Shared delay precludes unilateral liquidated damages; plausible arbitral findings on contractual milestones are immune to Section 34 interference.

The Petitioner (NTRO) awarded a contract to the Respondent (CIPL) on 10.08.2018 for the installation of a secure intranet infrastructure across 23 locations in India, to be completed within 28 weeks

Execution was marked by mutual delays: the Respondent delayed equipment supply and the Performance Bank Guarantee (PBG), while the Petitioner failed to provide timely site access, media connectivity, and bulk encryption units

During the COVID-19 pandemic, payment terms were amended, resulting in the release of 90% of the contract value, with 10% withheld by NTRO alongside the PBG

NTRO sought to levy Liquidated Damages (LD), claiming the delay was solely attributable to CIPL and that the On-Site Acceptance Test (OSAT) was never successfully completed

A Sole Arbitrator was appointed who, via an award dated 02.04.2024, found that both parties shared responsibility for the delays, deemed OSAT completed as of 17.03.2020 (when NTRO took over system credentials), and directed the release of the 10% balance payment and the PBG

The Petitioner challenged this award under Section 34 of the Arbitration and Conciliation Act, 1996

1. Whether the Arbitral Tribunal’s finding that both parties were responsible for the delay was perverse or contrary to the evidence

2. Whether the rejection of the Petitioner’s claim for Liquidated Damages (LD) violated the terms of the contract or established legal principles

3. Whether the Tribunal correctly determined the date of completion for OSAT and the subsequent commencement of the warranty period

4. Whether the direction to release the PBG and the withheld 10% payment constituted a patent illegality

The court primarily applied Section 34 of the Arbitration and Conciliation Act, 1996, which restricts judicial interference to grounds of "patent illegality" and conflict with the "fundamental policy of Indian law"

It relied on OPG Power Generation (P) Ltd. v. Enexio Power Cooling Solutions (India) (P) Ltd. to clarify that a "possible view" by an arbitrator on facts must be respected and that mere erroneous application of law is insufficient for setting aside an award

The court further applied the principles from Kailash Nath Associates v. DDA, establishing that liquidated damages can only be awarded as reasonable compensation and typically require proof of loss if the same can be quantified

Additionally, the "patent illegality" standard from Ssangyong Engg. & Construction Co. Ltd. v. NHAI was applied to bar the court from re-appreciating evidence or correcting factual errors unless they go to the root of the matter

The Court observed that the Arbitral Tribunal conducted a granular examination of the correspondence and milestones, concluding that NTRO’s failure to provide infrastructure (media links and site readiness) was a concurrent cause of delay alongside CIPL’s supply delays

Regarding LD, the Court upheld the Tribunal's rejection because NTRO failed to lead any evidence of actual loss and could not unilaterally impose damages when it contributed to the delay

The Court found the Tribunal's determination of the OSAT completion date (17.03.2020) to be a plausible factual finding, as NTRO had taken exclusive control of the system credentials and effectively barred CIPL from the sites on that date, thereby waiving further strict compliance with pending tests

Consequently, the calculation of the three-year warranty from 2020 to 2023 was held to be a reasonable interpretation of the contract

The Court emphasized that it cannot sit as a court of appeal; since the Tribunal’s findings were based on a "possible view" of the evidence and the Petitioner had elected not to lead any independent evidence during the arbitration, no patent illegality existed

It held that the Petitioner failed to establish any grounds under Section 34(2) or 34(2A) as the Tribunal’s findings on shared delay, rejection of LD, and the deemed completion of OSAT were reasoned and plausible

The Court affirmed that the Respondent is entitled to the release of the 10% withheld payment and the PBG, as the contractual milestones were deemed satisfied and no subsisting breach or loss was proven by the Petitioner

No order as to costs was made