Delhi Jal Board v. M/S Metrro Waste Handling Private Limited

11. The mentioning of total contract value and usage of the expression ‗minimum‘ for assuring deployment of the machines for two hundred hours per month and availability for at least twenty five days a month shall not be the only factors to determine the nature of the contract. There cannot be quarrel with the proposition that contract is to be read as whole and moreover, in case in hand the work order and LOI are integral part of the contract.

12. The internal communications of the petitioner are not binding but supports that the view taken by the tribunal to be plausible one. The possibility of another view is not a ground under Section 34 of the Act for setting aside the impugned award. The NIT, LOI, GCC and SCC were considered for holding that the work awarded was an item rate. The interpretation of clauses of contract by the arbitrator cannot be interfered with under Section 34 of the Act unless the relevant clauses have been ignored, the contractual terms are rewritten or the conclusion arrived at is perverse and it is not so in case in hand making no case for interference under Section 34 of the Act. Termination of Contract

13. The tribunal rightly concluded that the eventualities mentioned in clause 11.[1] of the GCC for termination of the contract never existed and the termination of the contract was illegal. The contention of the learned senior counsel for the petitioner that under clause 11.[3] of the GCC there was a power to terminate the contract is ill-founded. Clauses 11.[1] and 11.[3] of the GCC are to be read in conjunction and clause 11.[3] of the GCC empowers DJB to wholly or in part terminate the contract applies only if the circumstances mentioned in clause 11.[1] of the GCC occur. Scope under Section 34 of the Act

14. The scope of interference under Section 34 of the Act is well settled that interpretation of the clauses of the contract falls within the domain of the arbitrator and no interference is to be made if the conclusion arrived at is plausible and interference is to be made only in case of perversity. Reference is made to the following decisions of the Supreme Court. 14.[1] In Prakash Atlanta (JV) (Supra) it was held as under: ―52. ……Having considered the arbitral awards passed by the arbitral tribunals in the five appeals filed by NHAI, we find that the interpretation and construction of those terms and clauses by the arbitral tribunals cannot be said to be arbitrary, perverse or patently illegal. Given the situation obtaining in relation to the two Acts at the relevant time, the arbitral awards cannot be said to have violated the public policy of India or be in breach of Section 28(1)(a) of the Arbitration Act. Once the view taken by the arbitral tribunal is found to be a plausible and possible one on facts and not an unreasonable one, it is not for the Courts, under Sections 34 or 37 of the Arbitration Act, or for this Court to sit in appeal or substitute its view for that of the arbitral tribunal.‖ 14.[2] The Supreme Court in Ramesh Kumar Jain vs. Bharat Aluminium Company Limited, 2025 SCC OnLine SC 2857 held as under: ―28. The bare perusal of section 34 mandates a narrow lens of supervisory jurisdiction to set aside the arbitral award strictly on the grounds and parameters enumerated in subsection (2) & (3) thereof. The interference is permitted where the award is found to be in contravention to public policy of India; is contrary to the fundamental policy of Indian Law; or offends the most basic notions of morality or justice. Hence, a plain and purposive reading of the section 34 makes it abundantly clear that the scope of interference by a judicial body is extremely narrow. It is a settled proposition of law as has been constantly observed by this court and we reiterate, the courts exercising jurisdiction under section 34 do not sit in appeal over the arbitral award hence they are not expected to examine the legality, reasonableness or correctness of findings on facts or law unless they come under any of grounds mandated in the said provision. In ONGC Limited. v. Saw Pipes Limited14, this court held that an award can be set aside under Section 34 on the following grounds: ―(a) contravention of fundamental policy of Indian law; or (b) the interest of India; or (c) justice or morality, or (d) in addition, if it is patently illegal.‖ 14.[3] In Consolidated Construction Consortium Limited vs. Software Technology Parks of India, (2025) 7 SCC 757 it was held as under: ―46. Scope of Section 34 of the 1996 Act is now well crystallized by a plethora of judgments of this Court. Section 34 is not in the nature of an appellate provision. It provides for setting aside an arbitral award that too only on very limited grounds i.e. as those contained in Subsections (2) and (2-A) of Section 34. It is the only remedy for setting aside an arbitral award. An arbitral award is not liable to be interfered with only on the ground that the award is illegal or is erroneous in law which would require re-appraisal of the evidence adduced before the arbitral tribunal. If two views are possible, there is no scope for the court to re-appraise the evidence and to take the view other than the one taken by the arbitrator. The view taken by the arbitral tribunal is ordinarily to be accepted and allowed to prevail. Thus, the scope of interference in arbitral matters is only confined to the extent envisaged Under Section 34 of the Act. The court exercising powers Under Section 34 has perforce to limit its jurisdiction within the four corners of Section 34. It cannot travel beyond Section 34. Thus, proceedings Under Section 34 are summary in nature and not like a full-fledged civil suit or a civil appeal. The award as such cannot be touched unless it is contrary to the substantive provisions of law or Section 34 of the 1996 Act or the terms of the agreement.‖ Damages for Period of Suspension and Balance Period of Contract

15. The contract having been held to be an item rate contract and the termination to be illegal, the question surviving is as to whether MWHPL was entitled to damages for the remaining period of the term of the contract i.e. approximately twenty six months and the quantification of damages.

16. From the reading of the terms of the contract dated 17.11.2017, SCC, LOI and work order it is evident that the contract was for the total cost of Rs.59,64,84,000/-. Clause II of the SCC stipulates that the vehicles shall remain available for a minimum of twenty-five days a month and DJB will hire each machine for a minimum of two hundred hours per month for the duration of the contract. The calculation of the total cost of the contract which was extendable by DJB has been made taking into account the minimum two hundred hiring hours per month for seven years and for five machines. In mathematical terms: 7101 (minimum rate per hour per machine) x 25 (minimum days per month) x 8 (minimum hours per day) x 84 (duration of the contract in month) x 5 (number of vehicles).

17. The contract was an item rate contract yet from reading of contract in entirety, an assurance to MWHPL emerges that by hiring of the five machines for seven years there would be a minimum turnover of Rs.59,64,84,000/-. It is an undisputed fact that this amount was paid to MWHPL prior to termination i.e. on completion of four years and seven months. Clause II of the SCC provided that in case of hiring of the machines for less than eight hour a day the payment would be made on pro-rata basis. Further clause VI of the SCC provided that the payment was to be made on actual usage. The conclusion of the arbitrator that in spite of the additional working hours in the four years seven months period, MWHPL was entitled to a minimum of two hundred hiring hours per month per machine for seven years renders the clause of pro-rata payment and payment on actual usage otiose.

18. Another angle to be considered is that in the absence of proof of actual loss suffered MWHPL cannot claim damages due to premature termination of the contract by DJB, more so, when the minimum assured turnover to MWHPL upon completion of the contract was paid prior to termination.

19. There is a dispute raised with regard to whether the machines where tailor-made; the machines could have been put to use for cleaning other sewers; and one of the machines was actually put to usage after the termination of the contract but for claiming damages under Sections 73 and 74 of the Contract Act, actual loss or damage suffered has to be proved. The contention of the learned senior counsel for the respondent that damages have been calculated on the basis of a formula of genuine pre-estimate of loss provided in the contract lacks merit. There is neither pre-determination of liquidated damages nor a formula has been provided for doing so. The clause for minimum hiring hours was only to ensure the bidder that minimum business that would accrue on making an investment. At this stage, it must be added albeit, the total contract value could have been extended by the petitioner but that the respondent had no right to claim enhancement of the contract amount.

20. The law is well settled that for claiming damages under Sections 73 and 74 of the Contract Act the claimant has to prove actual loss suffered and in case it is not possible to prove loss, a reasonable amount of damages is to be assessed. Reference in this regard be made to the following judgments: 20.[1] The Supreme Court in Unibros (supra) while dealing with a claim for redressal of loss of profit made under Section 73 of the Contract Act arising from prolongation of the contract held: ―19. The law, as it should stand thus, is that for claims related to loss of profit, profitability or opportunities to succeed, one would be required to establish the following conditions: first, there was a delay in the completion of the contract; second, such delay is not attributable to the claimant; third, the claimant's status as an established contractor, handling substantial projects; and fourth, credible evidence to substantiate the claim of loss of profitability. On perusal of the records, we are satisfied that the fourth condition, namely, the evidence to substantiate the claim of loss of profitability remains unfulfilled in the present case.‖

20.2. The Supreme Court in Kailash Nath Associates (supra) held: ―43.6. The expression ―whether or not actual damage or loss is proved to have been caused thereby‖ means that where it is possible to prove actual damage or loss, such proof is not dispensed with. It is only in cases where damage or loss is difficult or impossible to prove that the liquidated amount named in the contract, if a genuine pre-estimate of damage or loss, can be awarded.‖ 20.[3] The Supreme Court in State of Rajasthan v. Ferro Concrete Construction (P) Ltd., (2009) 12 SCC 1 held: ―55.While the quantum of evidence required to accept a claim may be a matter within the exclusive jurisdiction of the arbitrator to decide, if there was no evidence at all and if the arbitrator makes an award of the amount claimed in the claim statement, merely on the basis of the claim statement without anything more, it has to be held that the award on that account would be invalid. Suffice it to say that the entire award under this head is wholly illegal and beyond the jurisdiction of the arbitrator, and wholly unsustainable.‖ 20.[4] The Division Bench of this court in Tower Vision India (P) Ltd. v. Procall (P) Ltd., 2012 SCC OnLine Del 4396 held: ―16. Consequence for breach of the contract are provided in Chapter VI of the Indian Contract Act, 1872, which contains three sections, namely, section 73 to section 75. As per section 73 of the Indian Contract Act, the party who suffers by the breach of contract is entitled to receive from the defaulting party, compensation for any loss or damage caused to him by such breach, which naturally arose in usual course of things from such breach, or which the two parties knew when they make the contract to be likely the result of the breach of contract. This provision makes it clear that such compensation is not to be given for any remote or indirect loss or damage sustained by reason of the breach. The underlying principle enshrined in this section is that a mere breach of contract by a defaulting party would not entitle the other side to claim damages unless the said party has in fact suffered damages because of such breach. Loss or damage which is actually suffered as a result of breach has to be proved and the plaintiff is to be compensated to the extent of actual loss or damage suffered. When there is a breach of contract, the party who commits the breach does not eo instanti, i.e., at the instant incur any pecuniary obligation, nor does the party complaining of the breach becomes entitled to a debt due from the other party. The only right which the party aggrieved by the breach of the contract has is the right to sue for damages. No pecuniary liability thus arises till the court has determined that the party complaining of the breach is entitled to damages. The court in the first place must decide that the defendant is liable and then it should proceed to assess what the liability is. But, till that determination, there is no liability at all upon the defendant. The courts will give damages for breach of contract only by way of compensation for loss suffered and not by way of punishment. The rule applicable for determining the amount of damages for the breach of contract to perform a specified work is that the damages are to be assessed at the pecuniary amount of difference between the state of the plaintiff upon the breach of the contract and what it would have been if the contract had been performed and not the sum which it would cost to perform the contract, though in particular cases the result of either mode of calculation may be the same. The measure of compensation depends upon the circumstances of the case. The complained loss or claimed damage must be fairly attributed to the breach as a natural result or consequence of the same. The loss must be a real loss or actual damage and not merely a probable or a possible one. When it is not possible to calculate accurately or in a reasonable manner, the actual amount of loss incurred or when the plaintiff has not been able to prove the actual loss suffered, he will be, all the same, entitled to recover nominal damages for breach of contract. Where nominal damages only are to be awarded, the extent of the same should be estimated with reference to the facts and circumstances involved. The general principle to be borne in mind is that the injured party may be put in the same position as that he would have been if he had not sustained the wrong.‖ (emphasis supplied)

21. The arbitrator erred in awarding damages of the entire turnover for remaining period of contract, calculating it by minimum assured hiring of the machines. The amount to be received by MWHPL was the gross turnover and would include operational expenses, consumables and other overheads and does not denote the loss suffered.

22. Another aspect is that making of a payment on actual usage basis and on pro-rata basis in case of hiring of the machine for less than eight hours a day makes the contract flexible enough to adjust according to the situations arising at ground level, with the only condition that MWHPL shall get minimum Rs.59,64,84,000/- during the tenure of the contract. The award of damages in absence of evidence on record of actual loss suffered or a finding recorded that the loss suffered cannot be proved is in violation of Sections 73 and 74 of the Contract Act and against public policy. The tribunal awarded damages without considering the value of the machines, the usage these were put to, loss of business and other factors. The gross amount to be received by MWHPL for remaining period of the contract, calculated with minimum hiring guarantee of two hundred working hours per month per machine in itself is not actual loss suffered by the respondent as only a percentage of turnover can be regarded as profit.

23. It is trite law that, in case of termination of contract the aggrieved party is to be awarded damages to put it in the same position that it would have been in if the contract had been executed. However, the damages must be reasonable and the parties should not be allowed to make a windfall profit. The Supreme Court in Batliboi Environmental Engineers Ltd. (supra) held: ―16. This is without doubt, a sound legal and correct proposition. However, the computation of damages should not be whimsical and absurd resulting in a windfall and bounty for one party at the expense of the other. The computation of damages should not be disingenuous. The damages should commensurate with the loss sustained. In a claim for loss on account of delay in work attributable to the employer, the contractor is entitled to the loss sustained by the breach of contract to the extent and so far as money can compensate. The party should to be placed in the same situation, with the damages, as if the contract had been performed. The principle is that the sum of money awarded to the party who has suffered the injury, should be the same quantum as s/he would have earned or made, if s/he had not sustained the wrong for which s/he is getting compensated. [Robinson v. Harman, (1848) 1 Ex 850, at p. 855 and Livingstone v. Rawyards Coal Co., (1880) LR 5 AC 25 (HL)]‖ [emphasis supplied] 23.[1] Contrary to the settled principles governing the award of damages, the gross turnover for the remaining period of the contract was taken to be loss suffered by MWHPL. The awarding of damages without deducting expenses puts MWHPL in position of having a windfall gain rather than reimbursing the loss suffered. At cost of repetition MWHPL has already achieved the assured minimum business.

24. The damages for the period the contract was suspended were awarded on the same basis and hence meet the same fate. The awarding of the damages is set aside. Grant of Interest on Delayed Payment

25. Clauses 12.2.[1] and 12.2.[2] of the GCC provide that payment of interest at the rate of ten percent per annum is to be computed after ninety days of the pay order. The petitioner though set up a case that the ninety days is to be counted from the date of the issuance of the pay order but the information exclusively in the possession of the petitioner i.e. the date of pay order was not disclosed. Moreover, it was not substantiated that for payments made to MWHPL, pay orders were being issued. The emails exchanged between the parties were also relied upon by tribunal wherein the amounts calculated were inclusive of interest at the rate of ten percent per annum. The tribunal rightly granted interest at the rate of ten percent per annum from the ninety-first day of submission of the bills. The grant of interest is in consonance with clause 12.2.[2] of the GCC and calls for no interference. Deployment of Additional Labour and Interest Thereon

26. Clause III of the SCC provides for deployment of one trained driver, operator and supervisor. DJB had to provide labour for other activities such as removal of manhole and desilting of manhole (only in abnormal circumstances). The contention of learned senior counsel of the petitioner that the staff was to be deployed only in abnormal circumstances as evident from clause III of the SCC, is ill-founded. The arbitrator rightly held that the abnormal circumstances applied only to de-silting of the manholes and not for other activities to be done for example removal of manholes. The contention that the deployment of additional labour itself shall not entitle the respondent for payment unless actual wages paid are proved, is of no avail. SCC provides for the log sheets were to be maintained for deployment of labour and these were to be counter-signed by the parties. The respondent produced the counter signed log sheets, extracts of the ledger and a certificate of the CA to prove deployment of additional labour and wages paid. The counter-signatures on the log sheets for deployment of additional labour were not disputed by the petitioner. The extracts of ledger produced by the respondent were backed by certificate issued by the CA and the entries in the log sheets. The quality of evidence to be considered is in the domain of the tribunal. Supreme Court in Parsa Kente Collieries Limited v. Rajasthan Rajya Vidyut Utpadan Nigam Limited, (2019) 7 SCC 236 held that quality of evidence to be relied upon is a matter for consideration of arbitrator only. Relevant part is quoted below: ―9.1......... it is observed and held that an Arbitral Tribunal must decide in accordance with the terms of the contract, but if an Arbitrator construes a term of the contract in a reasonable manner, it will not mean that the award can be set aside on this ground. It is further observed and held that construction of the terms of a contract is primarily for an Arbitrator to decide unless the Arbitrator construes the contract in such a way that it could be said to be something that no fair-minded or reasonable person could do. It is further observed by this Court in the aforesaid decision in para 33 that when a court is applying the ―public policy‖ test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the Arbitrator on facts has necessarily to pass muster as the Arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. It is further observed that thus an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score.‖

27. It would be relevant to note that the tribunal has not awarded the entire claim made for additional deployment of labour but considered the undisputed number of additional labour deployed and the minimum wages statutorily prescribed. Conclusion arrived at by the tribunal suffers from no legal error much less perversity. The claim awarded is upheld.

28. The challenge to the grant of interest on the amount awarded for deployment of additional labour on the ground that there is no clause for grant of interest is noted to be rejected. The tribunal has given the basis of awarding interest at the rate of ten percent per annum which is equivalent to the rate agreed between the parties under clause 12.2.[2] of the GCC in case of delay in payment of bills. Moreover, there is no clause in the contract barring the grant of interest. Escalation Charges

29. Clause 14.[1] of the GCC read with Clause VII of the SCC provides for payment of escalation charges in case of price fluctuation in labour component, material and fuel. The claim for escalation of prices and the fact that fifty-six bills on account of price variation were submitted by the respondent from April 2018 to December 2022 were not disputed before the tribunal. The only defence pressed was that there was deficiency in the documents submitted. The tribunal in the facts and circumstances of the case rightly held the respondent to be entitled to payment for the escalation bills submitted. For the grant of interest at the rate of ten percent per annum on the delayed payment of the escalation bills the tribunal relied upon clause 12.2.[2] of the GCC wherein the parties agreed for grant of interest at the rate of ten percent per annum on delayed payment of bills. It would be apposite to mention that there is no clause in the contract that no interest would be awarded for delay in payment due to escalation of prices. A plausible conclusion arrived at by the tribunal backed by the reasons cannot be tinkered with under Section 34 of the Act.

30. The tribunal under Section 31A(2) of the Act has the discretion to award costs. The discretion was exercised by the tribunal considering the expenditure incurred by the respondent in litigation, the certificate of costs submitted and the fact and circumstance of the case. The discretion exercised having a sound basis needs no interference.

31. The Supreme Court in Gayatri Balasamy v. ISG Novasoft Technologies Ltd., (2025) 7 SCC 1 held that while an arbitral award cannot be modified under Section 34 of the Act, a severable part of the award may be set aside. The relevant paragraphs are quoted below: ―32. In the present controversy, the proviso to Section 34(2)(a)(iv) is particularly relevant. It states that if the decisions on matters submitted to arbitration can be separated from those not submitted, only that part of the arbitral award which contains decisions on matters nonsubmitted may be set aside. The proviso, therefore, permits courts to sever the non-arbitrable portions of an award from arbitrable ones. This serves a twofold purpose. First, it aligns with Section 16 of the 1996 Act, which affirms the principle of kompetenzkompetenz, that is, the arbitrators' competence to determine their own jurisdiction. Secondly, it enables the Court to sever and preserve the ―valid‖ part(s) of the award while setting aside the ―invalid‖ ones. [The ―validity‖ and ―invalidity‖, as used here, does not refer to legal validity or merits examination, but validity in terms of the proviso to Section 34(2)(a)(iv) of the 1996 Act.] Indeed, before us, none of the parties have argued that the Court is not empowered to undertake such a segregation.

33. We hold that the power conferred under the proviso to Section 34(2)(a)(iv) is clarificatory in nature. The authority to sever the ―invalid‖ portion of an arbitral award from the ―valid‖ portion, while remaining within the narrow confines of Section 34, is inherent in the Court's jurisdiction when setting aside an award.

34. To this extent, the doctrine of omne majus continet in se minus—the greater power includes the lesser— applies squarely. The authority to set aside an arbitral award necessarily encompasses the power to set it aside in part, rather than in its entirety. This interpretation is practical and pragmatic. It would be incongruous to hold that power to set aside would only mean power to set aside the award in its entirety and not in part. A contrary interpretation would not only be inconsistent with the statutory framework but may also result in valid determinations being unnecessarily nullified.

32. The quashing of awarding of damages for the period of suspension and for the balance period of the contract along with the interest thereon are separable, not dependant on other claims awarded and are not intricately connected with each other. Conclusion

33. In view of the above, it is concluded:i. The conclusion of the tribunal holding the contract to be an item rate contract and the termination of the contract to be illegal is upheld. ii. The award of damages for the period of suspension and for the remaining tenure of the contract alongwith the interest thereon is set aside. iii. The award of escalation charges, amount towards deployment of additional labour, grant of interest and costs awarded does not call for interference and are upheld.

34. The petition is partly allowed. Pending application stands disposed of.