Court’s Decision
The Delhi High Court dismissed a petition under Section 34 of the Arbitration & Conciliation Act, 1996, which sought to set aside the arbitral award dated 31.03.2017. The award rejected the contractor’s claim for compensation for idling of men, machinery, and resources. The Court held that the Arbitral Tribunal (AT) had rightly interpreted the governing clauses of the contract—Clauses 2.2 and 8.3 of the General Conditions of Contract (GCC)—which expressly barred monetary claims for delay attributable to the employer. The Court emphasized that “adjudication must align with the contractual framework agreed upon by the parties” and refused to re-appreciate evidence or interpret the clauses differently under Section 34 proceedings.
Facts
A contract was executed in December 2011 for the construction of a viaduct and related works for the New Garia Airport corridor of the Kolkata Metro Railway Line. The stipulated completion was 30 months, but the work concluded only by June 2018 due to delays in handing over the site, providing drawings, and arranging necessary permissions. The contractor filed six claims before the AT. Of these, three were allowed (partly or fully), while Claim No. 1 for compensation due to idling of resources was rejected. The contractor contended that the delay was entirely due to the employer’s default, resulting in significant idling losses.
Issues
The primary issue before the High Court was whether the AT’s rejection of the claim for idling of resources suffered from grounds available under Section 34 of the Arbitration & Conciliation Act, such as patent illegality, perversity, or violation of public policy.
Petitioner’s Arguments
The contractor argued that the AT wrongly rejected the idling claim without adequate reasoning. It contended that Clauses 2.2 and 8.3 of the GCC, which bar monetary claims for delay, are inconsistent with Sections 55 and 73 of the Indian Contract Act and thus contrary to Indian public policy. The contractor asserted that despite clear findings that delays were due to the employer’s failure to provide timely work fronts and drawings, the AT mechanically denied compensation. Reliance was placed on various judgments, including Simplex Concrete Piles (India) Ltd. v. Union of India, G. Ramachandra Reddy v. UOI, Asian Tech Ltd. v. Union of India, and General Manager, Northern Railway v. Sarvesh Chopra, to argue that contractual clauses cannot override statutory rights to compensation for breach.
The contractor highlighted multiple letters issued during the project period to prove that delays were attributable solely to the employer. It also pointed out that in another related dispute, the AT had awarded idling costs to the contractor on similar facts, which the employer had accepted without contest.
Respondent’s Arguments
The employer argued that the AT’s reasoning was sound, contractual clauses were clear and binding, and the parties willingly agreed to them. It maintained that Clauses 2.2 and 8.3 specifically excluded any entitlement to damages or compensation for delays attributable to the employer and that the contractor was entitled only to an extension of time. The employer asserted that arguments regarding the illegality of these clauses were never raised before the AT, amounting to a waiver of the plea under the principle laid down in Union of India v. Susaka (P) Ltd.
It also argued that the Simplex Concrete decision was challenged and distinguished in subsequent cases like PLUS91 Security Solutions v. NEC Corporation India (P) Ltd., which reaffirmed the enforceability of contractual bargains. The employer distinguished Asian Tech Ltd. on facts, arguing no assurance for revised rates existed in this case.
Analysis of the Law
The High Court reiterated that arbitral tribunals are the best judges of the facts and interpretation of contracts. The Court emphasized that under Section 34, it cannot re-evaluate evidence or substitute its own view unless the award suffers from perversity, patent illegality, or violates fundamental policy. Clauses 2.2 and 8.3 of the GCC were found to be unambiguous: delays in site handover or drawings entitled the contractor only to an extension of time, not monetary compensation.
The Court noted that the contractor’s own conduct—seeking only extensions without simultaneous claims for costs—supported the AT’s conclusion that both parties acted within the contract’s framework. The plea that these clauses violated Indian law was not raised before the AT and was therefore impermissible at the Section 34 stage.
Precedent Analysis
The Court distinguished the contractor’s reliance on Simplex Concrete Piles as inapplicable since it was never cited before the AT and was subsequently distinguished by Division Benches in PLUS91 Security Solutions. The Supreme Court’s judgment in Union of India v. Susaka (P) Ltd. was cited to stress that pleas not raised before the arbitrator are deemed waived. Other precedents like Sarvesh Chopra, Kothari & Associates, and K.Marappan v. TBPHLC were relied upon to affirm the principle that courts must respect the terms freely agreed upon by contracting parties.
Court’s Reasoning
The High Court found that the AT correctly restricted itself to interpreting the contract, which the parties had freely negotiated. The bar on monetary claims for employer-caused delays was explicit. The contractor never challenged these clauses during the contract’s execution or before the AT. The Court observed that “parties cannot, after signing a contract, seek to avoid their express obligations under the guise of statutory inconsistency,” especially when they chose not to challenge the clauses earlier.
Conclusion
Finding no patent illegality, perversity, or conflict with fundamental policy, the High Court upheld the award. The petition to set aside the arbitral award was dismissed.
Implications
The judgment reaffirms the primacy of contractual terms in construction contracts and underlines that courts will not interfere with arbitral awards merely because a different interpretation is possible. Contractors must vigilantly preserve their rights under the contract and raise all pleas at the arbitral stage to avoid waiver.
FAQs
1. Can contractors claim compensation for delays caused by the employer if the contract bars monetary claims?
No. As reaffirmed here, if the contract explicitly restricts monetary claims for delays and allows only extension of time, courts and arbitral tribunals will usually uphold that bar.
2. Can a plea not raised before the Arbitral Tribunal be raised under Section 34 proceedings?
No. The Court reiterated that new pleas not raised before the AT amount to a waiver and cannot be entertained under Section 34.
3. Does an earlier award on similar facts bind subsequent disputes between the same parties?
Not necessarily. The Court held that each dispute must be examined within its own contractual and factual context, and prior awards do not automatically apply.
