accordance with the arbitral award.

There was no order as to costs, and pending applications were disposed of.